Will Hungary’s Viktor Orbán fall soon?

It was only a few days ago that I reported on the economic problems of the country which can no longer be covered up by loud self-praise by members of the Hungarian government. How long can György Matolcsy talk about “the first great victory” of his financial policies when every economic indicator shows otherwise? But let’s not fool ourselves, Matolcsy is only “the right hand” of Viktor Orbán. He doesn’t have an independent thought or, if he does, he keeps it to himself. The man who makes economic policy is Viktor Orbán himself. And Viktor Orbán is woefully ignorant of the subject. In fact, I am beginning to think that Orbán’s only strength is destroying his political adversaries. Governing is not his thing.

Since I last wrote about the state of the Hungarian economy the situation has worsened. Inflation is higher than expected and there is more and more talk that Hungary might follow in the footsteps of Greece. (I suppose one can say that in a perverse way Lajos Kósa was prescient.)

Viktor Orbán spent a couple of days in London where he gave a lecture at the London School of Economics before “faculty, students, and journalists.” He talked about the bright prospects of Central Europe. The countries in the region, including Hungary, will be the “motor of European economic recovery.” Most likely at the request of the speaker there was no question and answer period after the talk. I can imagine only too well what kinds of questions would have been showered on him.

In his speech Viktor Orbán insisted that his government is still thinking in terms of an economic growth rate of 1.5%. This was uttered on practically the same day that the European Union predicted a growth of 0.5% while others are talking about stagnation or, even worse, recession.

While Viktor Orbán was outlining the bright future his “unorthodox economic policies” will bring to the country, Hungary’s credit-rating outlook was cut to negative by Fitch. The rating agency indicated that they are also inclined to downgrade Hungary’s sovereign debt to junk status. The decision “reflects a sharp deterioration in the external growth and financing environment facing Hungary’s small, open and relatively heavily indebted economy,” said Matteo Napolitano, director of Fitch’s sovereign ratings department.

Hungary has been having difficulty selling its treasury bills. Last Thursday Hungary cut its offer as yields rose to a two-year high. Just to give an example, the yield on the benchmark five-year government bond rose to 8.099 percent.

A day later Standard&Poor’s Ratings Services placed the country on “CreditWatch with negative implications.” S&P will make a decision this month on Hungary’s credit rating, currently at BBB-. The next move would be to demote Hungary’s bonds to junk. S&P explained the reasons for the decision as Hungary’s “unpredictable” policies, including the dismantling of checks on policies and levying extraordinary taxes on certain industries and banks at the time of a deteriorating economic environment. “A more unpredictable policy environment, stemming from a weakening of oversight institutions and some budgetary revenue decisions, will have a negative effect on economic growth and government finances.”

The question is what the Orbán government’s answer will be to the looming downgrade of Hungarian government bonds. Will Viktor Orbán change strategy or will he stick with his original “unorthodox” ideas? If he chooses the latter, I’m afraid Hungary will find itself in Greece’s shoes. They will not be able to sell the government bonds necessary to finance the repayment of the country’s ever increasing sovereign debt.

Most people doubt that Viktor Orbán will change his mind. He is not that kind of guy, they say. However, more and more people are predicting that the markets themselves will bring so much pressure to bear on the country that he will be forced to resign. Last Wednesday László Lengyel, an economist and publicist, mentioned the possibility of Orbán’s forced departure on a television program featuring political scientists and economists discussing the week’s news.

Lengyel claimed that until now Europe was too preoccupied with Greece and Italy, but now that there will be new governments in both countries Hungary’s problems will come to the forefront. And just as the markets managed to get rid of Georgios Papandreou and Silvio Berlusconi they will get rid of Viktor Orbán as well. His own men will realize that they have reached the end of the road and that if they want to survive politically they will have to get rid of the prime minister.

Péter Róna, an American trained economist, went further yesterday. He even has a successor in mind. According to him “the EU picked its own men to replace the Greek and Italian prime ministers. In the case of Greece, [Lukas] Papademos is one of the deputy governors of the European Central Bank while Mario Monti, the next prime minister of Italy, used to be European Commissioner for internal market, financial services, customs, and taxation.”

