At least this is what one hears. Apparently some people are seriously thinking about moving their savings, currently in Hungarian banks, out of the country. And the Austrian banks are ready to receive. Burgenland, the Austrian province bordering on Hungary, is dotted with billboards inviting Hungarians to deposit their money in Austrian banks where "it is safe." This can happen if a government in an illegal manner expropriates assets belonging to individuals. Because people say to themselves: if they could do that to my savings in the pension funds why couldn't they do the same thing to my bank savings? Most likely the worry is unfounded, although by now I can imagine almost anything. A few months ago who would have thought about the expropriation of about $13 billion that had accumulated in private pension funds over the last twelve years?
Anyway, the bug has been planted in people's heads and I wouldn't be at all surprised if a fair number of people make a little trip across the border to Austria for the purpose of transferring money to a foreign bank. Ferenc Gyurcsány wrote about this in his blog a couple of days ago. He recalled the late 1980s when people with their $50 allowance in hard currency packed up the whole extended family in their Trabants or Wartburgs and headed to Vienna where on Mariahilfer Strasse there were signs in Hungarian: "Our salespeople speak Hungarian." The big items then were Gorenje freezers. The pilgrimage was necessary because there was a shortage of appliances in Hungary.
Now, the shortage is in trust in the Hungarian government. And after the flight of money might come the flight of people, especially since soon enough Hungarians will have free access to the German and Austrian labor markets. As it is, this year half of the newly graduating physicians left the country. The association representing the newly graduated doctors claimed sometime early in the year that if they were just given slightly higher salaries they would stay in Hungary because after all they are patriotic Hungarians who feel best in their own country. Well, it didn't work out that way because patriotism is not enough. I can't even blame them. Abroad they will get good training, perhaps better than in a Hungarian hospital, and they will get much better pay even as interns in a hospital.
As for the expropriation of savings that accumulated in private accounts, it seems that the European Union will tolerate it although it is not happy about the economic and political steps the Hungarian government has taken in the last six months. As a matter of fact, from next year on such "nationalization" of private funds will be forbidden throughout the EU. Hungary just managed to squeeze through. But Matolcsy must have gotten an earful in Brussels. The European Union demanded the utmost consideration of the people's rights. Hence Viktor Orbán's own recent proposal to make the returns that accumulated tax free. Originally, adding insult to injury, the proposed bill stipulated that returns that were paid out to the owners of the pension funds would be taxed. In the original proposal there were only a handful of offices in the whole country where people had to appear in person to express their desire to remain with the private funds. Otherwise, their accumulated savings would automatically be transferred to the big black hole of the Hungarian budget. Now, most likely as a result of pressure from Brussels, people will be able make their desire known in regional offices closer to home.
Second, although earlier there had been some vague talk about "reforms" sometime in the spring, Matolcsy earnestly promised extensive reforms by February. Apparently Matolcsy was told in Brussels that the European Union would accept the budget only if the 2.9% deficit was for real. That is without the extra revenues coming from the private pension funds and the extra taxes levied on banks and certain companies. Well, that will be a challenge, especially if the "structural reforms" are genuine. It is a known fact that reforms initially cost money. Moreover, according to economists the creators of the budget overestimated the revenues that will be received next year. Among other things they are counting on a fair amount of money being repatriated. No questions will be asked, and people who repatriate foreign accounts will have to pay only a low 16% tax.
Considering that people are actually thinking of moving their money abroad, it is very unlikely under the present circumstances that people will oblige. The Bajnai government tried to entice people to do the same thing, and its effort was spectacularly unsuccessful. If that was the case then, I'm certain that the Orbán government, after the state's coup against private property, will have even less of a chance of convincing people to bring their wealth back to the country. Meanwhile the deficit is growing and growing because less revenue is being received and the government is spending and spending. I am rather skeptical that the Hungarian government can fulfill the expectation of Brussels concerning an "honest budget" without billions being extracted from ordinary citizens, banks, and foreign companies. Then what will Brussels do?