What did the IMF want from Hungary?

The more I read some of the comments the more convinced I’m becoming that many of you seem to be unaware that in the last few years the IMF has drastically changed tactics. They no longer insist on austerity measures that would place an undue burden on the lower strata on society. Rather, their policy makers concentrate on sound economic and financial policy that should be adopted by the governments in financial need. They want, for example, structural changes that would eliminate waste and would ensure the efficient handling of the economy.

Anyone who is interested in finding out how these negotiations between governments and the IMF are conducted should listen to an interview with János Veres, former minister of finance and a member of the negotiating team that worked out the details of the IMF loan in 2008. From the interview it becomes clear that it is the government that first puts forth a proposal. Then the IMF negotiating team begins discussing the details in order to hammer out a deal that is acceptable to both the government and the IMF. Once the details are settled the negotiating team sends the proposal to Washington where the final decision is made. In 2008 the recommendations were accepted without any further demands or discussions.

When Veres was asked what kinds of demands the negotiators had, he related one that stuck in his mind. The IMF wanted to put aside 300 million dollars in case Hungarian banks needed rescuing. The Hungarian negotiating team didn’t think it was necessary but the IMF insisted. Eventually, the home team decided to relent. As it turned out, a few months later three Hungarian banks needed government assistance.

Now, after a few days of mulling over this latest turn of events, it is becoming clearer why Viktor Orbán kicked out the IMF. Anyone who thinks that I am using overly strong words in describing the IMF’s departure should read the Index‘s list of what government officials have said about the IMF since May 12, 2010. The most outrageous and most often repeated description of the IMF’s departure came from György Matolcsy who on May 3, 2011 was talking about the IMF’s “kipaterolása” from the country. “Paterol” comes from Yiddish and refers to a rough way of “removing” someone from the scene. Perhaps in English we would say: “sent them packing.”

So why did Viktor Orbán send them packing? We know from the Hungarian participants themselves that the first reason was that the IMF wasn’t going to approve the Hungarian government’s “nationalization” of the private pension funds. The IMF officials actually considered the Hungarian pension plan an ideal system that should be followed by other European countries. Second, the IMF objected to the very high levies the Hungarian government extracted from banks, telecommunication companies, and foreign supermarkets. Since then three trillion forints stolen from more than three million people are gone. Banks eked out only meager profits last year, and they are now either unwilling to or incapable of lending money. And finally, the EU found the extra levy on telecom companies illegal according to European law.

But let’s go further. What would have happened if the IMF were not “sent packing” when Hungary spent 500 billion forints (of IMF money) to purchase MOL shares on which the government has already lost a bundle? And they would certainly have objected to Matolcsy’s latest brainstorm of letting people pay off foreign exchange mortgages at a steeply discounted forex rate. Another burden on the already barely functioning banks.

All these moves which were or would have been opposed by the IMF are actually digging the grave of the Hungarian economy. They were self-inflicted wounds that could have been avoided if the two men largely responsible for the country’s economic policy knew the first thing about economics and finance. Mutt Damon was perfectly right when he questioned György Matolcsy’s credentials. In a comment he asked how such a stupid man could get that far. Matolcsy received his degree at Karl Marx University in 1977. At the time there was something called “ipari kar” (industrial faculty) which Matolcsy attended. In the English version of Wikipedia “ipari kar” is translated as “Karl Marx University of Economy of Industry.” Totally incomprehensible. Whatever the curriculum, I’m sure that it bore little resemblance to what was being taught at Harvard, the University of Chicago, or the London School of Economics at the time.

 

The caption reads: This is Stalin’s left ear and there is Orbán’s right hand.

In his speech yesterday, which has been watched with horror by Hungarians all over the world, we can see a totally uneducated man who threw together a speech which students were forced to attend because they had to write an essay on the great man’s weighty thoughts on economics. Instead they heard an incomprehensible speech. They learned, for instance, that China is one country but not really because there are numerous tigers within it. And that the ancestors of today’s Hungarians according to Persian and Byzantine sources were great at “brain surgery.”

