For years most Hungarian economists have considered joining the Eurozone to be an absolute priority. Even Fidesz politicians criticized the socialist-liberal governments for conducting an economic policy that made joining at an early date impossible. High inflation and too great a deficit were the culprits. However, after 2006 the Gyurcsány and Bajnai governments made a valiant effort to reduce the deficit, and Gordon Bajnai shortly before the end of his term predicted that if the government holds down the deficit for the next three years the Hungarian forint might be replaced by the euro on January 1, 2014. Such a move would solve the problem of the sometimes wildly fluctuating forint and would greatly help the situation of those who are indebted in euros or in Swiss francs.
Because Fidesz seemed so eager to join the Eurozone while the party was in opposition, it was somewhat of a surprise that on Saturday Viktor Orbán announced that “the introduction of the euro is unimaginable before 2020.” In connection with the Eurozone countries holding regular meetings he informed his audience that “Hungary and the Hungarian presidency is not opposed to joint conferences and joint decisions,” but it seems that he doesn’t want anything to do with them. This man’s megalomania knows no limits. On what basis would it even be conceivable for the Hungarian presidency to oppose or approve joint decisions of the Eurozone countries? I’m afraid Orbán as usual thinks that he really is the president of the European Union, a total misunderstanding of the rotating presidency.
Orbán went on to describe in the most pessimistic terms the very hard times ahead for the European Union; it was for this reason that the decision was made to hold regular economic consultations of the Eurozone countries. According to him the necessity of these regular meetings indicates that “the rescue of the euro demands special decisions.” A French-German suggestion would have the Eurozone countries introduce uniform taxation, adjust the retirement age to 67, and each country would have to include constitutional limits on its deficit. In Orbán’s interpretation “the leaders of the seventeen countries decided that solving the Eurozone’s crisis cannot be done within the framework of the twenty-seven countries” currently members of the European Union and therefore “the decision was made that they alone would try to solve the problems with unusual methods.”
Hungary, it seems, doesn’t want to have anything to do with the seventeen Eurozone countries and their unusual methods, but he added that this doesn’t mean the break-up of the European Union. “The ship must be strengthened, made safer, and modernized before the waves arrive.” According to Orbán the member states sail together but each country must strengthen its own boat, and it is up to the individual countries to make sure that they remain afloat. His and Matolcsy’s job is to strengthen the ship of Hungary.
Orbán justified the decision to postpone joining the Eurozone by emphasizing that Hungary cannot adhere to a unified tax code because in that case “it would lose its competitive edge.” The true explanation most likely lies elsewhere. For example, unwarranted tax cuts that without the extra levies on mostly foreign companies and the “nationalization” of private pension funds would leave a huge gap in the budget. I suspect that Orbán wouldn’t want the European Union to have a larger role in Hungary’s fiscal and monetary matters. But for his “freedom” he may be sacrificing the country’s future.
Most economists consider the introduction of the euro an absolute necessity. László Csaba, who before the elections had been very critical of the Gyurcsány and Bajnai governments, seems to be coming to the conclusion that Orbán’s and Matolcsy’s so-called economic policies are disastrous. A few days ago in an interview Csaba, who was apparently asked to be one of the four new members of the Monetary Council of the Hungarian National Bank, announced that “an upright man” couldn’t possibly accept the job. He is staying on as a professor at the Central European University. He is among those who urge the introduction of the euro as soon as possible. Some people point to the Czech Republic’s decision to remain outside of the zone as an example to follow, but as Csaba noted Hungary’s interest rate is currently 6% while the Czech rate is about the same as that of the Eurozone.
The current Hungarian government’s economic policy is based on the hope that sometime in the future because of the tax cuts a spectacular economic growth will take place and thus Hungary will be in a better economic position at the time of its entering the eurozone. But first of all, only György Matolcsy and Viktor Orbán seem to believe in the spectacular growth that is in the offing. Most others, including the IMF or even the European Union’s “finance minister,” think otherwise.
The Hungarian critics who voiced their opinion on Orbán’s announcement about the 2020 deadline fear that by not being a member of the “inner circle” of the European Union Hungary will in fact fall even farther behind the better developed west. Péter Balázs, former foreign minister, recalled the French economist and politician Jacques Delors’s theory that within the EU concentric circles might come into being. The Eurozone countries would be in the first circle; in the second those close to joining; and in the third “the laggards.” Hungary can easily end up in the last category if it doesn’t introduce the euro for another ten years.