The tax chief Ildikó Vida versus the Hungarian government: Who is lying? Most likely both

Practically daily I hear callers to György Bolgár’s program on Klubrádió, Let’s Talk It Over, ask: “Do these  people think we are that stupid?” ‘These people,’ of course, are the current leaders of Hungary, Viktor Orbán and his coterie.

Well, the answer to this question is a resounding “yes.” Moreover, until recently their assumption was correct. A large percentage of Hungarian society swallowed everything that was shoved down their throats. In fact, not much shoving was necessary. The gullible and often fanatic followers of Viktor Orbán refused to face the ever more obvious fact that members of this government brazenly lie. Day in and day out. The lies are necessary, at least in part, to cover up the illegal acts that are being committed daily.

As we all know, lies by their very nature multiply. A vain woman decides to lie about her age and from that moment on her whole life story must be adjusted, a difficult task. As Abraham Lincoln said, “No man has a good enough memory to be a successful liar.” Well, Hungarian officials are now trying to reconcile contradictory stories. Earlier lies about the alleged corruption case at the Hungarian tax authority (NAV) must be adjusted to square with the new revelations coming from Ildikó Vida, the chairman of NAV and one of the people put on the U.S. travel ban list. I must say that government officials are turning out to be less accomplished liars than one would expect from this experienced crew. The only man who cannot be caught uttering truly contradictory statements is Viktor Orbán. He is a master.

So, what happened today? Ildikó Vida gave a long interview to Magyar Nemzet in which she admitted that she and several other employees of NAV are on the list of six individuals who have been barred by the American government from entering the United States. The reason? Their involvement in corruption cases that hurt the interests of American firms operating in Hungary. This decision couldn’t have come as a shock to the Hungarian government because in the past two or three years the Americans have expressed their displeasure numerous times over the growing corruption in Hungary. Yet the government did nothing, which is not at all surprising because it is my firm belief that corruption is an integral part of the mafia state of Viktor Orbán that has been so aptly described in the two-volume The Hungarian Octopus. 

All right. So we know for sure that Vida is on the list, but as I said earlier, most of us were pretty sure that this was the case. Her sudden disappearance for a two-week vacation only reinforced that suspicion. What was new in this long interview is that Vida told Magyar Nemzet that she informed an unnamed member of the government right after she received the letter about the American decision. That was shortly before she embarked on her vacation on October 22. The problem is that in the last three weeks numerous government members, including the prime minister, have denied knowing any details of the case. They repeated time and again that they would be most willing to cooperate with the American authorities but unfortunately they can’t because they don’t know who is alleged to be involved. In brief, they were caught lying. Besides Viktor Orbán, the list of those who claimed they knew nothing includes János Lázár, Mihály Varga, and Péter Szijjártó.

But, of course, Vida herself is not exactly truthful when she claims that the accusations against her are baseless. The United States government would not embark on such a sensitive bilateral move against an ally without hard evidence. Vida’s threats to seek “legal satisfaction” in court are ridiculous. In the first place, M. André Goodfriend, the U.S. chargé d’affaires and the messenger of the bad news from Washington, did not reveal her name or that of any other person barred from entering the U.S. Moreover, he, as all other members of the diplomatic corps, has immunity against prosecution. Another strange aspect of the case is that Vida’s loud complaints about her ignorance of the American accusations are also bogus. She had and still has an opportunity to find out more about the case at the U.S. Embassy. Up to now she has shown no interest in doing so.

Those nasty Internet addicts have a wonderful time with Ildikó Vida

We found out from Ildikó Vida’s interview that there will be an investigation into NAV’s activities. She said that she will investigate the whole organization with “microscopic precision.” The head of the tax office who is accused of corruption will be in charge of the investigation into corruption in the organization. A perfect solution, don’t you think?

This interview is also interesting from the perspective of Ildikó Vida’s relationship to the Orbán government. Surely, Vida did not have to tell the whole world that she informed the appropriate official sometime between October 17 and 22 that she had been barred from entering the U.S. as a result of alleged corruption. After all, by this revelation she pushed Viktor Orbán and his government into a corner. On the surface her move seems both calculated and antagonistic. Observers of the Hungarian political scene immediately connected the dots: Vida has been a close associate of Lajos Simicska, whose current relationship with his old buddy Viktor Orbán is less than rosy. Orbán would like to curb Simicska’s power over politics while Simicska is fighting back with critical articles on some of the Orbán government’s latest attacks on businessmen.

Ildikó Vida is not too eager to cooperate with Fidesz politicians. Last week the parliamentary committee on national security asked her to appear today at its meeting. She did not show up. Instead she sent one of her deputies, Árpád Varga, who most likely could not provide any information to the committee members. Szilárd Németh, chairman of the committee, perhaps in frustration, announced that they will ask Goodfriend to appear before the committee sometime next week. My hunch is that Németh and his friends will not have the pleasure of the American chargé’s company.

In the meantime the official lying continues. Mihály Varga told an inquiring journalist that Ildikó Vida informed him only yesterday about her misfortunes. When a journalist called Szilárd Németh’s attention to the fact that there are only two possibilities in this case–either Vida is lying or the government is–he announced that he sees no contradiction between the two statements. László L. Simon (Fidesz), a member of the committee, is now asking Vida to please tell the government who the “appropriate person” was to whom she told her story. Perhaps that man “forgot to pass on” the information. There is a saying in Hungarian when somebody tells an especially big lie: “And the ceiling did not fall on him!”

Political observers often express their admiration of the Orbán government’s “communication skills.” This time something went very wrong, which is actually not all that surprising. Viktor Orbán and his crew think that good communication means constant lying to foreign politicians and the Hungarian public. Yet we know the other famous quip attributed to Lincoln: “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.” Or a proverb, which also exists in Hungarian, “the pitcher goes to the well once too often.”

Viktor Orbán picks another fight with the West, this time over the Southern Stream

I know that everybody is intensely interested in the Hungarian government’s latest brainstorm, the introduction of an internet tax, but I would rather wait with an analysis of this latest scandal until it becomes clear what the fate of the proposal will be. So far the reaction to this new tax has been so vehement that the government most likely will have to retreat. When an article in the right-wing Válasz predicts that “if we had an election today Fidesz would lose big,” I think it’s time to order a quick turnabout. I would like to add just one observation on a related topic: the Hungarian budget must be in a sorry state if an additional tax must be levied on soap and detergent, allegedly because they are harmful to the environment. Let’s not contemplate the detrimental effect of curtailing the use of soap because this would take us too far afield.

