But why would they? Any sane politician, realizing the negative impact of his government’s statements on the financial markets, would have carved out a little wiggle room. But not the new Hungarian government. In the early afternoon Péter Szijjártó, who is the prime minister’s not the government’s spokesman, in effect repeated what Lajos Kósa said yesterday, which had sent the Hungarian forint into a tailspin. So today the forint fell even more against the euro (which itself was very weak), closing at 289.225 forints to the euro, whereas yesterday it was just a little over 282. At one o’clock the stock exchange began to fall precipitously. Not surprisingly Hungary’s largest bank, OTP, was the hardest hit. Trading in OTP was suspended for a while, and by the close of trading it was down 11%.
Analysts simply don’t understand what is in the heads of the Fidesz politicians, though all sorts of theories are circulating. I don’t think that I will be able to come up with any answer. Instead I will try to piece together the events and comment on them.
Let me start by stating my strong belief that yesterday’s political announcements were coordinated. It couldn’t have been a coincidence that Lajos Kósa and Mihály Varga came out on the very same day with very similar messages about the dire state of the Hungarian economy. It is also no coincidence, in my opinion, that these announcements were made on the same day that Viktor Orbán was meeting with José Manuel Barroso in Brussels. Let’s fix the approximate timeline of these events based on the time that the MTI reports were released. The world learned about Kósa’s speech at 2:45, about Varga’s comments at 3:00, and MTI reported on the press conference after the Orbán-Barroso meeting at 4:39.Thus, it seems that the Kósa-Varga speeches were timed to precede Orbán’s meeting with Barroso.
Did Barroso learn about the Hungarian announcements? I doubt it, but even if he did I don’t think that he would have fallen for the dire messages about impending bankruptcy. Of course, we don’t know what kind of story Orbán told Barroso. Very possibly the same his faithful lieutenants frightened the Hungarians and the world with. From Barroso’s public statement it is clear that the president of the European Commission wasn’t moved. But by that time the whole mechanism had been put into motion.
Late last night Péter Szijjártó, who accompanied Viktor Orbán to Warsaw and from there to Brussels, returned to Budapest and gave an interview to MTV’s “Az este,” an evening political program. The transcript of Szijjártó’s conversation can be found here. In it Szijjártó minimized the financial turmoil that had beset Hungary. He even joked about the connection between Lajos Kósa’s speech and the fall of the Hungarian forint. Let’s keep in mind that Péter Szijjártó cannot utter a word without first consulting with Viktor Orbán.
Some analysts assume that Orbán and his team simply have difficulties switching from their position as spokesmen of an opposition party when they could say anything without serious consequences to their status as responsible representatives of a government. But this seems a weak explanation since Péter Szijjártó was sent out again this afternoon to give another press conference with the same message Kósa had formulated the day before. Szijjártó announced that he didn’t think that Kósa’s description of the situation was an exaggeration and repeated Kósa’s sentence about Hungary’s slim chance of avoiding Greece’s fate. He repeated Kósa’s charge that the previous Hungarian government had falsified the figures just like the Greeks had. The Hungarian government is ready to avoid Greece’s fate and, after finding out the truth, it will not hesitate to announce its plans.
So far so good because one could interpret these words as the government’s recognition that the Orbán government must follow the path that Gordon Bajnai and Péter Oszkó, his finance minister, chose. But during the question and answer period it became clear that this is not what Orbán has in mind. When asked about tax cuts Szijjártó announced that drastic tax cuts will take place as planned regardless of the “real” figures. He reiterated the Orbán government’s plans for a stimulus package and expressed his hope that tax cuts and the introduction of a stimulus package can be achieved at the same time.
Well, that press conference was so “successful” that the Hungarian crisis further deepened. The reaction, just as a day earlier after the Kósa-Varga speeches, was immediate. If Szijjártó made light of the influence of political utterances on the financial markets, he could now experience firsthand the connection between his own speech and the reaction of the international financial world.
What now? Viktor Orbán spent the day in the flood-threatened areas in northeastern Hungary and called together an “extraordinary cabinet meeting,” ostensibly to discuss the serious physical damage created by the weeks of heavy rain and the swelling of all the rivers and streams. The cabinet meeting was so urgent that the ministers couldn’t even attend the much heralded Trianon Memorial Session. One can be pretty certain that flooding will not be the only topic. Perhaps not even the most important topic of this cabinet meeting.
A broad spectrum of the Hungarian media have condemned the new government’s handling of economic matters. Even those internet papers that in the past expressed opinions that were sympathetic to Fidesz are turning against the Kósa-Varga-Orbán line. Portfolio.hu published an opinion piece that pretty well predicted the failure of György Matolcsy as super minister of economics and development. Index.hu bluntly announced that “Fidesz managed to ruin the stock exchange and the forint.” The same Index published an opinion piece in which the author announced that the days of “symbolic politics” must end. It is time to govern and govern responsibly.
But how can Orbán and his political cohorts get out of this very sticky situation without losing face? Perhaps we will find out this weekend.