Of course, he is not the only one in the government who doesn’t know what he is talking about. There is the great educator, Rózsa Hoffmann, who gave a lecture about the connection between the Hungarian language and Hungarian dignity. The example she gave turns out to be linguistic nonsense. Anyone who’s interested in Hoffmann’s misconceptions should read Klára Sándor’s excellent piece in Galamus entitled “House of Cards on Sand.” The problem is not that Hoffmann doesn’t know about the fine points of etymology but that she is intellectually lazy. People in important positions are spouting off all sorts of nonsense. This is not the way to run a country.

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Ron
Guest

Eva: But let’s go further. What would have happened if the IMF were not “sent packing” when Hungary spent 500 billion euros (of IMF money) to purchase MOL shares on which the government has already lost a bundle?
500 billion euros? I think you mean 500 billion forints, approximately 2 billion USD.

Eva S. Balogh
Guest

Ron: “I think you mean 500 billion forints, approximately 2 billion USD.”
You’re right. Thank you.

Ron
Guest

500 billion forints still a lot of money for a tap (Paul 2011).
Btw it seems that INA the daughter of MOL has a lot of problems. Not only legal (criminal charges), but also cash flow wise, caused by Syria.
I wonder if there is a guarantee issued by MOL to INA’s creditors. If so MOL may also run out of money.

Ron
Guest

Saw György Matolcsy speech on television. I did not understand a thing he was saying. But he did not look ashamed of what happened in recent days.
It reminded me of this Irakian general under Hussein, who did not even blink when a bomb was dropped on top of the bunker he was in.

Eva S. Balogh
Guest

Matolcsy in MTV’s “A lényeg” (The essentials)
http://videotar.mtv.hu/Kategoriak/A%20lenyeg.aspx

Paul
Guest

“The more I read some of the comments the more convinced I’m becoming that many of you seem to be unaware that in the last few years the IMF has drastically changed tactics.”
Speaking personally, Éva, you are quite right. I had no idea that the IMF had revealed its softer side.
But when I read on:
“They no longer insist on austerity measures that would place an undue burden on the lower strata on society. Rather, their policy makers concentrate on sound economic and financial policy that should be adopted by the governments in financial need. They want, for example, structural changes that would eliminate waste and would ensure the efficient handling of the economy.”
I began to have my doubts.
These sort of phrases are exactly what the right here in the UK uses when they want to institute “austerity measures that would place an undue burden on the lower strata on society”, but don’t want to admit it.

Paul
Guest

PS – I’d love to read Matolcsy’s speech, but Google would garble it even more.
Does anyone know of an English translation?

Eva S. Balogh
Guest

Paul: “PS – I’d love to read Matolcsy’s speech, but Google would garble it even more. Does anyone know of an English translation?”
I don’t think so, but the important part is quite short. I will try!

Eva S. Balogh
Guest

A change of pace. About the Attila József statue and the “verse marathon” around his statue. The more I think about it the more I agree with those who claim that he was one of the greatest poets of the 20th century. Here is his famous “Mama.” László Majtényi, former ombudsman, put it up.

Ron
Guest

Paul do you want to read a speech in English. Her is one of VO at the Opening Session of World Science Forum.
http://www.orbanviktor.hu/in_english_article/speech_by_viktor_orban_at_the_opening_session_of_world_science_forum.
Did you know he was a street fighter in the mid-eighties?
And education should be similar to what they have in China, India and Singapore?
I counted 9 times Dear Ladies and Gentlemen can you beat me?
And basically when a politician from the West speaks, he/she speaks only about crisis.
And he is doing his work in humility towards the ultimate goal, whatever that is.

Paul
Guest

Thanks Éva.
Ron – one of my recreations is to read OV’s speeches on his web site. Very odd indeed, I can’t work out if his English is really that bad or if the people who update his site translate from an original Hungarian script.
The combination of his weird English (where on earth did he learn it?) and the way he talks when he makes speeches is utterly baffling.
Check out his speech to the LSE, and in particular the Q&A session. It’s not so much his answers that are strange, but the questions are all so lame. Someone in that audience must have had some idea of what was going on in Hungary, but you’d never know it from the questions.
My wife often contrasts Orbáns English to Gyurcsány’s (favourably to Orbán), but I’m sure I saw an interview with Gy once where he spoke excellent English (and came across as a very nice, thoughtful, intelligent chap – not my wife’s view of him at all!).