So, instead of dealing with the effects of an internet tax, I will look at other recent governmental decisions that have been detrimental to Hungary’s relations with the United States and the European Union. What I have in mind is Viktor Orbán’s flirtation with Putin’s Russia, which is being watched with growing concern in Washington and Brussels. Already there have been a couple of moves indicating close cooperation with Russia that raised eyebrows in the democratic world: the building of a nuclear power plant by a Russian firm on Russian money, Hungary’s refusal to support the common European position on the Russian sanctions, a tête-à-tête between Gazprom and the Hungarian prime minister followed by the Hungarian decision to stop supplying gas to Ukraine, and the government’s decision to let Gazprom use Hungarian facilities to store gas in case Russia cuts off the flow of gas through Ukraine.

These moves worried and irritated the United States and the European Union, only compounding their concerns about all the transgressions of the rules of democracy committed by the Fidesz government against the Hungarian people. Years have gone by; at last western politicians are slowly, ever so slowly deciding that they have had enough. After Norway it was the United States that openly showed its dissatisfaction with the domestic and foreign policies of the Orbán government. Yet, as the last few days have demonstrated, Viktor Orbán is not changing tactics. On the contrary, as I wrote yesterday, he is strengthening ties with countries whose relations with the United States and the European Union are strained. Almost as if Viktor Orbán purposefully wanted to have an open break with Hungary’s western allies.

Yesterday one could still hope that Viktor Orbán would  come to his senses and would at least make some gestures, but as yesterday’s meeting between Péter Szijjártó and Victoria Nuland indicated, the new Hungarian foreign minister was sent to Washington without a Plan B. By today, however, most likely in his absence, the government came out with a new idea. What if the Hungarian office of taxation and customs (NAV) announces that in the last several years they have been diligently pursuing their investigation of those criminal elements who through tax fraud unfairly competed against the American company Bunge? Maybe it will work. Mihály Varga, minister of national economy, announced this morning that four of the culprits are already in jail. Very nice, but there is a fly in the ointment. Most likely the U.S. State Department remembers, as I do, that András Horváth, the whistleblower at NAV, months ago gave a detailed description of the ways in which these criminals operated. He asked NAV to investigate and disclose their findings, but the managers of the tax office first fired Horváth and a couple of days later announced that after an internal investigation found everything in perfect order. So I doubt that the Americans will fall for that bogus story.

Yesterday Portfólió asked “how to make the USA more angry with Hungary,” but they “did not have the faintest idea that the government has been holding the best answer to that and it beats every idea [the Portfólió] have ever had.” So, what is it? In order to understand the situation we have to go back to the controversy over Russia’s new pipeline already under construction–the Southern Stream–that would supply Russian gas to Bulgaria, Serbia, Hungary, Austria, Slovenia, Greece, and Italy. The United States and the European Union were never too happy about the project and now, in the middle of the Russian-Ukrainian crisis, they are especially leery of Putin’s plans. In fact, the European Commission asked the Bulgarians to stop the construction of the pipeline in their country. They obliged. The European Union also warned Serbia that they can forget about future membership in the European Union if they agree to support the project right now.

In Hungary construction has not yet begun, but the Orbán government seemed to be afraid that something similar would happen to them what happened to the Bulgarians. They decided to act. Changing the law by now has become a Fidesz pastime. Today Antal Rogán proposed an amendment to a 2008 law on natural gas that will allow any gas company to construct a pipeline. The original law, in harmony with laws of a similar nature in other countries, specified that the company in charge of the construction has to be a certified transmission system operator who must conform to international rules. Since pipelines are transnational projects, the countries involved must coordinate their individual projects. What the Hungarians hope is that as a result of this amendment Hungary will not be bound by any international constraint. Starting the project will depend only on the Hungarian Energy Office, which could give permission to any company it chooses to construct the pipeline. Portfólió suspects that both the European Union and the United States will be “furious” upon hearing this latest Hungarian ruse.

Clever Hungarian lawyers, who seem to specialize in circumventing the letter of the law, might think that this scheme is foolproof, but I suspect that EU lawyers will find the legislation full of holes. Hungarian papers suggest that the Orbán government is playing for time. But the case is settled, they argue; the pipeline will be built. Surely no one will force Hungary to destroy it.

Let’s contemplate another scenario. What if the European Union and the United States in joint action put such pressure on the Hungarian government that the plan must be abandoned? As it is, according to analysts, Budapest is already between a rock and a hard place. When political scientist Gábor Török, who has the annoying habit of sitting on the fence, says that “the Orbán government is in big trouble. It was before but now it is different. It will not fall, surely not now…. But if it does not recognize the fork in the road or if it chooses the wrong road, we will mark the events of today as a definite turning point.” And in an interview this afternoon Ferenc Gyurcsány twice repeated his belief that Hungary is at the verge of leaving the Union and, when it happens, it will not be Viktor Orbán’s choice.

I wouldn’t go that far, but I do predict that the screws will be tightened. Among those who will apply pressure will be Norway since the Hungarian government audit office just came out with its report claiming that Ökotárs, the organization in charge of distributing the Norwegian Civil Funds, has used the money inappropriately. A criminal investigation will be launched.

We know that Barack Obama said that the American government supports NGOs in countries where they are under fire. Today we learned that Veronika Móra, chairman of Ökotárs, was a member of a delegation that visited Washington in late September. During that trip the NGO leaders were received by President Obama in the White House. By contrast, Péter Szijjártó did not get any higher than one of the assistant undersecretaries of the State Department. If I were Viktor Orbán, I would take that as a warning.

Viktor Orbán on the world stage and at home

Every second Friday Viktor Orbán spends about twenty minutes with a servile reporter from Magyar Rádió who asks the great leader about his achievements and plans. But before I cover the latest pearls of wisdom coming from the prime minister I want to share some thoughts about an unexpected private meeting between Chancellor Angela Merkel and Viktor Orbán preceding the European Union Employment Summit held in Milan on October 8.

