Where will Viktor Orbán’s economic policy lead?

Just as I predicted, the bad financial news is continuing in the wake of the announcement of the “Budget for the Protection of the Nation.” The forint is steadily losing ground to the euro, the Swiss franc, and the U.S. dollar. A couple of weeks ago as a result of the intervention of the Swiss Central Bank the weakening of the forint against the franc stopped, but in the last few days the trend reversed. Today it closed at 241.44 ft to 1 Swiss franc. The weakening of the forint against the euro is spectacular. The exchange rate reached 292 forints to the euro, a record in the last twelve months.

The Budapest Stock Exchange isn’t doing any better. MOL today lost 4.3% and OTP 3.34%. I’m following the price of MOL stock with special interest because I considered the Hungarian state’s purchase of MOL shares from Surgut a very bad investment. They paid over 23,000 forints per share and at the moment one MOL share is worth 14,495 forints. That’s something on the order of a 37%+ decline.

While all this is going on, Viktor Orbán announced that the government today “will close the age of bankers” and “will protect the people cheated by them.” His government figures that foreign currency debtors will be able to borrow money in forints. And here we are at the crux of the matter. It is becoming quite clear that Viktor Orbán is hoping to ruin the foreign banks at the expense of Hungarian ones. Mind you, OTP, for example, is mostly owned by foreign investors (85.9%) and domestic shareholders own only 14.1% of the financial institution. The Hungarian state has no stake in it. However, OTP and a couple of other domestic banks can more easily raise forints than foreign banks, so the kind of solution Orbán is talking about clearly favors OTP and Sándor Csányi, its CEO and Orbán’s close buddy with whom he can be seen at soccer games.

Viktor Orbán confidently announced in his speech a week ago that he is not worried about foreign banks leaving Hungary, but an unnamed president of a foreign bank told Origo that he doesn’t know “when the parent banks will decide that they’ve had enough, but the time might be close.” In the last year and a half these foreign banks received unexpectedly heavy blows from bank levies, from losses on loans to individuals and municipalities, and now here is the opportunity for borrowers to pay off their foreign currency loans in one lump sum at a fixed rate. The Hungarian branches keep asking for more and more capital, but by now patience is running out and their activities in Hungary are being restricted.

So, as I said, as a result of these government measures the Hungarian banks may receive a boost at the expense of foreign banks. OTP, for example, has plenty of forints since it is the favorite bank of Hungarians with saving acccounts. From the latest move of the Hungarian government OTP will undoubtedly benefit most, but there are two smaller Hungarian banks: Széchenyi Bank of István Töröcskei, another man close to Orbán, and the Gránit Bank of Sándor Demján, another Fidesz supporter. At the moment these banks are small and fairly insignificant, but it is possible that in this new situation they will be able to expand their activities.

Meanwhile Orbán keeps repeating that the flat tax–which according to most observers created the current crisis in the first place–is so successful that it will have to remain on the books for ever and ever. One way of making sure that no future government can possibly change this unfortunate tax structure is to include it as one of the “cardinal laws.” That means that the current system can be changed only with the votes of two-thirds of the members of parliament.

Yesterday Orbán gave an interview to Metropol, a free and very popular newspaper, a day after his interview with Blikk, another popular tabloid. It is clear that he would like to reach as many people as possible by talking to newspapers with large circulations. Reading these interviews, however, one comes away with the uneasy feeling that there is something very wrong with Orbán’s sense of reality. Among other startling announcements, he said that “Hungary must become one of the manufacturing centers of Europe.” Pray, how? How can anyone take this statement seriously, especially under the present circumstances?

He ended his interview by claiming that “one mustn’t think of changing the current direction because any other policy would lead us to the fate of Greece, toward the precipice.” Most economists think exactly the opposite. They claim that the current policy will lead to tragedy and the ruin of the country and that’s why there are more and more people raising their voices: “Orbán must go!”

 

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Member

“Yesterday Orbán gave an interview to Metropol, a free and very popular newspaper, a day after his interview with Blikk, another popular tabloid. ”
I think maybe Metropol was ordered to make an interview with Orban. Metropol was sold in June to Megapolis Media Zrt. Megapolis was registered on June 2nd, and the purchase came together on June 6th. THe owner and the CEO of Megapolis both long tied to Fidesz (Orban), and have filled important positions through the years in Fidesz. Actually I fund a great article on Galamus about the subject: http://tinyurl.com/3su7ug9

Member

Very soon he will start threatening with nationalization of the banks.
Is he playing the Chavez script?
I guess when the food shortages will start he’ll nationalize the supermarkets and acuse them of price gouging.

Kirsten
Guest

That is really a recipe for disaster, not exactly Greek style, OV is actively working towards declining living standards, Greece (as Hungary during the Kadar years) has lived above its means but was not actively seeking to devastate the economy. Strange that OV still does not see the link to communist ideas in economic control.

