For at least two weeks the Hungarian opposition has been making strenuous efforts to lay their hands on the details of the agreement between the IMF and Hungary. The hope was, I guess, that there are provisions in the agreement that the Hungarian government has hidden from the public. The government refused their demand because there was no final document; negotiations were still under way. Well, today the long demanded document, dated November 4, was made public. It must have been a huge disappointment because there is absolutely nothing in the Hungarian proposal that was not divulged in earlier government communications about the deal.
The document released today is not a contract between the IMF and Hungary. Rather it is a carefully crafted grant proposal, obviously written to conform to IMF demands and perhaps even with the help of the IMF. The document is written in impeccable American English, if one considers U.S. Federal Reserve Bank statements impeccable American English. To quote the first paragraph of the document: "Financial market stress in Hungary has intensified in past weeks as a result of events in global financial markets. In response, the government and the central bank of Hungary (Magyar Nemzeti Bank, MNB) have developed a comprehensive strategy to firmly anchor macroeconomic policies and reduce financial market stress. We request that the Fund support our program through a Stand-By Arrangement (SBA) for a period of 17 months in the amount of SDR10.5 billion (€12.5 billion)."
And what is this strategy? Exactly the same as Ferenc Gyurcsány outlined when he first announced the impending agreement with the IMF. Nothing new here. I am not going to copy all the details of this strategy but I have to mention two of the restrictive measures: "keeping nominal wages in the public sector constant throughout 2009" and "eliminating the 13th monthly salary for all public servants." I repeat these two measures here because Fidesz spokesman Péter Szijjártó today had some interesting things to say about these two items.
Fidesz is not satisfied with the document. This is nothing, said Fidesz's financial expert and former minister of finance Mihály Varga, but a loan request. I assume like a small business going to the local bank. Well, it's a bit more. This document formalizes the terms on which the IMF agreed to extend the stand-by credit to Hungary. Negotiations took place, the Hungarian government acceded to certain IMF demands, and the final request to the IMF (which would obviously be approved) was submitted.
Szijjártó tonight repeated the same objections in an interview with Olga Kálmán of ATV. But Szijjártó added a few more accusations. One was that somehow in the "English version" of the document the government sneaked in something that was not in the Hungarian original. First of all, one can say with certainty that the English version is not a translation of the original Hungarian. It is the other way around. If Szijjártó doesn't know English well enough to notice that, it would have been enough if he had paid attention to the link in Népszabadság taking the reader to the English original and another link sending one to "the rough Hungarian translation" (nyers fordítás). Let me quote here the Hungarian translation of this specific passage about the nominal wages and the 13th month salary: "1. a közszféra nominálbéreit végig azonos szinten tartjuk 2009-ben, (2) kiiktatjuk az összes közalkalmazott 13. havi fizetését." According to Szijjártó there is a mistranslation in English (that is what was sent to IMF) that leads one to believe that more people will be victims of frozen salaries and lost benefits than the Hungarian public was told either verbally or in the "Hungarian original." I simply don't know what Szijjártó is talking about. "Közszféra" is the same as "public sector" and that includes all state employees and not only civil servants. Unfortunately Olga Kálmán didn't clarify this whole issue with Szijjártó. Moreover, on ATV's homepage the editors made a big thing about this (I don't blame them!) and next to the video of the interview one can read: "Szijjártó: because of IMF the salaries of public employees will be frozen." Hmmm? I can't believe that he doesn't know that he is purposely misleading his audience.
Fidesz has another objection. He found the important sentence easily enough: "We will consult IMF staff on adjustments to the primary balance target and on eventual corrective measures in the event of a larger-than-expected shortfall in government financing, the level of public debt exceeding its indicative target path by more than 300 billion HUF, or a further significant deterioration of the macroeconomic outlook. We will also follow closely developments in local government finances and will consult IMF staff on possible corrective measures in case the aggregate deficit of local governments exceeds expectations." What? Possible corrective measures in local government budgets might be necessary? No way, says Szijjártó. The country can go to hell, but they are not agreeing to any further restrictions.
Another development is that the Ministry of Finance and the Central Bank put aside 600 billion forints to help out, if necessary, three big banks. For the time being, these banks don't seem to need an infusion of public money but Fidesz is already upset. Until now they thought that the government wanted to help the people, but now it looks as if the people's hard earned money is being given to banks. And banks owned mostly by foreigners. (The split between Main Street and Wall Street is bad enough, but in Hungary Wall Street has a foreign zip code.) As we know from It's a Wonderful Life, banks and people cannot be neatly separated. Banks hold people's money and banks give loans to people. However, Mihály Varga, the financial expert, seems to have forgotten that simple truth. So this is where things stand at the moment.