As usual, there are conflicting explanations for the Hungarian Stock Exchange’s very poor performance today. The BUX lost 1.78% when other European exchanges moved in the opposite direction.
One explanation came from BudaCash brokerage, which claimed that the drop was due to foreign investors’ eagerness to realize profits before the announcement of the Hungarian government’s austerity program next Monday when Viktor Orbán will make his long-awaited speech in parliament.
Erste Investment Zrt’s spokesman believed that perhaps the IMF’s very sharp criticism of the Orbán government’s economic strategy had something to do with the bad performance of the BUX this week. Moreover, since nobody knows what the austerity package will include, expectations vary from optimism to deep concern.
But the BUX’s performance was not the only piece of bad news. Yesterday the National Economic Ministry announced that the budget deficit in January was 122.8 billion forints, 18% of the planned deficit for the entire year. And that figure doesn’t include the deficits accumulated by local governments. Revenues were 77.4 billion forints less than a year ago while expenditures were 72.2 billion forints higher than in January 2010. Personal income tax receipts alone were 36 billion forints less than a year ago. The reason for this change is obvious: the new tax code.
MSZP immediately reacted to the news in the strongest terms. They called the January figures “a horror story” that shows that not even with “extra levies and the expropriation of private pension funds” can the budget be balanced. According to MSZP “government expenses have increased dangerously.” The Orbán government promised a smaller and cheaper state but expenditures have grown by 150 billion forints in comparison to the situation a year earlier. At the same time, “the unjust flat tax has created a 350 billion hole in the budget.”
The National Economic Ministry tried to sell these very large deficit figures as a great success because, according to the ministry, they “are one of the lowest monthly figures in the last twelve years.” Of course, one can parse the data that way, but such a calculation is questionable because the size of the deficit varies from month to month within the year. One should compare January figures only to past January figures. In fact, the MSZP spokesman pointed out, in the last three years of the Gyurcsány and Bajnai governments there was a surplus in January: more than 30 billion forints each year.
And to add insult to injury, in January the number of unemployed workers grew by 90,000, which is almost one-sixth of the total number of unemployed (680,000). This despite the fact that during the same period the number of available jobs grew by 130%. The surge in unemployment is most likely due to the new regulation that restricts people until now employed full time on public works projects to half-time jobs of four-hour work days. The amount of money they would earn from part-time work is not enough to keep body and soul together. Thus these people are back in the job market.
It was also reported in Magyar Nemzet that the Hungarian government will cut back on subsidies used to lure foreign investment. According to Zsolt Becsey, undersecretary in charge of foreign trade, until now Hungary has been much more generous with subsidies to foreign firms than other countries in the region. That will come to an end. Subsidies will be given only to those firms that use Hungarian suppliers. Even then, the subsidy will not exceed five million forints ($25,386) per new job created.
There is one piece of good news for the prime minister. According to Századvég (a think tank close to Fidesz) almost two-thirds of the people liked Viktor Orbán’s speech. Three-quarters of them think that the speech was “forceful, strong, fit for a statesman.” Mind you, only about 20% of those asked actually saw or heard part or all of the speech. Forty-six percent heard about it only in the news. Six out of ten who actually watched the speech on television or heard it on the radio found the speech excellent because it was “easily understandable and assertive.” Eighty-three percent of the people agreed that the debt is the greatest problem that threatens the future while 98% endorse the notion that people ought to work instead of living on the dole. They also liked the idea of “renewal” (92%), and 64% agreed that “there is a need to have a new constitution that closes the past and opens a new chapter in the country’s history.”
Hungarians buy into Orbán’s rhetoric. They don’t ask how people will transition from welfare to work in a setting of increasing unemployment. They don’t ask what “renewal” means. Realism hasn’t been a strong suit of Hungarians.
And that reminds me of an interview I saw lately, although it was aired last October, with Attila Csernoch who lately has achieved some fame as an author of popular history books. Csernoch was trained as a statistician, later became an economist, and eventually one of the vice-presidents of the Hungarian National Bank in the Kádár regime. He moved to Brazil where he became a businessman. He still lives there but is by now retired. He decided to explain the causes of Trianon and in general tell the Hungarian public the “truth” about their own history.
The interview took place on László Juszt’s “Magánbeszélgetés” (Private Conversation). I wasn’t sure whether Juszt was actually ignorant of Hungarian history or just feigned it, but he looked very surprised about some of the facts related by Csernoch. At the same time, I’m sure that Csernoch shocked some of his listeners when he expressed very negative feelings about Lajos Kossuth and the 1848-49 revolution and war of independence. Or when he pointed out that over the centuries the Hungarians rose against foreign occupation six or seven times and were defeated in every case. He went on to explain the lack of realism that exists in the country and the provincialism that prevents the country’s inhabitants from seeing Hungary and her place in the sun in realistic terms. So, you can imagine Csernoch’s opinion of Fidesz’s victory. I can picture Csernoch back in Brazil reading Századvég’s opinion poll on the enthusiastic reception of Viktor Orbán’s speech on February 7 and shaking his head.
February 9, 2011