The Orbán government under fire: Endgame?

The first meaning of “endgame” is “the final stage of a chess game after most of the pieces have been removed from the board.” What is happening now in Hungary greatly resembles the last stage of an extended chess game. There are very few “pieces” left for Viktor Orbán to play in his dangerous cat and mouse game against the European Union, a community of nations to which Hungary belongs.

His relationship with the United States wasn’t the best even when the American president was a Republican. Now that Barak Obama is in the White House and Hillary Clinton is in charge of foreign policy Orbán’s chances of arriving at a modus vivendi with Washington is minuscule. That’s why I was amused when I learned that an American-Hungarian group of conservatives is bombarding the White House with letters urging Barak Obama to receive Viktor Orbán at 1600 Pennsylvania Avenue. Perfect timing! The gentlemen’s political acumen is remarkable.big grin

Today on Facebook Ferenc Gyurcsány predicted that Viktor Orbán could still be the winner of this game but only if he is ready to abandon his hitherto cherished ideas about Hungary as a country that can go its own way. After all, Hungary is a member of the European Union and as such has been receiving generous subsidies from Brussels. In return, the European Union demands that member nations adhere to the rules of the community, rules that Hungary promised to abide by when the country joined the EU. What Viktor Orbán is trying to do is to get the benefits that come with membership without fulfilling his end of the bargain. And that won’t do. Sooner or later the European Union will have had enough of what Hungary’s prime minister is doing.

The fact of the matter is–and I’m not at all sure whether Orbán understands this at the moment–that he can’t waste much time if he doesn’t want to spend the rest of his days as a coach at the Ferenc Puskás Academy of soccer hopefuls. (Although I’m not even sure whether he could do a half decent job there after seeing his pathetic soccer performance this morning.)

Until now few people believed that the European Union even has the instruments by which it can put an end to the kinds of Orbán policies that have led Hungary off the accepted Euro-Atlantic path. And yet, as A.L.B. said in The Economist article “Democracy in Hungary: Slip-sliding away,” this is surely something Brussels cannot allow from a member state. Because, as Paul Krugman wrote in The New York Times, if the political leaders of the European Union don’t act, “they risk losing everything they stand for.” Most likely Brussels has been aware of the danger coming from Budapest for some time. If I had to guess I would say for at least a year. Since the Hungarian parliament voted into law the infamous bill on the media.

Unfortunately, the Union is sadly lacking political instruments by which to discipline “rogue nations.” It does, however, have one weapon that might make Viktor Orbán think twice. Money.

Orbán with the help of György Matolcsy maneuvered the country into such a dire financial situation that the government had to turn to the much maligned IMF. And because the IMF can make a loan to an EU member only with the permission and cooperation of the European Union, the Orbán government was in a predicament.

The other day I heard an interview with László Andor, EU Commissioner for Employment, Social Affairs and Inclusion and himself a Hungarian. From the interview it was evident that in the past few weeks the Hungarian situation has been discussed at the highest level: at the weekly meetings of all twenty-seven commissioners chaired by José Manuel Barroso, president of the European Commission. Moreover, Andor alluded to the fact that Barroso himself is concerned. In fact, it didn’t take long, only a couple of days, for it to become known that Barroso actually wrote a very strongly worded letter to Viktor Orbán.

 

Viviane Reding and José Manuel Barroso, the two heavies

Last night, shortly before midnight, Origo reported the arrival of Barroso’s letter to Viktor Orbán. In it he “strongly urged [Orbán] to withdraw two cardinal laws,” the one on the National Bank and the other on the country’s financial stability. Origo had a copy of the letter. This time most likely the leak didn’t originate in Budapest. Perhaps someone in the European Commission wanted the Hungarian people to know that the letter had been sent to their prime minister.

