Not restrictions but reorganization: Orbán’s austerity program

I find it interesting that Hungarian prime ministers in the last five years or so don't dare to tell bad news to the people, looking them straight in the eye. Either they burst out in a fiery speech among the party leaders as Ferenc Gyurcsány did in Őszöd or they tell their secret thoughts to foreign journalists as Viktor Orbán did yesterday. I don't think that this is a very good practice. It certainly worked against Gyurcsány, and I suspect the same thing will happen to Orbán in the coming months.

Gyurcsány for the sake of winning the election in 2006 kept the news of the dire economic situation under lock and key. A few days after the election there was the unexpected announcement that without an austerity program Hungary would not be able to survive economically. The news was bad enough, but Gyurcsány also made the mistake of saying that "it will not hurt much." Well, the Hungarian people thought otherwise.

Viktor Orbán in opposition talked about these austerity measures as a means of punishing the Hungarian people. It is difficult to figure out why a government would want to punish the people it represents, especially when these measures diminish its popularity. Anyway, that nonsense went on for four solid years: there should be no austerity measures, everything can be handled without them. The only thing that is necessary is to get rid of the "commies" who torture the people with these unnecessary measures. The "commies" are so unimaginative that the only thing they can think of are "restrictions," but economic growth cannot be achieved this way. When they come into power they will show how to grow the Hungarian economy and reduce the country's indebtedness without austerity.

Well, for eight inglorious months they have been trying to show that it can be done. By dithering for that long, except for one-off measures, they have done an incredible amount of damage to the economy and to the country's reputation. My feeling is that they would have gone on this way for a few more months because they are very afraid of the inevitable backlash. In the last three months the Fidesz camp has been slowly shrinking and by February I suspect there will be an even larger dip in popularity. Because at the end of January millions of people with more modest incomes will find that their paychecks became a little smaller instead of larger. That will be the day of reckoning. But all that is nothing in comparison to what is expected at the end of February when Hungary must show Brussels that it is making a serious effort to trim its budget in a fundamental way. Not by levying extra taxes on foreign companies and expropriating people's savings.

So, what did Viktor Orbán tell the two journalists that he didn't dare reveal to the Hungarian people? It's best if I quote the prime minister verbatim:

“Financial discipline is important. But when we restore financial discipline, it’s important to reduce the level of redistribution [as a percentage of GDP]. And this year, in 2011, that will be proven, we are reducing that. So I think that structurally the budget is going in the right direction.”

How is he planning to achieve this financial discipline? It seems that it will be done in large part by serious cuts in social services:

“We have to make it clear that the public pension fund cannot pay more out in pensions than it collects. It must be balanced so that we can regain long-term sustainability of the pension system.”

“Nobody can retire without reaching the age limit.”

“We have to provide jobs in the areas of the country where markets don’t. Morally, you can take the responsibility for that kind of cut [in unemployment benefits] if you can provide at least public work. My estimation is that it’s going to take six months from now to set up that system. From July, we have a chance to introduce that system.”

Let's take these pronouncements one by one. As for pensions, at the moment the amount of money received in social security payments is not sufficient to cover the government's obligation to provide for the ever-growing number of pensioners. If one takes Orbán's words at face value, it might mean a reduction in the amount of money current pensioners are getting. That sounds fairly unrealistic since it would be political suicide.

The second suggestion about the retirement age is also problematic. First of all, there are certain professions where employees are entitled to early retirement: policemen, soldiers, firefighters, for example. And we mustn't forget that it was only a couple of months ago that the Orbán government changed the law, allowing women to retire after forty years of employment. Let's say that a woman started working at the age of sixteen; she could retire at the age of 56, allegedly to help to raise her grandchildren.

As for the last sentence, it seems that he is planning to decrease unemployment benefits. Perhaps also shortening their duration and introducing public work projects for those who run out of benefits. 

In addition, he mentioned a reduction in drug subsidies which will be a blow to the elderly, especially to those whose pensions are meager. Although the great master of words, Orbán's personal spokesman Péter Szijjártó, today asserted that drug prices will remain the same. Sure, the prices will be the same, but because of lowered subsidies the patients will have to pay more for them than previously.

Finally, Orbán talked about revamping the country's transportation system. One can only applaud this last item, but then why did the Orbán government reopen lines closed by the Gyurcsány and Bajnai governments that practically no one uses? One also wonders whether free transportation for those over the age of 65 will remain in force. Again, if the government touches that privilege there will be an outcry. We know that people usually get very upset when the government puts an end to an entitlement. I personally think that this privilege is a very bad idea, but I doubt that the government will dare to touch that sacred cow.

So, Viktor Orbán who for four years kept repeating that an austerity program was unnecessary had to realize that without it there is no way to get out of the perilous economic situation. But how can he not be labelled as his nemesis, Ferenc Gyurcsány, was–a liar? I don't know whether he will be able to pull this one off. But the new slogan is that this is not an austerity program, this is "the reorganization of Hungary." In order to make the bitter pill sweeter he announced that everything depends on 2011. If this year is successful, Hungary's fate will be secure for about ten years. For good measure György Matolcsy added that by 2013-2014 there will be an economic growth of 4-6% "if we do our job well, and why wouldn't we?"