Paul
Guest

Slightly off-topic – there’s a very good article on the forex loans situation on the Contrarian Hungarian blog: http://thecontrarianhungarian.wordpress.com/2011/09/16/paying-off-forex-loans-the-hungarian-way/#comment-204
It’s long, but it’s well worth a read. The author puts forward the theory that the reaction of the government (and the people) to the banks re the forex loans is not based on the economics of the situation so much, as on a basic feeling of injustice towards banks and their methods.
I thought this made a lot of sense, and gives an interesting (and I think accurate) wider insight into Hungarian’s behavour/attitude to banks/economics/etc.
The Contrarian Hungarian is an excellent blog, by the way, well worth checking out.
Éva – could you add it as a link from HS?

Paul
Guest

By the by, in the same article, the author says that one of the stipulations in the new law re forex loans (where you can repay the whole loan at a fixed FX rate) is that it’s not available to MPs.
A few days ago, one of the regulars (I can’t remember who) posted a comment about Kósa taking advantage of this new law – but, as an MP, he can’t.
Or has he found some way round that?

cba
Guest

@ Paul. Yes, although it was the MSZP who suggested the exemption for MPs clause.

Kirsten
Guest

Paul, the author of that article interestingly calls it “medieval crusaders logic”, for me this is always stunning how prevalent the middle ages are in Fidesz (but also broader) thinking. What I think is the biggest problem is perhaps not that they want to do something about the forex loans and the perceived “injustice” (and abstracting from the target group of beneficiaries), but that Fidesz by that repeats the precedent of being unable to recognise private property and private responsibility. They did not do it with the private pension funds, they try this (which will not succeed as any court will consider this a violation of law) and next time they choose other private savings as Eva already suggested. Simply it makes it likely that they will blur further the concept of private property, then of citizens’ rights and so forth. It is currently already Orwellian in some moments but they might be tempted to continue in that direction. And that is why, whatever one might think about banks and “injustice”, it is the implications that I find most worrying.

Paul
Guest

Good points, Kirsten. Unfortunately (as someone with quite a bit of money invested in Hungary!) I suspect you are right and we will see this blurring increase.
More and more I think that we need psychologists to analyse OV’s actions, rather than economists and politicians.

Paul
Guest

“Is he playing the Chavez script?”
No.
Leaving aside the facts that: a) Venezuela has money (and lots of it), which Hungary doesn’t, and b) Chavez is quite happy to give much of this money away to his political friends in other countries, which OV would never do, even if he had any friends, Chavez’s political philosophy is entirely different to OV’s.
Chavez’s big difficulty, and the reason he is so reviled by the right, is that he favours the poor over the wealthy. OV’s policies do the exact opposite.

peter litvanyi
Guest
It is not on my card to be subtle or tactful; am not proud of this fact. Perhaps it is a new beginning now, on odd days I am hoping so. This is no longer a debate about History/would be nice/. We are somewhat united here to put an end to Mr. Orban Viktor’s despicable dictatorship. If our common association ended here I would be very sad. There is /actually/ a lot more we share. In a way we are “those abroad”; we should add and benefit from the vantage point of our status. Roughly the same applies to those who are now Hungarians but never asked for it /like Paul or Odin’s/. Let us stand for democracy and openness. Let us stand for a better World. I live in Colorado where the now almost exterminated Natives though that your voice was your being. This is my voice and I stand behind it. I am asking you to name yourselves from now on. This is not Eva’s request. A voice is a voice and should be celebrated so. Let us be who we are, please! Stand behind your voice and let’s do it! A good starting point and what’s next?… Read more »
Paul
Guest

cba – thanks, but ‘yes’ to what?
‘Yes’, the new facility isn’t allowed to MPs, or ‘yes’ Kósa has found a way round it?
And while I’m at it, how come an MSzP amendment got accepted? That can’t happen too often!

An
Guest

@Paul: “And while I’m at it, how come an MSzP amendment got accepted? That can’t happen too often!”
The fact that Fidesz politicians could take advantage of the forex loan repayments, got really bad publicity really fast. I think Fidesz quickly realized how bad it looks on them if they let MPs cash in, so they accepted MszP’s amendment.

Paul
Guest

Thanks An.
This probably explains the Kósa post I was referring to – presumably posted when the fuss broke, but before the amendment was made.

