Let me start with Viktor Orbán's trip to Berlin and his talk with his old friend Angela Merkel. A few minutes after the meeting there was a joint press conference, the video of which was immediately up on the website of the German chancellor. It was interesting to see how nervously Orbán behaved while listening to Merkel's brief talk. Until the camerman decided to cut away, we saw him using his right hand to listen to the simultaneous translation and constantly fussing with his left hand.
Both talked about the necessity of taxing the banks. Let's state first and foremost that this is a very popular move with ordinary citizens. However, there are at least two important differences between the German and the Hungarian bank levies. The Hungarian government is using it to fill a gap in the budget they themselves created by introducing tax cuts and other popular measures. The German tax will be used to create an emergency fund in the case of future bank failures. Also, the size of the Hungarian tax is much larger than the western plans hitherto introduced. I guess one ought to mention that although Viktor Orbán today in parliament repeated his often used excuse that the banks caused the crisis and the government had to bail them out, in the Hungarian case neither accusation is correct. The banks in Hungary didn't require government help and they certainly didn't cause the Hungarian economic crisis. In fact, the foreign owned banks kept their Hungarian branches comfortably liquid.
Orbán's most surprising announcement was that since the loan agreement with the IMF expires in October there is no necessity to continue negotiations with the IMF. Hungary will pay back the billions it borrowed from the IMF in the next two years and that's it. (I admire Orbán's optimism about the state of the Hungarian economy in 2011 and 2012!) From here on, Hungary will talk only to the European Union. The subject of these talks will be how Hungary will reduce its promised deficit of 3.8% this year to under 3% by the end of 2011.
But while Orbán in Berlin insisted on abandoning talks with the IMF, his deputy Tibor Navracsics, speaking with Michael Brainer, the EU commissioner in charge of internal markets and services, expressed his hope that Hungary would come to an agreement with the IMF. Lajos Kósa, vice-chairman of Fidesz, was also sure that Hungary's negotiations with the IMF will reach a satisfactory conclusion.
But it is even more interesting that today Péter Szijjártó, the personal spokesman of Viktor Orbán, claimed that Economy Minister "György Matolcsy made it clear over the weekend that the Hungarian government would of course continue talks with international organizations including the IMF, EU, and the European Central Bank."
Iryna Ivaschenko, the resident IMF representative in Budapest, also tried to be helpful and encouraging. Today, in the early afternoon, she expressed her belief that "there was still a slight chance" of coming to an understanding but, she added, "first the Hungarian government must radically change its attitude toward the budget reform and to the independence of the national bank." The IMF, as opposed to what the Hungarians claim, complained not only about the size of the bank levy and the reduction in the salary of the bank chairman but more importantly about the obvious reluctance of the Orbán government to make long-range plans for deficit reduction. The IMF delegation thought that the "economic package presented is to a large extent of a temporary nature. It in no way assists the handling of the deficit of 2011." Indeed, structural reforms would be necessary to take care of the problem in the long run.
Ivaschenko also corrected Orbán, in case Orbán didn't know the facts: the IMF and the EU loan negotiations cannot be separated from one another. "The IMF worked hand in hand with the EU. This is a common program and it will stay that way." Orbán also seems to think (or pretends to think, we don't know) that the IMF has no right to inquire about any details. The Hungarian delegation told the IMF-EU delegation that they would stick to the promised goal of 3.8% and that's it. However, this is not the case. According to János Veres, finance minister in the Gyurcsány government who was the chief negotiating partner in the original agreement with the IMF-EU delegations in 2008, part of the agreement entailed "the constant monitoring" of Hungary's performance.
The IMF's spokesman in Washington repeated the Monetary Fund's readiness to continue talks at any time. But if American and Hungarian media reports are correct and the IMF-EU delegation left on Sunday because the Hungarians refused to lower the amount of bank levy, then the IMF offer might be in vain. The Hungarian parliament tonight voted with of course an overwhelming majority to accept the proposal for the enormous bank tax. It is quite obvious that Orbán has no intention of compromising. In fact, he repeated several times in the last two days that he and his government are ready to go against "the taboos of the last century." I guess one of these taboos is to fly in the face of international organizations and expectations. Moreover, if the IMF and the European Central Bank were upset over the Hungarian government's attack on the independence of the Hungarian National Bank, their concern was justified. Another piece of legislation that was accepted in parliament today was to reduce the salary of the chairman of the National Bank.
Financial Times, Deutschland published a long article about Hungary today in which the author, Christian Höller, declared that Hungary under Orbán's guidance is again moving toward bankruptcy ("Ungarns rechter Weg in die Pleite"). Höller claimed that Hungary since Orbán took over became "one of the most problematic" countries in Europe because Orbán combines two dangerous traits: obstinacy and nationalism. He believes in a "Hungarian solution." Indeed, he is brave and is ready to go against the whole world. In fact, today in parliament in an answer to Attila Mesterházy, he expressed his opinion that "the Hungarian elite must not behave like frightened chickens." He accused the MSZP delegation of siding with the IMF-EU delegation. As he said, "I heard all these objections a few days ago, only in English." And, he continued, "the [MSZP] politicians weren't really the representatives of the Hungarian people but panicky, nervous brokers."
Orbán after his meeting with Merkel gave a lecture at the Society for the Promotion of Culture (Gesellschaft zur Förderung der Kultur) entitled "What Next Hungary?" (Wie geht as weiter in Ungarn?" The author of the article added: "That is a good question."