Ron
Guest

Eva on the 12th of November you wrote:
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.
I do not know if there were questions asked. However, according to his website questions were asked, including about the IMF.
http://www.orbanviktor.hu/in_english_article/speech_at_the_london_school_of_economics
Interesting is the part of Question 5 (IMF) where he states that leaving IMF was a risky business. That does not sound like good governance.

Ron
Guest

Paul: About the Q and A sessions at LSE.
The questions are long and so are the answers. I doubt it that anybody asked these questions, unless it was memorized before or it was staged afterwards.

Gabriella
Guest

The available bits of news in the last few days were contradictory, and in most cases utterly senseless. Szijjarto’s misterious absense, Matolcsy’s nonsense combined with Orban’s cocky security made me uneasy about this whole fiasco.
Eva, you were discussing how difficult the negotiations will be with IMF just a few hours before Orban made his comments, as if everything already happened, and IMF was not only eating out of his hands, but Hungary would get extra brownie points for graciously taking IMF back.
Is there a possibility, that they know something that is not revealed yet on
IMF’s side? is it possible, that Orban agreed to something in secrecy, including selling his and the soul of the 2/3’s?
Is it possible he is aleady sure IMF will forgive and forget?

An
Guest

@Gabriella: I am sure there is no secret deal…. Orban is just arrogant and clueless as usual.

Paul
Guest

Agree with An. He is playing for time. The currency/bond crisis was too much, even for him, so he came up with something that would kid the markets into easing off.
He can drag this out for several months, especially with Xmas coming up. Then, if things still haven’t improved, he can actually take out an IMF loan. It won’t seem so radical by then.
He’s a short-term tactics man, not a strategist. And, in terms of surviving against the odds, he’s pretty good at it. Although at a tremendous cost to Hungary.

Member

The link to Attila Jozsef’s Mama doesn’t seem to work. But here is another by Jozsef Madaras, IMHO the benchmark on this poem. Better than Zoltan Latinovits’ version 🙂


Member

Mutt Damon, Thanks for the link. I watched a very few versions now. It gives me goosebumps. It just figures that the biggest priority of this government is to remove the Attila Jozsef’s statue.

mouse
Guest
Sorry to see Eva falling for the “Enemy of my enemy” fallacy. The IMF may have improved it’s publicity machine but inside I don’t see any significant change in behaviour. Their actions are shaped by a model of capitalism which results in the transfer of wealth from poor to rich based on an ideology that capitalism must not be restrained by government (unless it is the wrong kind of capitalism). For sure in the case of Hungary they would have made sure that the banks were in better shape, they always take care of the banks. Likewise given the current state of the world economy I’m not sure that having another LSE, Harvard educated or Chicago boy running the economy would do anything more than sooth the international markets and convince them that their interests have a voice. One of the points I note in politics here is people are continuously falling into the trap of assuming because I don’t like A and B doesn’t like A then I should support B. Until it progresses past this I don’t have much hope for politics here. I don’t approve of the actions of Viktor Orban, but his actions in whichever direction… Read more »
An
Guest
@Mouse: “Their actions are shaped by a model of capitalism which results in the transfer of wealth from poor to rich based on an ideology that capitalism must not be restrained by government ” Well, they actions (IMF’s )are foremost shaped by making sure that the countries that receive IMF money will be fiscally responsible and pay back their loans. They are not more insidiously capitalist than the average banker and honestly, they are not motivated by some secret conspiracy to make poor people poorer in any country. True, that at the same time, as their main goal is solvency, they do not really care how that solvency is secured… by which I mean, they don’t care about the social costs a country has to pay or if there are other options that may be less painful… they are operating with an ax rather than using a scalpel. As for Hungary, where the current government is running amok with grandiose but unrealistic ideas with no sense of fiscal responsibility … well, in a situation like this, IMF is actually good news and can save the country from its insane government. Our guys let to their own devices would run the… Read more »
peter litvanyi
Guest

Dear “mouse”,
I totally second your point here. Thank you for producing the letter I was about to produce in a bit here.
Dear Eva,
“Matolcsy received his degree at Karl Marx University in 1977.” Do you have anything against University Karl Marx or lately Corvinus? Nearly half of my graduating class ended up at Karl Marx/ Corvinus. I find your tone of voice extremely offensive and I won’t tolerate it any more. Karl Marx/ Corvinus is/ has always been an institution of learning on par with other universities from all along the globe.
If Mr. Matolcsy is an asshole; well that’s because he is. Perhaps he should have taken his studies at Karl Marx more seriously and be not such an asshole. Where did Gyurcsany Feri graduated from? Not sure, just a thought.
Sincerely:
Peter Litvanyi