 

Thus, says Róna, the EU might replace Orbán with László Andor, currently commissioner for employment, social affairs, and inclusion. Of course, this is nonsense. The EU cannot replace prime ministers of member countries. Moreover, Andor is close to the socialists and his appointment was severely criticized by Fidesz while the party was in opposition. So, we can forget about Róna’s prediction on this front.

At any event, so far just this week two economists have doubted Orbán’s survival because of the dire economic situation of the country. Even Orbán’s faithful man, his former minister of finance and most likely his pick for the next governor of the Hungarian National Bank, was making fun of him just yesterday.

More and more people question Orbán’s ability to govern the country under these circumstances. Of course, he is a great survivor. After all, he managed to remain the head of Fidesz after two lost elections. The question is whether he will survive an economic and financial meltdown of the country.

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An
Guest

@Eva: Despite his credentials, Rona tends to talk nonsense a lot. I wouldn’t take his prediction seriously.
As for Lengyel, I have more respect for him as a political scientist (whatever is the translation of the Hungarian term “politologus”) but I think Orban’s resignation is wishful thinking.
OV is clinging to power, no matter what. He is not the type who’d resign, he can only be removed. This means that under current conditions, only a coup d’etat within Fidesz could remove him.

Paul
Guest

An is right. I’m sorry, Éva, but talk of OV being forced to resign is wishful thinking.
As I always ask at these moments – how is anyone going to get rid of him?
He won’t go of his own accord, he can’t be democratically removed, and there is little or no chance of a coup within Fidesz – they all know they are nothing without OV.
And the comparisons with Greece are false – Hungary is not in the Euro Zone. Do you think there would have been all this fuss about Greece if they hadn’t been using the Euro? They’d have been left to sink or swim. As Hungary will be.
Our only hope is an ‘act of God’ – if something serious happened to OV Fidesz would be the proverbial headless chicken, and the country would rapidly collapse into political and financial anarchy.
But, even if that happened, who would the people turn to to get them out of the mess?
Gyurcsány?

Mouse
Guest

I also tend to see this as wishful thinking, a collapsing economy here can actually help make manufacturing here cheaper and probably for Germany this is more important that the living situation for Hungarians. For sure it is more unpredictable but in the current situation not more so than anywhere else.
Regarding the points that “The EU cannot replace prime ministers of member countries. ” I think we have some evidence to the contrary but for the same reasons as Paul I don’t see this being a priority for Europe. Hungary has the forint, it gives a freedom that my home country shares to try and print their way out of a financial hole.

Eva S. Balogh
Guest

An: “Despite his credentials, Rona tends to talk nonsense a lot. I wouldn’t take his prediction seriously.”
I think very little of Rona myself.

Kirsten
Guest
‘ “The EU cannot replace prime ministers of member countries.” I think we have some evidence to the contrary’ I feel reminded of the often read expectations that “the EU has to stop Viktor Orban”. It cannot, and this is still valid today even if perhaps there are people around who may think that Silvio Berlusconi was removed by the EU. But this case is instructive for Hungary. I agree that it was impossible for the opposition to Silvio Berlusconi to remove him from office without external pressure. As long as the Italian Parliament decided about domestic issues, there were always sufficient people who voted for the PM, no matter how blatantly corrupt this was. (But perhaps this was the will of the majority of voters.) This is very similar to Hungary, even if the concrete circumstances that give the PMs such strong positions differ. Yes, the pressure on Silvio Berlusconi rose when external forces started to worry about Italy, but it was not the EU but the financial markets raising the financing costs. (This can happen to Hungary too, and those people who some months ago asked the “EU” to do something about OV and Fidesz should not start… Read more »
nwo
Guest

Two thought.
1. Hungary has actually adopted very conservative goals (orthodox fetish of achieving a less than 3% budget deficit) but is trying to achieve them through reckless (they say unorthodox) non sustainable means.
2. I actually believe now unlike 2008, EU would allow Hungary to default and go bankrupt. Hungary is both a poster child for bad economics and politics. It is also not systemically not significant. for the Germans who are so bent out of shape on moral hazard, Hu presents a nice opportunity to give the lesson they wanted so much to give with Greece but could not ( due to others reasonable fear of a total Euro meltdown).
3. Given all the bad choices ahead for Hungary, I am not sure default is the worst. Having said that, I am afraid that Matolcsy and Orban will look to Argentina as the model and example to follow.

