Olli Rehn

“Secrets revealed”: Memoirs about the financial attacks on Hungary

Many opposition politicians, especially before the deal between Orbán and Putin became public, suggested that the coming election should be declared a kind of referendum on the European Union. After all, the majority of the Hungarian electorate still supports Hungary’s membership in the Union while Orbán’s favorite target is the European Union. Well, the Orbán government is prepared. Helga Wiedermann, the right hand of György Matolcsy in the ministry of national development and again in the Hungarian National Bank, came out with her memoirs entitled Chess and Poker.

How timely! The book is not yet available in bookstores, but Magyar Nemzet has an advance reader’s copy from which the newspaper quotes extensively. The upshot of the story is that the European Commission, especially Olli Rehn, commissioner for economic and monetary affairs, is a deadly enemy of Hungary. The European Union, conspiring with leading members of the international world of finance, tried through monetary means to unseat Viktor Orbán as prime minister of Hungary. But in the end Matolcsy’s genius guided by Viktor Orbán’s superior vision triumphed against all odds.

Who is Helga Wiedermann? Mighty little can be found out about her on the Internet, which should surprise nobody. The whole Hungarian government is full of people who have no professional background for the jobs they fill. Political loyalty is what counts. I assume that Wiedermann must have had good Fidesz connections because she began her career in Matolcsy’s ministry as “political adviser.” To accommodate faithful Fidesz supporters this administration creates new positions right and left. Matolcsy either must have been terribly impressed with her political advice or received word that Wiedermann needs a more important and permanent job: she was elevated to be Matolcsy’s chief-of staff. When Matolcsy moved over to the National Bank, his trusted chief-of-staff went with him. They created a new position for her called “director general” (főigazgató). According to a blogger who seems to know a lot about the inner workings of the National Bank, Helga Wiedermann is the only person besides Matolcsy who can hire and fire at will. The same blogger calls Widermann a “professional zero,” nothing more than the person in charge of human resources.

Given this background, one must ask how Helga Wiedermann can report on minute details of Ecofin meetings attended by all the finance ministers of the European Union. How did she learn what transpired there? Clearly, only from her boss, György Matolcsy.

According to her story, Olli Rehn from the very first Ecofin meeting Matolcsy attended was a sworn enemy of Hungary at a time when the country was struggling to conquer the economic crisis. For example, at that very first meeting Olli Rehn tried “to portray Hungary in the worst possible light and claimed that the Hungarian situation was as bad as the Greek when Hungary was in fact in much better shape.” Now, that is really funny! I remember distinctly that it was not a long time ago that Viktor Orbán himself claimed that when he became prime minister Hungary was in worse shape than Greece. Well, what is the truth then? I have the feeling that by now even they cannot tell.

There was incredible pressure put on Matolcsy from day one, even from members of the European People’s Party, to extend the IMF-EU loan and introduce an austerity program. After Matolcsy categorically stated that he was unwilling to follow their advice, “he was put under incredible economic and later political pressure.” And yet he resisted.

Wiedermann then moves on to really juicy stuff. How the European Union, conspiring with the leaders of large European and American banks, tried to remove Viktor Orbán and replace him with another Fidesz leader who would not insist on levying extra taxes on banks and instead would be ready to introduce the much desired austerity program. According to the author, the decision to unseat Orbán was hatched sometime in the spring of 2011. By July 2011 there was an attack against the forint, which until then had moved together with the Polish złoty and the Czech koruna. According to Wiedermann, there was no reason for this sudden weakening of the Hungarian currency. On the contrary, the Kálmán Széll Plan had just been introduced and was well received by the markets. Moreover, in the spring of 2011 the Hungarian treasury floated a successful bond issue.

So, what happened? Why this attack on the forint? Wiedermann has the answer. In the spring of 2011 in a New York restaurant six representatives of American investment banks decided to attack the forint. Why did they conspire to do that? After all, these banks didn’t have subsidiaries in Hungary and therefore they were not directly affected by the extra levies on banks in Hungary. They acted because they realized the danger of the Hungarian example. The poor innocent Hungarian official in the ministry didn’t realize what was going on until September because until then the weakening of the forint was slow and gradual.

Source: tenytar.blog.hu

Source: tenytar.blog.hu

The rest of the book is a tale of the brilliance of György Matolcsy, who managed to lift the sanctions against Hungary despite Ollie Rehn’s concerted efforts. Matolcsy had many friends among the finance ministers. Even the finance minister of Finland and Denmark sided with Hungary, although they were close allies of Rehn. A real surprise came when Great Britain and Sweden voted for lifting the sanctions. In brief, total victory for the efforts of Viktor Orbán and György Matolcsy.

The appearance of the book is well timed. This attack on the European Union and American bankers is supposed to sway Hungarian voters to support the heroic Orbán government, which stands for independence and sovereignty. The members of the “Hungarian team” are the defenders of the nation while foreigners wanted them to suffer the indignity of a draconian austerity program. These guys pull out all the stops.