Critics and opponents of Viktor Orbán’s domestic and foreign policy initiatives were dismayed over news of the meeting. Just when the United States finally seems to be showing signs of greater resoluteness in its dealings with the Hungarian government, Angela Merkel rewards him with a private meeting. Hungarian opposition papers pointed to Merkel’s broad smile and assumed that the encounter had to be friendly. But this might not have been the case. Of course, we don’t know what transpired during the meeting, but there are a few signs that may indicate a less jolly encounter than Merkel’s smile would indicate.

The official government website republished the MTI summary of the encounter, based on information supplied to the news agency by the prime minister himself. What can we learn from that brief description? “First and foremost [they] talked about foreign affairs.” The second topic was energy policy. As far as foreign policy is concerned, I assume the topic was Hungary’s reluctance to support the common EU resolve concerning further sanctions against Russia if necessary. It is also possible that Merkel mentioned her disapproval of Viktor Orbán’s eastern orientation. When it comes to the country’s energy policy, I’m almost certain that Merkel brought up Hungary’s sudden decision to stop sending natural gas to Ukraine three days after the CEO of Gazprom paid a visit to Viktor Orbán.

How do I surmise that? A careful reading of this short report on the meeting makes that interpretation more than plausible. Let me quote the appropriate passage verbatim: “Hungary will be part of the common European efforts, but at the moment she must establish her own energy security. Thus, Hungary now is busy with feeding its own storage facilities.” After January 1, 2015, when the Slovak-Hungarian gas pipeline is functioning, “we will be able to send non-Russian gas to Ukraine, if our Ukrainian friends would like it.” I should call attention here to Orbán’s emphasis on the source of the gas intended for Ukraine. That strongly indicates that he agrees with the Russian position that selling Russian gas to countries outside the EU is illegal.

As for the possibility of a discussion between Merkel and Orbán on Hungarian-EU relations, my source is Viktor Orbán’s Friday morning interview. While until now we have heard only criticism from Orbán concerning the West, which is in decline and on the wrong track, during the interview Orbán praised German economic strategy. The German mentality of hard work and prudence is the basis of  successful economic policy. I might add here that praise of German economic strategy was somewhat ill-timed in the wake of dismal economic news from the country.

As far as future domestic policies are concerned, the Friday morning interview was singularly uninformative. There has been much talk lately about a new era coming, but Viktor Orbán refuses to provide any details. A careless remark by Mihály Varga a couple of weeks ago prompted speculation about the introduction of new austerity measures. Rumor has it that the government cannot hold to the 3% deficit, which may followed by the reintroduction of the excessive deficit procedure by the European Commission. And that would mean turning off the money spigots from Brussels. A government denial followed Varga’s remark, but people are not convinced that austerity measures are not in the offing. The budget that should already have been presented to parliament is still nowhere. According to Orbán, he and Varga will go through the numbers this afternoon.

There was only one topic on which Orbán was more expansive: his ideas about education. Specifically, producing skilled workers. He has big plans for something he calls “dual education,” which will produce a highly skilled workforce. After a student has been in school for eight years he would enter a course of study that would combine some academic study with hands-on work experience. It would be a kind of apprentice (inas) program. There is nothing new under the sun. Many of us still remember Nikita Khrushchev’s introduction of precisely the same type of education. We also remember that it was a huge flop and the experiment was abandoned. I guess Orbán thinks he can do a better job.

But if Khrushchev’s experiment was a bad idea in the 1960s, it is a terrible idea today. Who thinks that eight years of elementary education are enough to produce highly skilled workers who nowadays need higher math, computer skills, and–most likely in Hungary’s case–the command of a foreign language, just to mention a few requirements? The very word “inas” (apprentice) conjures up images of the little boy who was apprenticed to a master and who was terribly exploited by him. He lived with the master’s family and often did all sorts of things that had nothing to do with his future trade.  But in those days one didn’t need a lot of education to learn how to make shoes or to become a bricklayer. Today I would say that to become a skilled worker one should finish high school and have at least a two-year associate’s degree.

Back to olden days

I agree that training a skilled workforce is needed, but Hungary is unlikely to be a country where industry dominates. The service sector will most likely remain the mainstay of the economy, as elsewhere in western countries. Moreover, it is not true, as Orbán claims, that “the road to successful life is through crafts” because statistics prove that university graduates’ compensation greatly exceeds the salaries of non-graduates. I fear, however, that he will introduce his ridiculous ideas on education very soon. He promises such legislation this year. I wonder what impact such a reorientation of education will have on the current educational system, which has already gone through a very hard time because of the nationalization and centralization of all public schools. One could also ask where they will find teachers by the thousands to instruct students to become skilled workers by the age of 16 or 18. What will happen to those teachers who today teach academic subjects? The whole thing sounds not only crazy but injurious to the country.

This year was spent mostly on campaigning for three different elections, and therefore the Orbán government had relatively little time to come up with ever new ideas and proposals that become law in record time. I fear this legislative respite is over, and the prime minister will have quite a few surprises for us in the coming months.

Procreation and pensions in Hungary

In the last month or so article after article appeared about the conclusions of a group of economists and demographers who have been discussing possible solutions to the interrelated problems of the low Hungarian birthrate and the eventual depletion of the state pension fund. This group, the Népesedési Kerekasztal (Demographic round table), seems to have the support of the Orbán government. It is deeply conservative and a promoter of family values.

One of the most vocal proponents of pension reform among the group is Katalin Botos, an economist who was a member of parliament between 1990 and 1994 and also served as minister without portfolio in charge of the banking sector in the Antall government. Prior to the change of regime she was a department head in the Ministry of Finance (1971-1987). Lately, she has been teaching economics at various universities.

The Hungarian media acts as if this is the first time the public has heard about the outlandish plans of Katalin Botos. But in May 2012 Népszava ran the following headline: “One must give birth for one’s pension.” At that time Katalin Botos and her husband József Botos were active in the Working Group for a Family Friendly Hungary, which was organized under the aegis of the Ministry of Hungarian Economy. The study that appeared at that time was entitled “A középosztály gyermekvállalási forradalma” (The revolution of childbearing of the middle classes). In it, the Botoses explained the logic behind the introduction of a sliding scale of pension payments depending on the number of children. After all, pensions are being paid by current wage earners, and if a couple did not produce at least two children they are freeloaders.

At that time the group made calculations on the basis of 2010 maximum, minimum, and average salaries and came to the conclusion that an employee earning an average salary would get 14.4 points but only if he/she produced at least two children. Extra points would be earned for each additional child. On the other hand, employees with one or no child would be docked a certain number of points. According to this system, someone with an average salary of 113,000 forints with no children would receive a pension of 70,000 forints while a person with four children would get 142,000!