Kirsten
Guest

‘rendszer’, of course.

dvhr
Guest

When considering Mr Rona’s statements, one should not forget that he already started his own fight for the prime ministerial position: http://www.facebook.com/rona.peter.miniszterelnok?

NewVoiceNewHope
Guest

the iprotest.hu movement needs a clear voice.
a hungarian voice.
gyurcsany must join this movement, and line up behind a charismatic wise potential leader. Can we find one?
the desperate, and not too decent hungarian minority that follows jobbik, and the no soo nice csurka, is asking for reforms, which can give them some hope.
it can not be anything easier than explaining the bankrupt structure of the jobbik, and fidesz, combined with an offer to build up a decent future.

Johnny Boy
Guest

“How long can György Matolcsy talk about “the first great victory” of his financial policies when every economic indicator shows otherwise?”
Lie again. Every economic indicator proves Matolcsy is right. Government debt is getting lower, budget deficit is low (we are in the best 1/3 of EU member countries in this respect), inflation does not grow. The only problem is economic stagnation but the reasons for that are partly external, partly due to the high rate of debt in foreign currency, due to your fav previous governments.
By the way, you of course would be happy if Rona were right. You’d so love to see democracy suspended in Hungary, you’d love to see the voters’ will overruled. This shows your completely anti-democratic attitude. Mind you, Hungary was always willing to defend its independence by military means, so if you are planning to overthrow the legally elected goverment via external means, you’d better prepare for what is to come.

Kirsten
Guest

“Hungary was always willing to defend its independence by military means,”
That sounds like very bleak prospects indeed because how successful has that proved at earlier ocassions…?

Member
Oh Boy….. Just when Hungary is on the brink of default, when people are loosing their jobs, when no one cares to buy Hungary’s bonds, banks are cutting back on loans for Hungary, people’s retirenment income has been forced into government investments, the flat tax that only supported the the top earners failed (even by the admission of Orban), we have Fidesz supporters saying, “Matolcsy is right”. THey grab a micro-economics indicator and nnounce that all well because I pay less for my morning java. No kidding that Orban will stay in power if the fan base is so blinded. lol It would be lucky if Orban would go, on his own or otherwise as democracy, press freedom, freedom of speech, right to protest would be restored. Money spent on mock trials and paintings to illustrations, pianos, expensive cars would go back to balance the books. Lies like “Do not listen what I say” (Orban), “Teachers will not loose their jobs” (Hoffman), “1984 was the first time I could travel to Western Europe [because the regime did not allow]” (Kover) had to ask for a piece of paper “from communist traitors, from the friends of Ferenc Gyurcsány” to travel. [Kover]… Read more »
Paul
Guest

That was a little weak, JB. Not up to your usual standard at all.
Are you still decorating your flat, perhaps?

Odin's lost eye
Guest

Once the great Viktator gained power he is determined to keep it forever. He believes that he and he alone, is destined to rule over all Hungarians. He will stick to power like a limpet sticks to a rock.
Bankruptcy will not move him he will blame Europe for this. Hyper inflation will not shift him he will blame the banks. Spats with neighbouring countries he will blame them. Food shortages will not shift him he will blame the “idegenszívű”. Unemployment at super high levels will not move him he will blame capitalism.
Remember The Viktator is a self-made man who worships his creator. I fear that nothing short of the type of actions which happened in Libya swill shift him.
What a pity that his mother did not throw him away and keep blinking the stork.

Paul
Guest

Excellent article, Kirsten.

Johnny Boy
Guest

Any genuine response Paul?
Don’t you think my points are perfectly valid?

Johnny Boy
Guest

“is a self-made man”
This is the sole true snippet from your pathological rambling.

dvhr
Guest

An earlier opinion from Lengyel:
“Napjaink két egymásnak feszülő hőse Gyurcsány Ferenc és Orbán Viktor. Politikai kétpetéjű ikrek. ”
“Ezen az őszön lejárt a politikai ikrek, Orbán és Gyurcsány ideje. Összekapaszkodva együtt szállnak politikai sírjukba.”(A varázslók halála, Nepszabadsag, September 23, 2006.)