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Another round of talks between Viktor Orbán and José Manuel Barroso

Viktor Orbán had a full schedule today: a lecture in Brussels and three important meetings with José Manuel Barroso, president of the European Commission; Herman Van Rompuy, president of the Council of Europe; and Martin Schulz, president of the European Parliament. A pretty exhausting schedule, especially since tomorrow the Hungarian prime minister is flying to Moscow to have a discussion with Vladimir Putin. The meeting will be brief, only half an hour, but the topics to be covered are weighty: setting natural gas prices for the next ten years and possible Russian involvement in the extension of the Paks Nuclear Plant.

In anticipation of the Orbán visit to Brussels, commentators differed in their assessment of what Viktor Orbán could expect in his negotiations. Some predicted difficult negotiations while others contended that after the two-year-long “freedom fight” it was time for Hungary to mend fences and normalize relations. Interestingly enough, Magyar Nemzet‘s commentator predicted a tough time, especially in light of the IMF-EU report released on January 28. The IMF officials predicted that in both 2013 and 2014 Hungary’s deficit will exceed 3%. If the European Commission takes the report seriously, their opinion might adversely influence Ecofin’s decision about lifting Hungary’s Excessive Deficit Procedure (EDP). And Viktor Orbán’s political future might depend on this decision. If the EDP is lifted, the Hungarian government could spend more freely in 2013 and early 2014 in anticipation of the election sometime in April of that year. Otherwise, further austerity measures must be introduced.

Viktor Orbán’s meeting with  Herman Van Rompuy was also more than a courtesy visit. As it stands, the European Union is planning to reduce the subsidies to Hungary by 30% over the next seven years. Considering that the little investment there is in the country comes from the EU convergence program, a 30% reduction could be devastating to the Hungarian economy.

Orbán began his Brussels schedule with a lecture at the Bruegel Institute, a European think tank specializing in economics. HVG somewhat sarcastically entitled its article about Orbán’s appearance at Bruegel “Orbán teaches economics to his audience in Brussels.” The very idea of Viktor Orbán giving a lecture on “work-based economies” to a group of economists working for this think tank borders on the ludicrous. I also wondered what his listeners thought when he boasted about his government’s achievements and called his economic policies a “true success story.”

The meeting between Barroso and Orbán took place in the afternoon and lasted a little longer than expected. At the subsequent joint press conference Barroso told the reporters that they talked about the upcoming EU summit in early February, about the 2014-2020 EU budget, and naturally the present state of the Hungarian economy. For the time being the Commission has no definite opinion about the past performance of the Hungarian economy, but by February 22 their recommendations to Ecofin will be ready. There was one sentence here that I think needs more clarification: “We also discussed the quality of the economic adjustments.” To me this means that Barroso and the Commission are aware that the way the Hungarian government achieved the low deficit may not be optimal.

Viktor Orbán and José Manuel Barroso at the press conference, January 30, 2013

Viktor Orbán and José Manuel Barroso at the press conference,
January 30, 2013

Viktor Orbán was more exuberant. “It was an excellent meeting,” he announced. They discussed matters that had created friction between the the Commission and Hungary in the past. He claimed that on the issue of the Hungarian National Bank they came to an agreement quickly. He admitted, though, that there are outstanding issues. Orbán indicated that he has no intention of backing down: the European Court of Justice will decide those issues he refuses to address himself. I might add here that cases the Commission sends to the Court usually go in the Commission’s favor.

Barroso sent a message to the Hungarians about the “rights and duties of the European Commission to insist that all national governments respect the laws of the Union.” The Commission tries to be impartial and objective. The Commission, like an umpire, must enforce the rules and regulations. This comment was most likely prompted by last year’s anti-European Union demonstrations instigated by the Orbán government.

Viktor Orbán might claim that the meeting was successful, but serious differences of opinion remain between the European Union and the Hungarian government over economic policies. The IMF-EU delegation predicted that further budget adjustments will be necessary to hold the deficit under 3%. Viktor Orbán disagrees, but I would be surprised if in the next few months, sometime before April, György Matolcsy didn’t announce another new tax in order to boost revenues.

All in all, at least on the surface, the meeting was friendly, or at least the two men pretended that it was. However, both Barroso and Orbán were careful in formulating their thoughts. In fact, Orbán opted to speak in Hungarian instead of his customary English, ostensibly because most of the reporters present were from Hungary. I suspect that the real reason was to avoid any imprecise formulation of his carefully worked out statement.

Whether Viktor Orbán was hoping for a public promise of support with regard to the Excessive Deficit Procedure I don’t know, but he didn’t get it. Olli Rehn, the commissioner in charge of finance, will have to mull over the details of the IMF report as well as the 2012 economic data submitted by the Hungarian Statistical Office. In my opinion, the 2013 budget belongs in a Brothers Grimm collection. The question is what the experts in Brussels will think of it.