The more the merrier

Members of the working group did address the problem of couples who cannot have children for physical reasons but somewhat heartlessly remarked that “the fact still is that there is no one behind them who is responsible for their pensions.”

When this study was made public the vast majority of experts found the scheme unacceptable and ineffectual. To hope for a higher birthrate by linking it to higher pensions thirty or forty years later is totally unrealistic.

The public reception was anything but friendly, and the government promptly announced that they have no intention of introducing it in the near future. But, as we can see, this plan has remained on the government’s agenda because the latest scheme released by the Demographic Round Table is practically the same as the one in 2012. The few additions to the new report in fact make it even less attractive.

As far as the government was concerned, the original Botos plan had one huge flaw: in the Roma population families are large and girls begin to reproduce early. Surely, the argument went, you don’t want to encourage them with a pension system that might increase family sizes. So, an additional restriction was added: only children who finished high school (matriculation) or trade school would count. Not surprisingly, this was considered by critics of the plan as anti-Roma.

This time around the authors of the scheme also addressed details that were not considered in the 2012 version. For example, a person whose child died before he could finish high school would be exempt. The same would be true of children with a mental disability. But many questions remain. What will happen to young people who decide to work abroad? Will their departure be accompanied by a drastically reduced pension for their parents?

Although the plan was fleshed out a bit, by and large the “mad” scheme, as many commentators called it, remained intact.

Across the whole spectrum of the Hungarian media the reaction was uniformly negative. And real panic set in when Péter Harrach, leader of the Christian Democratic parliamentary delegation, announced that the report of the Demographic Round Table was in line with the thinking of the government and therefore there was a good possibility that the suggestions will be adopted, perhaps as early as September.

This was unfortunate from the government’s point of view. Right before the municipal elections such an announcement could have disastrous consequences, especially among those under the age of 35 whose pensions would be directly affected by the new law. Mihály Varga, minister of national economy, quickly reassured the voters after Harrach’s unfortunate interview that “it will not be necessary to have more children for higher pensions.” The Hungarian pension system is stable and there is no need to make any changes before 2030. But then why all the talk about a scheme that has been on the table for at least two years?

Well-known experts on the pension system, like György Németh, are convinced that the entire economic framework that lies behind the Botos couple’s scheme is wrong. In fact, in Németh’s opinion, it is unacceptable. Raising the birthrate is desirable, but it can be achieved only by the introduction of government measures that lower the expenses of child rearing. Compensation forty years down the road for the heavy financial burden of bringing up children today will not achieve anything. It is no coincidence that this interview appeared in Magyar Nemzet.

I would like to believe that this madcap idea will not be adopted, but I have a strong suspicion that in spite of Varga’s assurances to the contrary something is afoot. I would not be at all surprised if within a few months parliament passes a law that links procreation with pensions. If such law is passed, even more people will leave Hungary and settle elsewhere where the state does not interfere in their private lives. Oh well, at least the state won’t have to worry about their pensions.

Another austerity program introduced in Hungary, but they call it a “freeze”

It was not quite a month ago, on June 20, that Mihály Varga, minister of national economy, triumphantly announced that he “convinced the European Commission that no further austerity measures are necessary for Hungary to keep the 2.9% deficit target” that would ensure the receipt of investment funds from the European Union. Previously the Commission had expressed its misgivings about the feasibility of achieving the prescribed goal. According to Varga, the Commission was impressed by the recent positive results of the Hungarian economy: low inflation and rapidly decreasing unemployment figures.

So, great was the surprise that, after all, the government ordered a freeze of 110 billion forints worth of government expenditures in order to make sure that the deficit target is met. Varga tried to calm the nerves of Hungarians by saying that the freeze “will not affect families and businesses.” So, what will it affect? It looks as if Investment Fund expenditures will be substantially affected and several projects will be postponed. Across all ministries there will be an almost 40 billion forint spending freeze. Reserves for extraordinary measures, like floods, snowstorms and such, will be greatly reduced. The freeze will lower the GDP by .036%. He emphasized that these measures are not really necessary; they are only precautionary.

Yet Varga gave himself away once he began listing the reasons for the freeze. He explained that the favorable economic developments of late had actually had a negative effect on the state’s budget. For instance, a lower inflation rate than expected reduced excise tax and VAT revenues. Moreover, he added that “Hungary is facing some possible punitive measures from the European Union” which would affect certain funds coming from Brussels. Commentators judge that figure to be close to 100 billion forints. As for lower tax revenues, Varga could have added that due to the newly introduced state monopoly of tobacco the state lost about half of its former revenues from this source. Varga of course did not want to mention the substantial expenditures on the nationalization of several large private concerns. In addition, thirteen infringement procedures are currently underway, the latest being an impending fine to the tune of 60-90 billion forints over the tenders for the toll system introduced about a year and a half ago. All in all, the budget is not in great shape.

According to Levente Pápa, an Együtt-PM politician who deals with economic matters, the government has loosened the purse strings of late. The public works program was greatly expanded just before the national election. The same will be true in the coming months, this time because of the municipal elections in October. Sándor Burány of MSZP, who usually responds to issues connected to the economy, also called attention to the so-called “prestige projects” undertaken for the election year.

This morning Viktor Orbán explained the reason for the freeze. This year’s budget is tight, “at the very edge” of 3%, and thus it is a good idea to make it clear to the whole world that Hungary will hold the deficit under the maximum allowed. Then he tried to teach the Hungarian public, which is not too sophisticated when it comes to economics, that “Hungary must continually take up loans in order to finance its earlier loans and it is not immaterial under what terms the country gets these loans. Interest rates are greatly influenced by whether investors consider the budget stable.” Hence the freeze.

At this point the servile reporter who conducts these Friday morning interviews asked Orbán whether it hurts that the building of stadiums must be suspended. Naive man. Orbán announced that “luckily” one does not have to worry about these projects. There is always money for the prime minister’s pet projects. Moreover, he said that some of the expenses connected to stadium construction will occur only next year. Let’s worry about them then.

