Hungarian right-wing economists in the service of politics

It was on November 29 that I wrote a post entitled "The Hungarian budget debate: Politically motivated economists and others." There I pointed out that most of the signatories were not economists, either well-known or not so well-known, and that those whose names ring a bell–Péter Ákos Bod, Zsigmond Járai, and György Szapáry–all held high positions during the Orbán government. Therefore the publication of an open letter to members of parliament in which they were urged to vote against the 2010 budget was most likely politically motivated. Said I. I also added that these people seemed to be so committed to the cause that they were even ready to dole out a considerable amount of their own money: the letter was published as a paid advertisement. It was not a small ad but a full-page spread!

As it turned out I was too naive. It has since become clear that the initiative came not from the "well known economists" but from Fidesz itself. Therefore the cost of the paid advertisement was most likely also covered by the party. Fidesz killed two birds with one stone. It managed to convince three or four serious economists and financial experts to support the party's position on the budget and at the same time it helped out two important right-wing dailies by placing an expensive ad in their pages.

How do we know that the "open letter" was a Fidesz creation? Because György Szapáry, who might be a good economist but is unfamiliar with the pitfalls of politics, spilled the beans. Inadvertently, of course. He was invited for a friendly chat with Olga Kálmán (Egyenes beszéd/Straight Talk at ATV) who wanted to know the circumstances in which this letter was born. Who initiated it, whose idea it was, when Szapáry learned about it, and from whom he received it. And here our man fell victim to his own political inexperience. He admitted that the organizers "were people from Fidesz who deal with such things." "Not politicians but those who work for Fidesz in the background." After he most likely realized that he had said something he shouldn't have Szapáry added: "One may say that it was drafted by economists supporting Fidesz." Then seemingly realizing that he was digging himself deeper and deeper into the hole he said: "It wasn't Fidesz that phoned me."

If one compares Szapáry's explanations for the need to write such a letter to what Viktor Orbán says about the subject there is an important difference. The party's line is that the government budget is based on fraudulent data. Szapáry doesn't go that far. He argues that the budget is too tight and therefore poses greater risks than are indicated. One never knows what can happen. Let's say one or two hospitals or one or two towns go bankrupt, then what? The central government surely will give them a helping hand. Olga Kálmán at this point interrupted and pointed out that the government considered such eventualities. There is a very large reserve in the 2010 budget that can be tapped into in case of need.

Szapáry wasn't convinced. He came up with a couple of other, in my opinion equally weak, arguments. One was that the budget doesn't include the cost of those "structural changes" that are necessary to lower expenses. For example, MÁV (Hungarian Railways) will receive 40 billion forints less next year but the cost of closing certain lines doesn't show up in the budget. Olga Kálmán again interjected that these "structural changes" most likely will take place this year and, even if not, the cost of closing some lines is really minimal. OK, if that didn't convince Olga Kálmán, Szapáry tried another argument that went something like this: a government that is in the throes of an election campaign doesn't really care much about the budget that it just passed. In other words, this government between January and May will spend and spend without the slightest regard to its promises to the IMF and to the European Commission as articulated in the 2010 budget. Well, we have seen such behavior. For example, in 2002 when by May the Orbán government spent eighty percent of the yearly budget!

The reporter pointed out that everything Szapáry was saying is framed in the conditional. Yes, Szapáry admitted, but "the government" will take a look at the real situation. By "the government" we must understand the new Orbán government. Surely, Fidesz doesn't want to increase the deficit. After all, they want Hungary to belong to the eurozone as soon as possible but "they would like to see clearly." If it turns out to be "five, six, or seven percent" they will say "it will be difficult but we will fix it. But they want to know what they are facing." Olga Kálmán remarked that it looks as if Szapáry "is worried about the next government." Szapáry's answer: "Of course not. I'm not a member of the party."

One doesn't have to be a party member to be a supporter of a party and surely Szapáry is a supporter. But for one reason or another he didn't shine during the interview. It is a truism that anything can happen. A meteor might hit Hungary. Of course, there can always be surprises either within or outside the country that might upset the apple cart, but urging members of parliament not to pass the budget just because it is "tight" or because "there are risks" doesn't strike me as sound economic advice. Put it this way, Szapáry and his friends seem to be in the minority. Former finance ministers, including the usually very critical László Békesi, praise it as a courageous document which most likely will put Hungary on the road to financial health. Foreign financial experts heap praise on the Bajnai government's economic moves since April. From Fidesz's point of view the trouble with the budget is that it is indeed too tight. It will not allow Orbán and his team to fulfill all their empty promises. That's why they are madly looking for a way out. To find "some skeletons" in the closet that could be used as an explanation to double the deficit and blame it on the former government. We will see whether they succeed.