Member
Paul: “The author puts forward the theory that the reaction of the government (and the people) to the banks re the forex loans is not based on the economics of the situation so much, as on a basic feeling of injustice towards banks and their methods.” Hungary had a choice to stay with the Kadar Goulash Communism or start on the road of capitalism. In 1989 the people decided on capitalism. Now, they have capitalism. (What they do not have is democracy.) Suddenly Orban turns around and says, I do not want capitalism as it is, I wanted under my terms, so I will privatize whatever I want, and I also will punish the banks. I think Orban things that Chna will pull him out of the deep sh*t he is in, but what he is not counting on is that China will only invest in Hungary because that is the easy road to the West. If Orban burns up all the relationship with the West, China will walk away. Peter Litvanyi: ” This is my voice and I stand behind it. I am asking you to name yourselves from now on. This is not Eva’s request. A voice is… Read more »
GDF
Guest

Peter Litvanyi:”PS; Dear “Mutt” or whoever you are /see text/; what the fuck do you know about Chavez? You know it’s working. A couple friends of mine just visited.. ”
1. I doubt this language belongs here.
2. I had the misfortune to visit Venezuela during Chavez’s regime. It was the first time I felt like I used to when I lived under Ceausescu.
3. I guess all of us have our individual reasons for using or not using our real names here or elsewhere. It seems to me that using real names is not a requirement for posting here.

pusztaranger
Guest

“By the by, in the same article, the author says that one of the stipulations in the new law re forex loans (where you can repay the whole loan at a fixed FX rate) is that it’s not available to MPs.”
But it is. The MSZP-proposal of excluding MPs and members of the government was not supported by the Fidesz-majority, the Austrian Press Agency noted yesterday.
http://www.boerse-express.com/cat/pages/1197595/fullstory
About 1/3 of Hungarian MPs (of all parties) have forex loans. If they meet the requirements, they can pay back their loans now like everybody else.
The Contrarian Hungarian is a great blog indeed, check him out on Facebook too.

John T
Guest
Unfortunately, Hungarian politicans (of all shades really) don’t really bother to look at the bigger picture and the Forex issue is a very good example of this. In Orbans eyes, it’s simply a case of slapping the nasty foreign banks who exploited Hungarian citizens. And of course this resonates well with the population, especially those who took out the loans to finance things they couldn’t really afford, even in calmer economic times. As I said elsewhere, I’m sure the banks pushed these products. But the people who took them out were no doubt told of the risks, but chose to ignore them. And if the loans were mis-sold, then of course it will have most likely been Hungarian employees who did the misselling. But by using the poisonous language he has against the foriegn banks , and pushing a proposal that potentially hammers the banks and lets the loan holders off almost scot free, he is also putting another nail in the coffin of his relationship with the EU and other Western European governments. I suspect they are by now heartily feed up with the stupidity coming from the government in Budapest and I would think it will take decades… Read more »
Paul
Guest

Orbán seems to be working on the naive assumption that China is some sort of altruistic Fairy Godmother, and the deal will be entirely one-way – in Hungary’s favour.
This level of naivety from a man almost single-handedly ‘running’ (ruining) a country is almost beyond belief.
Anyone with any awareness at all will know that the Chinese are only in this for what the Chinese can get out of it. They will dictate the terms, and they will pull out as and when it suits them. Orbán will have no real control over it at all.
And if he puts all his eggs in the Chinese basket (because he has fallen out with everyone else) and the Chinese then decide that they no longer need Hungary or to switch to another country (Albania anyone?), then the only eggs Orbán will be left with will be all over his face.
With a sane and rational person in charge, a careful and controlled deal with the Chinese could be of great benefit to Hungary. But with OV in charge it has ‘potential for disaster’ written all over it.

Paul
Guest
As for naming ourselves, I have a strong dislike for nicknames on the internet (there are some incredibly stupid ones around – although not on here, thankfully), and always use my own name. However, although I started on here using my full name, once I began to realise the full horror of what OV was up to and where it could lead, I decided to be a little more circumspect. This will sound like paranoia, I know, but what if one day we get to passport control at Ferihegy and my name appears on a blacklist because of ‘anti-Hungarian activity’? Admittedly, it wouldn’t be too hard for Fidesz to identify me, as there are plenty of clues in my posts, and I stand out a lot more in Kósaland than I would in Budapest. But at least I’m not giving it to them on a plate. And a name change at this stage would be a bit pointless, as I suspect my ‘voice’ is very much my own. Paranoia, as I say, but people didn’t believe what could happen in the 30s in Germany either, and Orbán is increasingly painting himself into an irrational corner, where his behaviour will become… Read more »
Hoping
Guest

I have a CHF mortgage in Hungary… when we took it out we were explained what the risks were. But when faced with the choice of a mortgage in CHF with an interest rate of 6% and a mortgage in HUF with rate around 13%, the choice was not so hard. Would be interesting to do the calculations to see if I had taken the HUF mortgage whether I would be paying more or less than I do now while suffering from the CHF/HUF rate.
And the reason for not using my real name is because I am scared. Deomcratic rights are being attacked every day. Judicial system is clearly being shaped to allow convictions to be based on political orientation rather than on the breaking of any law. Yes I am scared.