It is certainly worth taking a look at yesterday’s Magyar Közlöny (Official Gazette) which contains the details of this latest adjustment of the budget figures. The three ministries affected most are the Ministry of Human Resources (9,671.1 million), Ministry of National Economy (8,378.3 million), and Ministry of Agriculture (5,552.0 million). It is true that the Prime Minister’s Office will be able to spend less money from here on (1,446.5 million), but that is a relatively small cut, especially if we compare it to the 3,785.5 million taken away from projects financed by the European Union.

Even more interesting is appendix #2, which lists the exemptions. These are projects that the ministries cannot touch while adjusting their budget figures. One of the first is the prime minister’s protocol expenses. But no one can chip away at the enormous “government communication” budget either. Although I did not know that Viktor Orbán was keen on horses, the “development of the Horse Center in Szilvásvárad” is also exempt. The reconstruction work in the Castle District (Szent György tér, Mátyás templom) must go on. The Ludovika Campus reconstruction, including sports facilities, will continue uninterrupted. This is where military officers and civil servants will receive a proper Fidesz education. Monetary gifts for excellence in sports must remain the same as before. And then we have an incredibly long list of stadiums and sports facilities: Győr, Debrecen, Bozsik Stadium in Budapest,  Ferenc Szusza Stadium also in Budapest, Pécs, Nyíregyháza, Zalaegerszeg, Kaposvár, Kecskemét, Paks, Pápa, Békéscsaba, Mezőkövesd, Siófok, Dunaújváros, Gyirmót, Ajka, Balmazújváros, etc. etc. etc. Too long to list them all.

This is what the Ludovika Campus will look like

But there are other sacrosanct items worth mentioning: aid to art collections of churches, aid for the teaching of religion in schools, financial assistance to priests and ministers serving localities with populations of less than 5,000, financial support of priests and ministers serving abroad, aid for the Piarist order, aid to the Hungarian Reformed school in Debrecen, aid to religious organizations abroad, and finally financial aid for the organizations of ethnic minorities.

It is perhaps not surprising for those who are familiar with the Orbán government’s modus operandi that the largest amount is being taken away from the ministry that looks after healthcare, education, and culture. At the same time the government is spending billions and billions on at least three dozen stadiums all over the country. There is no question where this government’s priorities lie.

Corruption and anthrax: The sorry end of a “city farm”

On July 4 news spread rapidly that several people had become infected by anthrax, which is called lépfene in Hungarian. “Fene” here most likely means something like “trouble” while “lép” means “spleen.” Apparently the spleens of infected people become enlarged.

Anthrax spores are formed by anthrax bacteria that occur naturally in the soil. These spores remain dormant for years until they find their way into a host: sheep, cattle, horses, and goats. Anthrax is rare in Canada and the United States but common in the developing world. Hungary had several outbreaks of anthrax over the last few years.

One can be affected by the anthrax bacteria by eating undercooked meat from an infected animal, by inhalation when one breathes in anthrax spores, or through the skin. Infection by inhalation is the most deadly way to contract the disease. That’s why we see pictures of health workers covered from head to toe while working at the scene where the infected animals were grazing or were slaughtered.

It seems that the owner of the cattle farm noticed as early as June 21 that something was wrong with some of his animals, and at least one had to be slaughtered due to severe illness. On July 1 there was another sick animal who had to be killed. No veterinarian saw them and no health official inspected the meat of the slaughtered animals.

Once the anthrax outbreak became public knowledge newspapermen invaded Tiszafüred where the first anthrax outbreak occurred. Tiszafüred is a favorite spot for vacationers who want to take advantage of Tisza tó, a large artificial lake second in size only to Lake Balaton. Very few people were ready to talk, but reporters eventually learned that the owner of City Farm in Kócsújfalu is new at animal husbandry. He purchased about 100 cows, a Hungarian variety called “magyar tarka,” only a few months ago. Where the cattle came from is not clear. Zoltán Gőgös, former MSZP undersecretary in the ministry of agriculture, seems to know that the Hungarian owner purchased the animals in Romania. He also claims to know that the owner, instead of  immediately placing the sick animals in the compulsory three-month quarantine, immediately began slaughtering them.

This is what the “magyar tarka” looks like. Excellent for meat and milk production

The first five or six people who became ill were butchers who handled the meat. Later it turned out that the meat was sold to a company that supplies food to the municipality of Tiszafüred, which provides lunches for 88 needy children in town. Since then the town of Tiszafüred broke its contract with the company. Another purchaser was a restaurant called “Nemzeti Étterem,” whose owner, I assume, must be a great Fidesz supporter judging from the name of his restaurant.

News spread that the authorities actually kept the anthrax infection a secret for three or four days, something the Ministry of Agriculture hotly denied in a communiqué that appeared on the ministry’s website on July 4. In it Róbert Zsigó, former Fidesz spokesman and mayor of Baja, claims that as soon as the anthrax infection became known the authorities took all necessary steps. Since symptoms of anthrax infection appear about a week after the time of contact with the sick animal and it was on July 2 that anthrax was diagnosed in five patients, it is likely that the infection was spread by the animal that was slaughtered on the 21st of June.

The locals were not too communicative when journalists wanted to know more about the owner of City Farm. They did say, however, that the owner is a well-off man who lives in a big and expensive house. LMP politicians soon discovered that the owner of the herd of cattle is József Nagy, who just recently received 250 hectares from the Hungarian government to raise cattle. His case is similar to hundreds of others where people with good connections to party and government leaders received tracts of land without knowing the first thing about animal husbandry or agriculture.

Soon enough it became known who the “godfather” of József Nagy is: Sándor Fazekas, the minister of agriculture, himself. LMP was not alone in its detective work; Jobbik also looked into Nagy’s government connections. They discovered that Nagy’s other business venture also received government subsidies. Since then it became known that Nagy is on very friendly terms with Mihály Varga, minister of national economy.

Everywhere you look you find corruption. In most cases only the locals know all the details of suspicious land transactions. Only in glaring cases like this one does the news of corruption surface and spread nationwide.

Indeed, corruption is everywhere and on all levels. After following the trail of the infected meat, it turned out that it was not only József Nagy who was guilty of negligence but also the owner of the company that provided meat to the town of Tiszafüred. One corrupt businessman, Nagy, phoned the other corrupt one, Tamás Ábrahám, on June 23 and inquired whether he was interested in some beef at a bargain price. He was and purchased 100 kg of it on the very same day. Ábrahám apparently didn’t ask for the meat inspector’s certification but relied on Nagy’s verbal assurance that all was in order. Ábrahám and Nagy know each other through soccer. Ábrahám established a local soccer club and Nagy was one of its sponsors.