I have the feeling that selling this program will be a difficult job.

 

 

 

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lookingglas
Guest

There is no use to cite contradictions between opposition statements and today’s statements. However damning, they are, they won’t get known to the H. public. See media law. That must have been the idea for it.

Guest

This is off-topic, but it may be that some of the readers here can help. Recently I learned of a site from the Center for European Policy Analysis dealing with Central and Eastern Europe. Today I could only find a meager reference on Wikipedia–none of the other links worked. Simply, nothing happened when I clicked on links to the CEPA site. Does anyone know anything about this–or is it just me?

Kevin Moore
Guest

lookingglas: please show where the new media law has kept any medium from publishing any negative opinion on the government or the latest announcements.
To the post: I have no doubts the pathologic Orbán-hater author would very much like to see this austerity program hit the voters hard, but she’ll fail again, as always. Fidesz’s voters are the active people and these measures hit the inactive, the MSZP voter base. Game over.

Member

“Please do not feed the trolls”.
Often, calling someone a troll makes assumptions about a writer’s motives. Regardless of the circumstances, controversial posts may attract a particularly strong response. Experienced participants in online forums know that the most effective way to discourage a troll is usually to ignore them, because responding tends to encourage trolls to continue disruptive posts — hence the often-seen warning: “Please do not feed the trolls”.

Eva S. Balogh
Guest

Kevin, the well informed: ‘Fidesz’s voters are the active people and these measures hit the inactive, the MSZP voter base. Game over.”
Did you ever see sociological analysis of the Fidesz voters? I’ll tell you a secret: they are less educated and less well-off than the liberal and the socialist voters. Fidesz is strong in the villages and in Budapest until now they were extremely weak. But even in the last elections, still 30% of the voters voted for the socialists.
It is true that among the older generation, MSZP was very popular but I’m not sure whether this is still the case today. However, if Orbán does what he promises to do, I bet the pensioners will go back to MSZP.

Sackhoes Contributor
Guest

There is a reference to a very interesting study that attempts to explain why the recent negative international reaction has no effect on Fidesz’ support. (The article is in Hungarian).
Essentially the article states that while there is (some) political debate among the Hungarian elite, the vast majority of the nation either does not understand the debate or simply does not care.
http://hvg.hu/velemeny/20110110_ertekek_fidesz_demokracia#utm_source=hvg_top&utm_medium=email&utm_campaign=newsletter2011_01_11&utm_content=top1

Kirsten
Guest

This time I am inclined to agree with Kevin that even such a programme need not necessarily mean that the support for Fidesz declines in a way that could threaten OV. But not because Fidesz voters are the active ones but because OV is likely to combine that with a campaign that will (in Kevin’s logic) “uncover the truth” (about the lazy and inactive socialists and other suspects, which every upright Hungarian of course avoids to be or to support). Others could call that hate-campaign. Given the diffuse opposition that may suffice for some time. But even if OV succeeded in reducing the deficit and debt and got rid of some “sacred cows” such as the free transportation of pensioners, the damage to the society would be enormous because (like it or not) most of the “lazy socialist” compatriots will still be present (hopefully) and it will still be needed to learn to live in one country on some common ground.

Jo Peattie
Guest

Drug subsidies could be less if Hungarians would trust or accept generics. I do not want to buy Nurofen or Panadol but do not have another choice here. The same could be said for many other more complex drugs. I think that the drug companies, pharmacists and advertisers are the only ones to benefit from this. Hungary needs a Galpharm.

Kevin Moore
Guest

Eva: yes I’ve seen sociological analyses and they said Fidesz voters were typically better educated and better well-off than socialist voters. (Liberal voters are so few they don’t really count.)
And I can prove to you I’m right: see how voter colors look like in Budapest. The more intellectuals in a district, the more secure Fidesz’s supremacy is; the more ‘workers’ and low-class in a district, the more MSZP’s supremacy is secured. In the ‘elite’ districts I., II. and XII. in Buda Fidesz has always had the upper hand, and the same applies MSZP-wise to the areas with huge amounts of blocks of flats in Kőbánya-Kispest or Csepel.
As for pensioners, I don’t think they would go back to MSZP because of the recently announced measures: these leave pensioners alone. They hit those who live off faked disability pensions (mostly wealthy, criminal gypsies speeding in Mercedeses) and those who aim to become pensioners ahead of time, who work in certain sectors.
The ‘chronically’ unemployed, among them notorious skivers, are MSZP’s base.

