It's almost impossible to know what Viktor Orbán's economic strategy will be if he wins the 2010 election. His political opponents try their best to make him admit that under the present circumstances a Fidesz government couldn't do anything else but what the present administration is doing. For obvious reasons, no Fidesz politician will ever admit to that. After all, the party's popularity hinges at least in part on its promise that all the measures introduced by this bloodsucking government will be reversed. Young mothers will be able to stay at home at the government's expense for three years instead of two, a reduction imposed by the Bajnai government. The newly introduced property tax will be abolished. For a while there was even talk about the reintroduction of the extra month pension, but a couple of days ago Orbán said something very tentative to the effect that "perhaps one will have to be careful about its reintroduction" because that is a big item in the budget. The latest Orbán utterance on the deficit was revealing. According to him, the Hungarian deficit should be allowed to grow to the average of the European Union, which at the moment is 7%. It's no wonder that foreign financial analysts consider Orbán's rather irresponsible and obviously political statements a risk factor for Hungary. The latest warning came from Kai Stukenbrock at S&P Credit Research. He expressed his doubts about an Orbán-led Hungary's economic strategy.
However, one may make the same mistake I made in 1998 when Orbán and Fidesz campaigned on a populist, fiscally irresponsible platform. Everybody, including me, already saw the beneficial results of Lajos Bokros's belt tightening campaign disappearing. Squandering (osztogatás) will be continued. At the time Tina Rosenberg in an editorial in The New York Times (June 27, 1998) talked about Orbán's "unrealistic economic promises." In response I wrote a letter to the editor (http://tinyurl.com/nxdxbq) in which I expressed the opinion that "we must hope that Mr. Orban's promises will remain only promises. Otherwise, the economic recovery of the last three years will come to naught." And indeed, they remained mere promises. The squandering started only two years later in anticipation of the 2002 elections. One head actually rolled because of indiscretion. László Urbán, the man who was picked to be Orbán's minister of finance, lost his bid for the post because he made the mistake of saying publicly that the "campaign program" and the "government program" are two different things. Orbán wasn't happy.
The situation is somewhat similar now, eight years later. "Unrealistic economic promises" are followed by cautionary statements made by economists close to Fidesz. Viktor Orbán is quite capable of making a speech at the time of the release of a hefty volume of essays by economists, some of whom are advisors to Orbán, and hail it as "our program." But when it turns out that in one of the essays an economist advocates the introduction of property tax, he then claims that, after all, the contents of the volume are only the personal opinions of the writers and not Fidesz's program. Strictly speaking, of course, he is right. One must say that it is a clever ploy.
The latest twist in the so-called economic strategy of the party is that György Szapáry, a close economic advisor to Orbán, gave an interview to HVG (July 16, 2009) in which he said certain things that contradict the "official" party line. First, let me say a few words about Szapáry. He is blue blood on both his father's and mother's sides. He is the grandson of a former Hungarian prime minister, Count Gyula Szapáry (1890-1892), and his father, also Gyula, was a wealthy landowner in eastern Hungary in Tiszabura, a village of about 2,000. He was born in 1938, and his aristocratic family didn't fare too well after 1945. In 1956 at the age of eighteen he left Hungary, ending up in Belgium. He received his degree in economics at the Catholic University at Louvain in 1961. In 1967 he went to Washington where he worked for the IMF until 1990. In that year he returned to Hungary as the representative of the IMF. Later he was one of the vice-chairmen of the Hungarian National Bank. In 2008 Orbán asked him to be the unofficial ambassador of Fidesz within the international financial community that Szapáry knows well. He was supposed to allay the fears abroad about Viktor Orbán's intentions.
The first surprising announcement was that, as opposed to Orbán, Szapáry doesn't want to increase the budget deficit. "Increasing the budget deficit would eat away the trust that Hungary has slowly begun to regain, and that is something one must avoid at all cost." Hmm! As for what Fidesz is going to do after a possible victory, "we don't know, we have to wait until they form a government." However, Szapáry thinks that Hungary will need further loans from the IMF and the EU for at least two reasons. First, receiving more money from these sources would "increase the trust" of the international community; second, Hungary will not be able to obtain credit at such a low interest rate elsewhere. These loans would be accompanied by certain restrictions that would "force a certain discipline on the government."
Later in the interview Szapáry returned to the 7% budget deficit Orbán was talking about. He announced that he was almost certain that the IMF wouldn't never agree to a further loan on this basis, but he added that he didn't think that Fidesz had such intentions. But new loans will be necessary because the current agreement will expire in March. "The question is which government should conduct the negotiations." In Szapáry's opinion it should be the next one, although the elections will take place only in April and May. Of course, this is an impossible suggestion. No government two months before the elections will cede power to negotiate an international contract. It would be political suicide because it would be an admission of defeat before the elections were held. I don't know how good an economist Szapáry is, but he seems to be totally unfamiliar with political realities. I might add that just today the minister of finance announced that there might be no need for another IMF loan because today's sale of euro-denominated government bonds was a tremendous success. The Hungarian government could have sold three times as much as it offered. However, I can assure György Szapáry and Viktor Orbán that if Hungary needs a new loan from the IMF or the EU it will not be the Fidesz candidate for the post of minister of finance who will conduct the negotiations on behalf of Hungary. Moreover, who knows? He may lose his prospective job just as László Urbán did in 1998 when he told the truth.