According to the latest intelligence József Nagy’s herd of cattle is shrinking in size. Lately apparently several animals had to be slaughtered, including the bull that was to assure the future of the cattle farm. He ended up in the carcass pit. His ear tag, which should have had the information that would have identified him, was missing. I wonder why.

Hungarian parliament voted on Paks; the Jewish-government dialogue is stalled

Yesterday we all thought that the parliamentary vote on the Russian-Hungarian agreement about financing and building two new reactors in Paks would take place only next Thursday. But, in typical Fidesz fashion, the Fidesz-KDNP majority made a last-minute change in the agenda and opted to hold the vote today. Perhaps the sudden decision had something to do with the revelations of Mihály Varga, minister of the economy, about the financial details of the agreement. Parliament had only four days to ponder the bill, and five hours were allowed for discussion on the floor.

The decision to move the vote forward naturally upset the opposition, but that was not all that raised eyebrows. The figures Mihály Varga revealed were much higher than earlier expected. First of all, Hungary will have to pay back the loan not in 30 but in 21 years, in 2035. In the early years the interest rate will be 3.9%, later 4.5%, and in the final years 4.9%. The Russians will pay the 10 billion euros it is lending to Hungary over ten years, and Hungary will have to pony up 2 billion euros in the final years of plant construction. (That figure, of course, assumes that there are no cost overruns, a highly unlikely possibility.) According to information received from government circles, one reason Viktor Orbán was so eager to push through the vote at the earliest possible date was that he was concerned that even Fidesz legislators would be unwilling to vote for the plant expansion once they knew its true cost. This information had to be revealed because the court so decided. Moreover, according to estimates, the expansion of nuclear capacity would be so costly that it would raise the price of electricity at least 40% and in the first decade perhaps 80%. Népszabadság gave the following headline to its article on the estimates prepared by MVM, the state-owned utility company: “More expensive electricity, brutal losses.” Nice prospects, if MVM’s calculations are correct.

LMP asked for a roll call vote, after which András Schiffer held up a sign: “Hungary sold out and indebted,” while Szilvia Lengyel, also of LMP, held up another placard proclaiming that “We will not be a Russian atomic colony.” Bernadett Szél (LMP) and Katalin Ertsey (LMP) had megaphones that produced the noise of ambulance sirens at full volume. The scene was quite something. I highly recommend the video of the brawl, available on Index. Parliament had to adjourn for over an hour. László Kövér called the protesters idiots and also indicated that the highest possible fine will have to be paid by the four LMP members.

LMP (Politics Can Be Different) / Source Index

A quick look at the record of the votes is most interesting. It is striking how many members chose not to be present. Let’s start with Fidesz which has a large 223-member delegation out of which 21 members were absent. Among the missing were Viktor Orbán, Zoltán Balog, Mihály Varga, Tibor Navracsics, and Zoltán Illés and Zsolt Németh, undersecretary for foreign affairs.. Out of the KDNP caucus of 34 members only two were missing but one of them was no other than Zsolt Semjén, deputy prime minister. Half of the Jobbik members were absent, but those present with the exception of one voted with the government parties. The majority of MSZP members decided to stay at home (32 out of 48). Out of the 27 independents 17 were absent and only one of those present voted for the bill: József Balogh of blind komondor fame.

The other important news of the day was the scheduled meeting between Jewish leaders and János Lázár. If anyone had great hopes for a compromise between the government and the Jewish community, he was mistaken. It turned out that János Lázár was simply a messenger. As he himself admitted, everything depends on Viktor Orbán. His is the final word and at the moment that word is “no go.” The monument will be erected, Sándor Szakály will stay, and the House of Fates “can become a reality only if there is intelligent, correct dialogue that concentrates on the essence of the matter… If there is no cooperation there is no reason to go ahead with the project.” So, if you raise objections and want to oversee Mária Schmidt’s activities, there will be no new Holocaust center in Hungary.

As for the monument depicting Archangel Gabriel and the German imperial eagle, “it would be a falsification of history if we pretended as if Germany didn’t deprive Hungary of its sovereignty on March 19, 1944.” The problem is that most respectable historians dispute the government’s contention of a lack of sovereignty, pointing to the composition of the governments formed between March 19 and October 15, 1944. For example, all ministers and undersecretaries of the Sztójay government also served in earlier Hungarian ministries going back as far as 1933. It is also clear that Miklós Horthy was not entirely powerless, as he demonstrated several times during this period. In my opinion, given the seemingly firm position of the government, there can be no agreement between the two sides.

I very much doubt that Viktor Orbán, who will have the final say on the issue next week, will move an inch. He is not that kind of a guy. As for the Jewish organizations that will sit down to talk on Sunday, they are unlikely to retreat from their position. So, it can easily happen that an international scandal is in the offing: the Hungarian Jewish community will boycott the Holocaust Memorial Year initiated by the Orbán government.

The plight of a Hungarian whistleblower

It was a month ago that András Horváth, a former employee of NAV (Nemzeti Adó- és Vámhivatal/National Office of Taxation and Customs), turned to the prosecutor’s office to report a breach of fiduciary duties committed by the top management of this 23,000-employee office. He claimed that large-scale cheating goes on with fictitious VAT reimbursement payments, especially in the case of large commodity distributors and food chains, both multinational and domestic. The figures Horváth was talking about are staggering. He estimates the loss of revenue at 1.7 trillion forints a year.

Since then András Horváth has been in the news constantly. There has been hardly a day that he wasn’t in the electronic media, and thousands of articles have appeared about what is called the NAV scandal. Some people predicted that this affair might bring down the Orbán government, which I very much doubt. These guys are far too foxy to trip over such a “trifling” item as a 1.7 trillion forint fraud.

