I already wrote that one word that mustn’t be uttered by anyone in the Orbán government or in Fidesz is “megszorítások” (restrictions, curtailment, reduction). Because, after all, in the last four years of the socialist-liberal governments Fidesz almost daily criticized the “mistaken” policy of austerity. They claimed that one could easily solve the problem of the budget deficit without doing anything restrictive. Viktor Orbán only a few days ago made some, in my opinion, utterly indefensible remarks about the socialists’ “pleasure” at introducing more and more “restrictions.” He, by contrast, will show that the problems of the budget deficit and very high sovereign indebtedness can be solved without putting any additional burden on the population.
Well, for a short period, while the money lasts, it may be sufficient to levy extra taxes on the banks and some foreign companies. For a while, one can expropriate people’s retirement savings. But again, that money will soon disappear and then what?
The Hungarian government has to come up with something by March because it is in that month that a new convergence program must be presented to the European Union. If not, EU subsidies might come to a screeching halt. In that program the government must show to the satisfaction of Brussels that a serious effort has been made at, yes, “restrictions.”
Of course, an austerity program will be introduced, but for internal consumption it must be called something else. The government came up “revival of the economy.” Just to show that I’m not the only one who finds some of the Hungarian political scientists’ so-called analyses no more than cynical exercises that are supposed to justify what others might call lies, Tamás Bauer severely criticized Gábor Török, a political scientist and a prolific blogger, about whom I wrote several times. This time Török in an interview praised Orbán and Fidesz for basically lying about the nature of the “reforms.” According to him, Gyurcsány made a mistake in telling the truth in the summer of 2006, a mistake that Orbán must avoid making. So, basically Török approves of the kind of double talk Orbán is famous for. To say one thing to a foreign audience and something else for home consumption. The question is, of course, how long one can play this game.
As I wrote a few days ago, Orbán first announced his “non-austerity program” to the Budapest correspondent of The Wall Street Journal, and it was only a couple of days later that he repeated the message in Hungarian at the launch of the New Széchenyi Program. Here is a picture taken at this occasion:
More and more pictures like this one appear in the media inside and outside of Hungary. A rather telling picture of a man who thinks that he can not only move Hungary in the “right” direction but bring about a revolution in the European Union as well.
So, let’s take a look at the “interpretation” of the reforms. Orbán promised to lower the sovereign debt from 80% of GDP to 73-74%. That will be done, according to him, by using the amount of money the government receives from the private pension funds and by paying back the unused portion of the IMF loan. Indeed, with the help of this amount of money the debt can be reduced by 8.4 to 8.7%. Earlier Orbán wanted to reduce the sovereign debt by rapid economic growth, but now it will be done by using up past savings of citizens.
He mentioned in his conversation with the correspondent of The Wall Street Journal that the introduction of the euro is not realistic until the end of the decade. Moreover, it is better to be outside of the euro zone than inside. However, Fidesz in the campaign was promising the introduction of the euro by 2014-2015. In those days Fidesz’s economic expert, Mihály Varga, was championing for an early introduction of the common currency. Today the story has changed considerably. György Matolcsy thinks that the introduction of euro can take place only after the Orbán government creates one million new jobs. That might mean that the government wants to loosen fiscal and monetary restraints. That can also be interpreted as working toward a weaker Hungarian forint.
The system of pensions is a tricky problem. From the amount of money received from the private pension funds 434 billion will simply be added to the budget in order to be able to pay current pension obligations. Another 434 billion will be used to reduce sovereign debt. In three years either individual contributions must be raised or pensions must be lowered.
Other promises for revival involved lowering unemployment benefits, decreasing subsidies on prescription drugs, and introducing reforms in the transportation sector. Cutting unemployment benefits by a third, as Matolcsy promised, would seem to be difficult to achieve, given the high, over 11% unemployment. As for subsidies on prescription drugs, Szijjártó claimed that consumers will not have to pay higher prices. That might mean some kind of extra tax on the Hungarian pharmaceutical industry, which could be a considerable blow to one of the few Hungarian economic success stories. As for transportation, until now Fidesz resisted any reform. They opposed higher rates as well as closing practically unused lines. In fact, they restored several that had been closed by the Bajnai government. Of course, it is possible that they will pursue an entirely different course and will raise fares, but it will be difficult to explain to the people that this is not a “restriction.”
And finally, Orbán talked about “the harmonization of the budget of the member states of the European Union.” In typical fashion, Orbán was against “harmonization” but he was for “coordination.” Apparently that means that within the euro zone the members can “harmonize” to their hearts’ content, but outside he doesn’t have to stick to the strict rules. Most likely that is one reason that Orbán no longer wants to belong to the euro zone. This way Hungary could have greater fiscal freedom than the European Union, the investors, the IMF, and the ratings agencies demand. That goes against the European Union’s directives.
The answers to these questions will come in a few months. Orbán at the moment has an immediate and difficult task ahead. Tomorrow he will have to go to Strasbourg to answer some hard questions about the media law. He will not be in an enviable position. Even some of the European People’s Party’s politicians are leery about his policies in Hungary. Almost all parties in the European Parliament promised to ask tough questions. One newspaper article on the subject called it a “grilling.” We will see whether he will be as feisty and unbending as he normally is.