Paul
Guest

That was my genuine response, JB. I always hope for more from you. This blog needs inteligent argument from the opposition. Unfortunately it very rarely gets it.
What about covering all the economic factors, not just those that appear to support your argument? And what about some precise facts and figures, and, dare I mention it, some sources?
How about, for instance, the performance of the Forint against the Euro/CHF/etc compared to the performance of other currencies in the region?
And have you noticed that you are the only poster who tells others how they think?
Perhaps you should ponder that for a while too?

Eva S. Balogh
Guest

To dvhr, Of course, you’re right. The joke about Lengyel is that not one of his predictions has ever materialized.

Member

I’m also pessimistic about his resignation, but actually I’m not sure what other quality politician can follow him from his circles (gutter). His a moron, but we at least know him.
I think he will serve his term. I can imagine that next year we will see the obligatory circus act of narcissistic dictators when they pretend to tender their resignation but they change their minds because of the strong public demand. There will be thousands of adoring old ladies crying and demanding that he stays. In this period Johnny & Joseph will be absent from this blog cranking out the old lady posts but they’ll enjoy the serious overtime pay when it ends.
@JB “you are planning to overthrow the legally elected government via external means”
Are you high? Who do you have in mind? The Martians? Has the spaceship parted already? How much time we have left?

Johnny Boy
Guest

No Paul that was no genuine response.
You still ignore all the points I make in my post.
Until that…

Johnny Boy
Guest

Mutt you could even think about that for a while.
ESBalogh and the similar causatives are always seeking methods of overthrowing the government they don’t like. They did it after WWII, they did it in 1956, and they are trying to do it now.
Now they don’t have the Russian army at their disposal, that’s why they’re trying to arrange a coup from the EU.

Member

@Johnny What’s your definition of “overthrowing”? I really can’t imagine how the EU can overthrow the Hungarian government.

Member

Remember The Viktator is a self-made man who worships his creator
Heh, 100% right.
There’s as much chance of The Dear Leader being forced out by the forces of international finance as there is of me becoming the next Hungarian PM.
The difference between Hungary and Greece and to a lesser extent Italy is the complete lack of *rage* amongst the vast majority of the population. I almost feel I’m back in the UK with the “Life may well be shit but hey, mustn’t grumble” stoicism.
I am convinced we are not far off the economic tipping point; I am less convinced that will herald the departure of OV.

Paul
Guest

Well, if the trolls on this blog are anything to go on, Fidesz seems to be getting a bit worried about all this.
Everything not going as you hoped, then, Vik?
Couldn’t possibly be your stupid policies and the incompetent way you’re ‘running’ the country?
No, of course not, must be those EU/IMF/communist/liberal/Jewish bastards then (delete as applicable).

Ron
Guest

Off topic: Once somebody said to see how civilized a country is, than please look at the treatment of their poor.
Today, this was on the Contrarian Hungarian website.
http://thecontrarianhungarian.wordpress.com/2011/11/13/28-arrested-in-sit-in-against-criminalization-of-homelessness-in-budapest-hungary/

Paul
Guest

oneill – it must be some time since you were in the UK. You’ll be claiming that we’re reserved next!
And what I pick up in Hungary is hardly ‘stoicism’, it’s more like defeatism, or, to put it more positively, keeping your head down.
The real difference between Greece (and Ireland, Portugal, Italy, etc) and Hungary is that Hungary isn’t in the Euro. No one’s going to rush to help Hungary, because its collapse doesn’t really affect anyone – except, as Kirsten pointed out, Germany’s imports get a lot cheaper.

Paul
Guest

“ESBalogh and the similar causatives are always seeking methods of overthrowing the government they don’t like. They did it after WWII, they did it in 1956, and they are trying to do it now.
Now they don’t have the Russian army at their disposal, that’s why they’re trying to arrange a coup from the EU.”
JB, this is one of the maddest things you’ve ever posted on here.
In what way did Éva try to overthrow the government in 56 with the help of the Russian army?!
Whatever you are drinking, I’d put the bottle down and walk carefully away.

Eva S. Balogh
Guest

Paul: “JB, this is one of the maddest things you’ve ever posted on here. In what way did Éva try to overthrow the government in 56 with the help of the Russian army?! Whatever you are drinking, I’d put the bottle down and walk carefully away.”
Absolute craziness. Not only that I was asking the communists to take over in 1948! The man is not quite normal.

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