An
Guest

@peter litvanyi: Well, good old Kozgaz (Karl Marx University, or Corvinus), before 1989, was not teaching a lot of stuff that would come handy in a market economy. They taught mostly Marxist political economy, at least they called it that…. not sure Marx would have been happy to hear how his ideas were interpreted/simplified/distorted to fit politburo’s ideology during those times.
Though it’s possible that Matolcsy is using some old economic policy textbook from there… as I remember, that was one of our most idiotic textbook when I went there (and that was just right after 89, I think the economic policy textbook wasn’t yet updated).
It wasn’t such a bad place though, I tend to be overly critical with higher ed. institutions.

Eva S. Balogh
Guest

Peter Litvanyi: “I find your tone of voice extremely offensive and I won’t tolerate it any more.”
Who says that you have to tolerate it?

Eva S. Balogh
Guest

Gabriella, Orbán is lying. As usual. By now I’m convinced that he is a pathological liar.

Ron
Guest

IMF confirms receipt of request for possible financial assistance, and mention that a similar request was made to the EU.
http://www.imf.org/external/np/sec/pr/2011/pr11422.htm

Member
I think Eva’s comment about Karl Marx University at the time is right on. To attend this university at the time you did not need to much of a high aptitude for studying, but more commitment for the governing party and some track record with that. Now, there is nothing wrong in believing in communism or Marxism for that matter. What is wrong that the same party that vehemently goes after anyone and everyone who they suspect with being a sympathizer of the past communist regimes (Rakosi style, McCarthy style and Orban style) has no misgivings about the qualifications of a man like Matolcsy. Even though Matolcsy together with Orban are so awfully bad politicians and economists that they even failed to fail what they were against. What is upsetting that if they hate the IMF so much (and its factually stated by them), they are also failing with any alternatives. Hungary is not segregated from the rest of the world, and as long as the world operates under certain economical principals (capitalist, industrial, Western, bank driven, name it how you wish), Hungary either become part of the current economical times or it will fail. SImple that is, Hungary is… Read more »
Odin's lost eye
Guest

What did the IMF want from Hungary?. When you sign up to join the IMF, you sign up to allow them to periodically ‘Look at the Books’ and comment on them. It is now that time in the examination cycle.
If the Viktator wants insurance he should go to ‘Lloyds of London’ they do that sort of thing (for a premium).
When you buy ‘Fire insurance you receive a ‘policy’. That policy tells you what you can and cannot do in your house. They also tell you the maximum value of any item they will insure. Mine tells me that I cannot machine Titanium or depleted Uranium in my workroom. In addition my postillion is not insured against lightening

Pete H.
Guest

Fidesz has introduced a law into parliament that would criminalize the socialist party.
“”Due to the personal continuity binding the leadership of the old and the new party,” the Socialists (MSZP) should be held accountable for the actions of the former communist regime, which has until now escaped scrutiny,…”
Read more: http://www.montrealgazette.com/news/Hungary+hold+socialists+account+communist+regime/5743224/story.html#ixzz1eMjIAQ4E%22
Please contact the US Helsinki Commission members to voice your concerns about this latest attack on democracy in Hungary. I am in no way a supporter of MSZP in Hungary, but I am a strong supporter of democracy in Hungary. This law would be a serious blow to Hungary’s democratic development.
Eva I trust you will covering this alarming development.

Paul
Guest

I’m surprised it’s taken this long for them to introduce a anti-MSzP law like this, I predicted it months ago.
I suppose they didn’t bother until now because they thought they’d walk the next election. Maybe it’s a sign that their confidence is slipping?
Has Gy jumped just in time? Slightly ironic if he has!

Pete H.
Guest

Paul, it is not clear that this would apply only to MSZP, but rather to the “heirs” of the communist regime. My guess is that GY’s new party would be part of that family tree according to this legislation. They of course ignore that many Fidesz members have such a pedigree.

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