Odin's lost eye
Guest
Professor you write that ** “While all this is going on, Viktor Orbán announced that the government today “will close the age of bankers” and “will protect the people cheated by them.” **. Shades of the medieval accusations about usuary! So Hungary is going to return to the early medieval period or perhaps to a time before 600 BCE. When I take a motor to be rewound how will I pay for it? By giving them two chickens and a pot of jam! My gas bill paid by a pig and two goats etc?. First of all apart from the three Hungarian banks you have named all the others are subsidiaries of foreign Banks. These foreign banks are all ‘Joint Stock Companies’ with boards of directors elected by their stock-holders. Quite a few of the directors and CEOs of those banks who got into trouble have had to account to their shareholders and have ‘fallen on their swords’. They have paid the price for their sins. Banks in reality have no money of their own. They have their depositor’s money which they hold ‘in trust’. All the rest (their assets, their reserves and their profits) belong to their debtors and… Read more »
Paul
Guest

The photographers who took the photos of the speeches the other day have been banned from Parliament.
http://thecontrarianhungarian.wordpress.com/2011/09/20/photographers-banned-from-hungarian-parliament/
Lassan, lassan…

Member
Paul: “The photographers who took the photos of the speeches the other day have been banned from Parliament.” Yes, and it was already reported by Mutt Damon yesterday. “Laszlo Kover kicked out the journalists from the parliament and from the building that hosts the PM’s offices who took pictures of the Orban speech. Not the particular photographers but ALL the photographers of the Index.hu and origo.hu Freedom of speech! Here we come … Posted by: Mutt Damon | September 19, 2011 at 12:01 PM” With all due respect to everyone, I have no problem with thecontrarianhungarian as I read it myself, but can we all stop quoting from there? It is a blog, just like this one, and delivers its facts from other publications. It is a second source (just like this blog). The two blogs have different approach to various issues. If you want to bring attention to various happenings, maybe you want to use the original source. In this blog Eva chooses what she would like to discuss, on that blog it’s author decides what would he/she like to discuss. I so not see that many of you refer that blog’s readers to visit this one or for… Read more »
Eva S. Balogh
Guest

Paul: “The Contrarian Hungarian is an excellent blog, by the way, well worth checking out. Éva – could you add it as a link from HS?”
There is a certain etiquette governing linking blogs. It is usually a mutual courtesy. The two authors agree that they will exchange links. I didn’t receive any such request or offer from the author of the blog you mention. I don’t even know who he or she is. I’m familiar with the author or authors of all the links that can be found on Hungarian Spectrum. I think that’s the correct approach.

Eva S. Balogh
Guest

Some1: “I cannot find the interview now, but he said that “MPS should not have any privileges but should also should not suffer any drawbacks” in the course of their activities.”
I think it was in the Blikk interview.

GW
Guest

With all of the focus on parliament members’ mortgages, might we once again return to the question of how OV was able to buy the land and build a large house in a very pricy section of Budapest’s District XII on the salary of a Hungarian MP and PM?

florian
Guest

Umm I used to be someone else on here. I would love to remove my details from previous comments but do not think it can be done. It was all getting a bit personal and not at all nice. Any suggestions Eva? I typed in my previous persona on the google search and up I popped- unfortunately.

KAM
Guest

Sorry. This is off topic. I am trying to access a copy of the MSzP’s “Nemzeti modernizáció, összetartó közösség” (National modernization, cohesive community). The link on your older blog post no longer works. I found a pdf of something labeled as “2010 program” on the MSzP website, but it is only about 15 pages long and does not sound like the document you reference in your post (the one that discusses the 2010 program). Wonder if you have any suggestions. Thanks

Guest

Thanks for that link to the contrarian Hungarian – there really is a lot of food for thought there (just as her on Eva’s blog) …
I didn’t want to spend so much time here – but I can’t pull myself away (as we say in Germany) …

Thecontrarianhungarian.wordpress.com
Guest
Dear Prof. Balogh: I want to be sure that you know that any readers who may have asked you to link to my blog did not do so at my request. If anything, they probably did so out of respect to you, with the recognition that your blog is the well-established, authoritative English language blog on all matters Hungarian, and of the fact that you have considerable resources to help out new blogs like mine. I was not raised in the Hungarian system of “nem illik” and “nem szabad” so I’m not familiar with “linking etiquette” – which seems far from “mutual” to me. I am not sure how well you know others you link to, and I am not sure whether I have the means to become personally acquainted. If you are ever in the New York area, I would be happy to meet in person. There is of course a lot you know about me if you read my blog, as you say you do. I go by the name “Contrarian Hungarian” in part because I receive a considerable amount of hate-mail from the unpleasant Hungarian neo-nazi crowd, and because I am not yet tenured as a professor.… Read more »
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