On November 19 I reported about the affair in as much detail as was available at the time. Predictably, since then politics entered the fray. The first party that offered assistance to Horváth was András Schiffer’s LMP. Schiffer is a lawyer who made sure that Horváth had good legal counsel. At the same time LMP began an effort to get the 78 signatures necessary to set up a parliamentary committee to investigate Horváth’s allegations. MSZP and DK were reluctant to join forces with Jobbik in calling for the committee, which I think was a mistake. I understand that the overwhelming majority of DK’s membership shared my opinion. Well, by the end they managed to get the 78 signatures without current Jobbik members, but Fidesz boycotted a hearing that was supposed to question Horváth on the details. Later Fidesz thwarted the opposition’s effort to set up the committee, claiming  that the existence of such a committee is illegal when a criminal investigation is already underway. I don’t want to delve into the legal complexities of the issue, but legal experts claim that Fidesz as usual was not exactly on the up and up on this issue. Moreover, as it turned out, Horváth was never informed of the investigation launched against him, and his report to the prosecutor’s office on the wrongdoings of the management of NAV wasn’t followed up with any investigation.

Meanwhile direct evidence was mounting that underscored Horváth’s claims. Economic Minister Mihály Varga, under whose ministry NAV operates, admitted in response to a question posed to him by a couple of LMP MPs that NAV investigated only the distributors, not the food chains themselves. This is exactly what Horváth was talking about.

For two years Horváth tried to call attention to the wholesale tax fraud at NAV. He approached several top Fidesz politicians. For example, Antal Rogán and János Lázár. I don’t know why he didn’t go to the Ministry of National Economy where Gábor Orbán, no relation to Viktor, is the undersecretary in charge of taxes and finance in general. Perhaps he had his reasons, although yesterday he said that it wasn’t the government that put pressure on NAV but influential businessmen, oligarchs as he called them.

Yesterday was no ordinary day for the poor Hungarian whistleblower. Out of the blue, at 7:30 a.m., four detectives arrived at Horváth’s apartment and took his famous green dossier, which he carried everywhere he went, claiming that all the information he has is in that folder. For good measure they also took the hard drive from his computer as well as his notebook with the names and telephone numbers of journalists, politicians, and lawyers with whom he has been in contact lately. The sudden and apparently illegal raid reminded people of the surprise visits from the state security authorities during the Rákosi period. They usually arrived at the crack of dawn to arrest people. Everybody agrees that the aim of yesterday’s raid was intimidation. Indeed, Horváth seemed to be genuinely shaken last night when he talked to Olga Kálmán of ATV, although he promised to fight on.

Source: cherispeak.wordpress.com

It was during during his encounter with the detectives that Horváth learned that a charge had been filed against him: breach of confidentiality. Considering that up to this point Horváth didn’t divulge any details about those companies which were, according to him, purposefully not investigated, it is really questionable whether this charge can be maintained. Later it also became clear that NAV already on December 11 filed a police report against Horváth with the Emergency Police’s National Detective Section, not only in connection with the breach of confidentiality but also with the abrogation of fiduciary duties. They only neglected to inform András Horváth of the charges against him.

A right-wing blog gleefully announced that Horváth might receive a three-year jail term. On the other hand, TASZ, the Hungarian equivalent  of the American Civil Liberties Union, alongside other groups active in the defense of the law like Transparency International, considers the police search most likely illegal. Whistleblowers have appropriate protection in Hungary. According to a 2009 law (Law  CLXIII, Act 21 § (5) “filing for breach of confidentiality cannot be applied unless it was done in bad faith .” That is, if it turns out that Horváth made malicious and unfounded charges. But first his charges must be investigated.

Others rightly compared the case to the UD Zrt. scandal in which the victim, Ibolya Dávid, president of Magyar Demokrata Fórum, a since defunct right-of-center party, ended up being the accused. UD Zrt., most likely at the behest of Fidesz, spied on her and on her party. That was in 2008. By the summer of 2009 she was a defendant, and as of today she still hasn’t been able to clear her name in court. Only recently, after she and her co-defendant Károly Herényi were acquitted, a judge ordered that the whole procedure be started again from the very beginning. Viktor Orbán doesn’t forget easily. He blamed her for his defeat in 2006 when she refused to go along with a joint Fidesz-MDF ticket. But Dávid knew what she was doing. Her experience in a Fidesz-MDF-Smallholders coalition when she was minister of justice taught her a thing or two about how Orbán deals with those whom he needs to acquire power and how he subsequently ruins them.

Viktor Orbán naturally has been fairly quiet on the subject of the possible tax fraud at NAV.  He spent the last two days in Brussels. During the press conference after the meetings he was asked about the scandal. He made no mention of the search and seizure at Horváth’s apartment yesterday morning. Instead he explained why “the state machinery hasn’t moved yet.” He would like “to have answers to three simple questions: who committed what and when.” Can you imagine what would have happened to Horváth if he had obliged and answered these questions? Surely, given how the Hungarian system works, by now he would be in pre-trial detention.

Viktor Orbán’s state visit in India

What a happy day for Viktor Orbán. He is on an official state visit to India, with all the attendant pomp and circumstance. I can well imagine his pride when he walked down the red carpet accompanied by a Indian officer, dressed all in white, with sword drawn. And that long line of soldiers several rows deep. I suggest that you take a look at the official photos on the website of the Prime Minister’s Office.

Viktor Orbán in his element / Source: Viktor Orbán Facebook page

In keeping with the Orbán government’s standard practice, the official word of his three-day visit to India came only yesterday afternoon, after he boarded the plane. The trip was announced both in Hungarian and in English. Mind you, the English version sounds a bit odd because it says that “the prime minister holds official visit in India.” (You see, this is what can happen when politicians buy certificates of foreign language proficiency, as we found out a few days ago. Language professors at the Hungarian Reformed University did a brisk business selling these phony certificates. Among their clients they had a VIP group that was handled separately.)

As soon as the news of Orbán’s trip was out, sarcastic headlines appeared in blogs and other Internet sites. I liked the one that read:  “Viktor Orbán will fight for three days in India.” Actually, ever since August when Péter Szijjártó visited New Delhi one could sense that something was in the offing even though in the past Szijjártó’s extensive travels seldom resulted in an invitation for a state visit. This time he was successful.

Orbán was accompanied by Mihály Varga, minister of economics, Zoltán Balog, minister of human resources, and Péter Szijjártó, undersecretary in charge of  external economic relations and foreign affairs. The schedule is rather tight. Today Orbán delivered a lecture at the Indian Foreign Policy Institute entitled “Hungary and Europe in a Changing World,” and later in the day he will address the Hungary-India business forum. After meeting with Shree Pranab Mukherjee, India’s president, he will also “exchange views” with Sonia Ghandi, the chairman of the United Progressive Alliance. Tonight he will be meeting with India’s prime minister, Mamohan Singh, to sign several bilateral cooperation agreements in R & D, medicine, culture, sports, and aviation. Hmmm! Not exactly heavy-weight business cooperation between the two countries. Tomorrow he will open the Mumbai stock exchange and later in the day will inaugurate the opening of a Hungarian consulate in Mumbai.

