Viktor Orbán, after taking the profits of the banks, supermarket chains, and telecommunication companies, began piling new taxes on businesses and individuals. But it is still not enough. His latest idea seems to be to raid the foreign currency reserves of the Hungarian National Bank. Naturally, András Simor, the governor of the bank, will have something to say about this latest “unorthodox” plan of the Orbán government.
What Hungarians think of these endeavors is well documented in this caricature:
Look, they are taking the thief that way!
All this came to light last Friday, the day the prime minister makes his weekly appearance on the Hungarian public radio station, MR1. During his first administration these weekly conversations used to be on Wednesdays on the Hungarian public television station. He himself picked the reporter who wouldn’t give him any trouble. No difficult questions. In fact, the softball questions only furthered his agenda. He would, with the help of the reporter, propagate his political messages to a wide audience.
The new Friday sessions are organized in very much the same way. The willing reporters are described in Hungarian as “podiums for the microphone.” Last Friday, the day after the announcement that Hungary must return to the IMF for a loan, Orbán skipped his chat with Gábor István Kiss, the reporter. I guess he couldn’t face the world. But this past Friday he was there with all sorts of “announcements.” People could perhaps take solace in the prime minister’s words that “the latest serious speculative attack was successfully averted” by his government, but Hungarian citizens might have been frightened to learn that the prime minister is preparing himself for another similar attack. Moreover, the most interesting part of this announcement was that Orbán seems to know exactly when the attack will occur. “A few days after the middle of December.”
Since we all know that the financial markets don’t work the way Orbán thinks they do and that “speculators hiding in the dark” are not conspiring to attack Hungary, we must conclude either that Orbán is planning something the international financial community is not going to react favorably to or that he knows that something unfavorable will happen in mid-December as far as Hungary is concerned. The question is what.
There are many guesses on the subject circulating in the Hungarian media. One is that Fitch will downgrade Hungarian government bonds to junk status in mid-December. Another is that the 2012 budget will be passed at about this time and the international markets will realize that the budget is not based on realistic figures. A third possibility is that the Hungarian government is planning to increase the number of people eligible to pay off their forex mortgages at a much lower exchange rate than current market rates. Not long ago the Orbán government urged employers to lend a helping hand to their employees in this endeavor by giving them tax-free bonuses up to 7.5 million forints. If this generous offer on behalf of the employers is expanded to state employees, the cost to the budget might be as high as 1.3 trillion forints.
Finally, there is yet another possibility that hasn’t been mentioned in the Hungarian media as a possible reason for “the speculative attack” on Hungary. That is a raid on the Hungarian National Bank’s foreign currency reserves amounting to 35 billion euros. But let’s take a step or two back in time.
It seems that the International Monetary Fund is not eager to negotiate with György Matolcsy. They trust him so little that the IMF insisted that the request for negotiations be signed by Viktor Orbán himself. And the Hungarian delegation will be headed by Tamás Fellegi. In order to save face the explanation for this unusual change of personnel was that at the prime minister’s orders György Matolcsy must work on a new plan: the National Economic Growth Plan. So, he is just too busy to get involved with the negotiations. But for economic growth there must be new investments and for new investments one needs money. The Hungarian government certainly has no extra money. In fact, it doesn’t even have enough to get by next year. However, there are the foreign exchange reserves which are “lying about” in the Hungarian National Bank. These were Orbán’s exact words: “lying about.” He added that Matolcsy and Simor must agree on “the inclusion of these resources in the economic growth” of the country.
However, these reserves cannot be used to stimulate the economy. Moreover, although György Matolcsy did have a conversation with András Simor, the governor of the central bank, according to Simor himself the topic didn’t even come up during the consultation. I can easily imagine, given the haphazard way this government functions, that Viktor Orbán opened his mouth without first learning about the possibilities of tapping into the forex reserves of the Hungarian National Bank. Perhaps he was thinking about the possibility of announcing by mid-December the final shape of the National Economic Growth Plan which would include the use of the central bank’s reserves. The announcement of such a plan would further shake the trust of the international financial community in the Orbán government.
Of course, it is also possible that Viktor Orbán is simply talking through his hat. This wouldn’t be the first time. Or, I’m sure, the last.