Kevin Moore
Guest

Sackhoes Contributor: true. Most of what surfaces in foreign press doesn’t even reach the levels of the Hungarian public. And those that reach don’t leave that much of an impact as people are more concentrated on their own living than on opinions that don’t at all correlate with what they’re experiencing in the country.
This is one of the things that has somewhat changed in the recent years. Now I don’t think it could be possible for example for Heti Hetes to trick people into thinking they’re experiencing a dictatorship when in fact they don’t experience anything of the like in their own lives.

Kevin Moore
Guest

Kristen: even if OVi couldn’t effectively tell the people why the govt is taking these measures that hit a (not big) proportion of the population, it wouldn’t necessarily mean a bit hit in Fidesz’s popularity. People are willing to accept strictening measures if they at the same time clearly see its benefits, and not necessarily in the foggy future as socialists always lied.
If, for example, disability pensions and unemployment subsidies are reconsidered, among the government may lose their liking but the same measures cause a rise in popularity among the active population. Actives are typically better educated and capable than inactive, thus being better ‘subjects’ for rational explanations on these measures, plus they basically see and feel their own interests favorized at the expense of the interests of the inactive. There is more to gain on this one than what there is to lose.

John G
Guest
I rather think all this discussion about who will return to or turn away from which camp is at best futile at the moment. The political climate is in a total flux. The results of the last election is an anomaly based not entirely on the popularity of the Fidesz but also because the voters have had enough of the last government. Had Bajnai decided to lead the MSZP I believe Fidesz/KDNP would have still won the election but with a bare majority, not with 2/3 of the seats. Please note everybody the 2/3 refers to number of seats in Parliament and not 2/3 of the popular vote. A serious distinction everybody seems to forget. It is a reality that for obvious reasons the government goes out of it’s way to blur, but must be kept in mind when talking about voting patterns. I know quite a few “active” voters in 4 parties of the last Parliament. Without exception the MSZP voters told me they had enough at about the time Gyurcsany’s health reforms went up in flames, let’s see what Orban can do. (Note they said Orban and not the Fidesz) They either cast their vote for one of… Read more »
Hoping
Guest

This is not very on topic I know but you have to see this on BBC website… http://tinyurl.com/5ux85lr .
This is hilarious. These guys are incapable of being diplomatic, humble, considerate or adult even at home. I thought until recently that the famous Hungarian hospitality was a value that even these guys would try to maintain. Seems not. Reminds me of my 5 year old’s behaviour.

Scott H Moore
Guest

Orbán’s comments are short on details but it seems that his ideas would be a step in the right direction. The number of pensioners in Hungary (many of them under 65) is staggering. So any attempt to reform the public pension systems needs to start with restricting their numbers. The drug subsidies in Hungary are truly ridiculous – they are, in effect, state support for drug companies. They also encourage the over-prescribing of drugs by Hungarian doctors. As the article comments, I have doubts as to whether Orbán will implement these ideas. But general sniping at Orbán will not help. We should be supporting his good ideas and criticising his bad ones – just maybe that will nudge him towards a better course.

Eva S. Balogh
Guest

Hoping: “This is not very on topic I know but you have to see this on BBC website.”
You are wrong. It is very much on topic. These people simply don’t understand! Deaf and blind. Mistake after mistake and total incomprehension about what the problem is.

GW
Guest

Scott Moore,
you are absolutely correct that these are areas in urgent need of reform, but the irony cannot be missed here that FIDESZ stood in total opposition to any attempts by the previous government to do exactly that and their election victory was largely assured by their image as the party that stopped reforms, for example through the referendum against Health Care Reform. Now, in power, and with at least three years of lost time, FIDESZ finds itself having to carry out precisely the same sort of reforms. Talk about lying to voters about the true state of affairs!

An
Guest

@GW: Exactly. Well-said.
Also, watch out for the substantial decrease in future pensions. As much as Fidesz denies it, I think they are getting ready to implement something like the Swedish system. As Orban said, the payouts of the system cannot exceed the pay-ins.. exactly the principle of the Swedish pension system.
So they first force everybody back to the state system, then decrease future state pensions… beautiful. And all under the slogan of “saving pensions”.
It’s not that the pension system does not need the reform. But it is outrageous how the people are being misled about the whole thing.

whoever
Guest

Without wanting to validate any particular policy, I feel it must be said that the pension system as set up in the mid-1990s was a total mess.
The ‘private’ pension funds were in fact anything but private. The money was, basically, stuck in Hungary, mainly in the form of government securities. This was reinforced by the various regulations and red tape surrounding the administration of the funds.
Any downturn in Hungary would therefore be reflected in underperformance of these funds. And – by and large – most of them have underperformed, at a long-range rate barely above real rates of inflation.
I have no problem with the Swedish system of pensions, but doesn’t it at least partially rely on:
a) a state that is not corrupt, knows itself and can actually pull off a successful project within costs
b) a workforce that is skilled and well-trained
c) some amount of global growth, external and inward investment
d) competent and transparent trade unions and NGOs to administer the top-up parts of the pension
e) some kind of link to an effective and compassionate welfare state (not the workfare apparently envisaged by Orbán).

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