The Hungarian parliament goes on vacation and the IMF visits Hungary

Although Hungarian politicians claim that there will be no real lull in governmental and political activity during the summer, parliament had its last session yesterday. Thanks to a very diligent webmaster the video is already available on the internet. You can see it here: Some of the highlights: János Veres's five-minute report on the economic developments of the first six months of the year. He naturally blamed Viktor Orbán's ill-conceived and irresponsible announcement about the restructuring of Hungary's debt load for the large drop in the value of the forint on Friday. As I mentioned in my letter to the blog, since Monday morning the forint has risen steadily against the euro. Other speeches of interest were those of Tibor Navracsics, Ferenc Gyurcsány, and Gábor Fodor.

I especially enjoy watching the faces of politicians when they are listening to their colleagues. This time I concentrated on Mrs. Pelcz neé Ildikó Gáll, an economics professor at the University of Miskolc who appeared on the political scene out of the blue and was immediately elevated to a high position in Fidesz. Apparently she was Orbán's discovery. She was seated next to Tibor Navracsics, head of the Fidesz delegation (even that shows her relative importance within the party), and it was amusing to watch her as Navracsics decried the abysmal economic performance of the country and the total failure of the current government. She nodded in agreement and, if Navracsics happened to say something clever, she smiled in appreciation. Not unusual, of course, and certainly not confined to the opposition. Just fun to put a human face on parliamentary proceedings.

One heard the usual statistics about the members: for instance, 75 didn't say a word between September and June. Now everybody can go home with the exception of the cabinet members and their undersecretaries and some MSZP VIPs. They will be closeted in a government compound at Dobogókő, an all-season resort not far from Budapest among the Pilis Mountains. Somehow I don't think that it will be all fun and games: for two solid days there will be discussions about the next steps to be taken by the government. The most important questions: further reductions in spending, tax relief, especially for workers, and how to increase employment. As it now stands illegal work plus welfare payments offer as much or more income than the minimum wage. Therefore for some people there is no incentive to enter the labor force. The four economists from Oriens have been invited to this retreat to outline their bold plans for the revitalization of the economy. As I mentioned earlier, it's most unlikely their plan will be accepted. The government will undoubtedly pursue a more cautious course.

Meanwhile a delegation of the International Monetary Fund headed by James Marsink arrived in Budapest for meetings with the government and officials of the Hungarian National Bank. The members of the delegation were impressed with the government's handling of the very high deficit: in 2006 it was over 10%. They claim that the goal of a budget deficit of 4% this year is attainable and are pretty certain that in 2009 it will further shrink to 3.2%. According to their report, there is no room for tax relief without a simultaneous decrease in government expenses. They think that because of global inflationary pressures there may be a need for further interest rate hikes. They predict a GDP growth of 2% this year, 2.5-3% next year. They welcomed the surprising growth in exports and in industrial production. And they give the usual cautions about risk in the banking sector in light of the global meltdown. All in all, there is nothing revolutionary in these statements, and they seem to jibe with the government's predictions.

This in large part boilerplate IMF report may not have been the best news for Viktor Orbán, who in the company of György Szapáry, former vice-president of the National Bank, had a conversation with the IMF delegation this morning. Orbán didn't say much afterwards, but the few words he uttered indicated that he repeated the Fidesz mantra that Hungary is in the throes of a serious crisis and that only his election as prime minister can rescue the country. His companion, György Szapáry, attended the meeting because between 1967 and 1990 he worked at the IMF in Washington. A brief bio: Szapáry comes from a historically important noble family. He was born in 1938 and in 1956 he escaped first to Austria and eventually to Belgium where he received a degree in economics at the University of Leuven. In 1990 he returned to Hungary as the representative of the IMF. In 1993 he became one of the vice-presidents of the Hungarian National Bank. He is close to Fidesz and Viktor Orbán. He attained some notoriety when as the deputy of Zsigmond Járai he went to Brussels to squeal about the Hungarian government's attempt at creative accounting (actually it seemed reasonable; it just didn't conform to EU accounting standards) when it came to road construction. Today Szapáry is entrusted by Viktor Orbán with some public relations work to quiet worries in international financial circles in case Orbán takes over the reins of government.

And finally one more thing. MSZP is not alone in having a retreat to analyze the state of the country and to forge strategy. On June 13 Fidesz will do the same. But in Fidesz's case there seems to be no need for any change in strategy. It seems to be working supremely well: just keep repeating that the country is in crisis, that economic collapse is imminent, and more than half the country will believe it.