“More than seventy Hungarian and several dozen Indian businessmen” attended his speech at the Foreign Affairs Institute. Considering that 66 Hungarian firms went along with the prime minister’s entourage, it looks as if Hungarian business interest in India may be greater than Indian business interest in Hungary. I would like to see the list of businessmen who went along with the official Hungarian delegation.

Orbán clearly would like to have more trade with non-European countries. He explained that 82% of Hungary’s exports go the countries in the European Union and three years ago only 8% went to non-European countries. This number by now is 12%, and “by 2018 he would like it to reach 33%.” He was always an ambitious man. He emphasized his own “re-industrialization” project which would provide great opportunities for Indian businessmen. Although the large business contingent indicates that he would also like to increase Hungary’s business footprint in India, the speech emphasized investment in Hungary where there are already a few Indian businesses. I do hope, however, that not too many Indian businessmen remember Apollo Tyres’s attempt to set up a factory in Gyöngyös in 2008, which Orbán managed to wreck.

Orbán spent a great deal of time expounding his long-held belief that European economic success will come only from the Central European region. He claimed that Hungary is one of those countries that have already left behind their economic woes and are on the road to spectacular near-term growth. He asked Indian businessmen and politicians “to put Central Europe on their map.” (The prime minister’s upbeat economic pronouncements came at about the same time a business analyst announced that there are two countries that aren’t following the Central European growth pattern: Hungary and Romania.)

It’s hard to imagine, but he even managed to squeeze into his speech his favorite theory of late: Europe’s past greatness derived from its Christian roots as formulated by Saint Benedict in his rules of monastic life “Ora et Labora” (Pray and Work). Today the old rule is still applicable. Only hard work and a return to its Christian roots will make Europe great again. The Indian audience  must have been impressed considering the religious diversity of their own country where one can find followers of Hinduism, Islam, Christianity, Sikhism, Buddhism, Judaism, and the Bahá’i Faith, just to mention the most important.

Of course, there will be more speeches and a lot of boasting about the successes of Hungary, but only time will tell how useful this trip was. Similar attempts in Russia, China, and the Middle East have brought only meager results thus far.

The latest nationalization plan: Dunaferr

Members of the Orbán government don’t like the word “nationalization.” To be precise, they don’t like the Hungarian word államosítás for nationalization. After all, they claim, the word államosítás can be used only for nationalization without compensation. As it happened after 1945 and especially after 1948. Today the state simply buys companies the government deems strategically important. Mind you, as usual the Orbán government doesn’t tell the whole truth about the recent nationalizations. After all, one of the first  moves of the Orbán government was the nationalization of public schools previously in the hands of the local communities. No one compensated them for their loss. The next step was the nationalization of hospitals. Again, no money exchanged hands.

This government seems to be enamored with the old socialist system of state ownership and centralization although they should be the first ones to realize its pitfalls, which eventually led to the total collapse of the socialist system. But I guess they think they can do better than those old party hacks. I don’t think that I’m alone in thinking that Orbán and his comrades are dead wrong.

I could go on and on listing companies, from MOL to E.ON and Rába, that have been taken over either in full or in part by the Hungarian state. E.ON cost the Hungarian taxpayers 870 million euros and MOL,1.88 billion euros. And now the Hungarian government has offered to buy the ISD DUNAFERR Company Group in Dunaújváros, which is one of the largest industrial firms in Hungary. The company is a diversified manufacturer of steel products. They produce hot rolled, pickled, cold rolled, galvanized strips and sheets, and hollow steel sections for engineering, automotive, and construction products as well as for the production of steel structures, household appliances, and other parts.

The company, owned early on by the Hungarian state, lost money year after year until the government managed to sell it to the Ukrainian Donbass Group in 2004. Later it was taken over by a Russian company. Eventually, the company became profitable but since the 2008-2009 financial crisis Dunaferr has suffered mightily. In an article that appeared on privatbankar.hu today one can see telling graphs of Dunaferr’s losses and debts.

A few days ago the company announced that because of its financial losses, it will have to let 1,500 workers go. Such a decision came at a very wrong time for the Orbán government. Dunaújváros plays a key role in the economy of Fejér County. We must also keep in mind that Viktor Orbán’s beloved Felcsút is also in Fejér County. Székesfehérvár, the first capital of Hungary, is the county seat and the city to which the Orbáns eventually moved and where the young Viktor went to high school. So, the whole issue has a personal aspect for Orbán as well.

On Monday morning Economics Minister Mihály Varga was dispatched to talk to the managers of Dunaferr in order to find a solution to the company’s problems. I assume Varga tried to convince the management of Dunaferr to postpone its decision to downsize its work force.  No buyout offer was discussed.

The decision to make an offer was reached hastily that same day during a cabinet meeting, which was conveniently and appropriately held in Székesfehérvár due to the August 20th celebrations.

Such quick decisions are typical of Viktor Orbán’s leadership style. I am certain that this particular decision, just like all the others, was the prime minister’s alone. Given the company’s dire financial straits it’s hard to imagine that no one in the cabinet raised doubts about the Hungarian state’s ability to take on another losing concern. But at these meetings Orbán is surrounded by yes-men; he doesn’t have to fear serious opposition. Perhaps at the meetings of the high brass of Fidesz there are men like László Kövér or even János Lázár who can have some influence over him, but such people don’t exist among the few ministers and the more numerous undersecretaries handpicked by the prime minister.

In the past it happened that the Hungarian state took over companies allegedly in order to prevent a loss of jobs and yet shortly after the nationalization the new owner, the Hungarian state, had to fire hundreds or even thousands of workers. In the case of Malév, the airline actually folded. It would be good to know whether the government has any business plan that would enable the company to continue employing its 7,500 workers and at the same time turn a profit.

I very much doubt that there is such a plan, so it is likely that sooner or later Dunaferr, this time as a concern owned by the Hungarian state, will have to let thousands of workers go. (Probably after the 2014 elections.) Meanwhile good money is being thrown after bad, as the saying goes. How long can all this go on, especially since only today I read that the deficit is on the rise again?