Péter Szijjártó, spokesman for Viktor Orbán, admitted the existence of the letter but naturally wasn’t going to talk about it. András Giró-Szász, government spokesman, claimed that he had no notion of what was in the letter because he is, after all, spokesman for the government and not for the prime minister and the letter was not written to the Hungarian government. However, he insisted that the information released by Origo about the contents of the letter was no more than “speculation.”

Well, the speculation was rather specific. Barroso stated that the negotiations with the IMF-EU delegation came to a halt because the members of the delegation didn’t receive “assurances from Minister Fellegi concerning the postponement of the vote on these two cardinal laws until we are certain that they are compatible with the laws of the European Union.” Barroso also wrote that Hungary’s financial and economic problems are largely due to wrong domestic decisions and moves and not the crisis in the eurozone.

If Viktor Orbán or János Lázár thinks that the IMF-EU delegation will return in January without receiving the assurances Barroso was talking about, they are mistaken. The head of the “embassy of the European Union in Budapest” said that the delegation will not return until there are satisfactory answers to their questions and guarantees for the fulfilment of their demands.

For the time being Viktor Orbán refuses to heed the warnings. Yesterday he had a fairly long meeting with the Fidesz parliamentary delegation in which he emphasized that “what we started we have to finish.” They may change a word or two in the two cardinal laws but basically he is unwilling to oblige the would-be lenders. Apparently Orbán tried to convince the Fidesz members of parliament that the IMF’s “dictating terms in Hungary means the political defeat of the government.” A well-known Fidesz politician told a reporter of Népszabadság that the EU cannot get rid of Viktor Orbán as it did with the prime ministers of Greece and Italy. “This is not Italy, Orbán is not Berlusconi, Hungary doesn’t belong to the eurozone, and its government has a stable majority. The two-thirds wouldn’t permit the removal of the prime minister.” If the EU in the final analysis prevents agreement with the IMF, after removing András Simor from his position as governor of the Hungarian National Bank, “we can use part of the 35 billion euro reserve of the bank for purposes of financial liquidity.”

But, the same politician admitted, there is another possibility. In case Viktor Orbán has to go, his successor would be Mihály Varga. The only good thing one can say about Varga is that he has been safely tucked away by Orbán somewhere in the background. He was exiled after some careless remarks before the elections about the Swedish pension system that might be introduced by the Orbán government. Until then he was supposed to be finance minister for a second time. Otherwise, according to the WikiLeaks documents, Varga talks a lot in almost incomprehensible English. At official receptions everybody tries to escape from him. And, yes, he wasn’t much of a finance minister either. However, he can’t be worse than Matolcsy.

P.S. Just got the news that the Media Authority refused to grant KlubRádió a frequency. The only voice on the air against the government is silenced. I am stunned. I was sure that they wouldn’t dare to be that blatant.

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Guest

KlubRadió is still broadcasting. (Sadly, I only understand a few words) Was there any word about when they would have to go off the air.

Eva S. Balogh
Guest

Gretchen: “Was there any word about when they would have to go off the air.”
Yes, February. But let’s hope that the outcry and the present situation of the government might prevent this outcome.
I just heard that even Putin didn’t dare to do this with an independent radio station called Ekho Moskvy.

Paul
Guest
“I am stunned. I was sure that they wouldn’t dare to be that blatant.” Éva, I don’t want to appear rude, especially towards yourself, but how can you, as someone with so much information on Hungary, Orbán, etc at your fingertips, possible be “stunned” at this news? It has been clear for ages that OV will stop at nothing to achieve his ends. He has total power and he will use it. He isn’t the slightest bit bothered about what his critics think or say. As you say, the only thing that will stop him, the only weapon the EU has, is money. But it will be some time before the financial situation becomes so critical that OV will either heed the EU, or the powers behind the throne will replace him. And during that time he can still do a lot more damage to Hungary. And, even if he does back down and make the changes the EU demands, they are only concentrating on a few areas, all the other changes he has made (and will make) will survive. It remains to be seen just how canny OV is, or just how mad he is – will he play… Read more »
Paul
Guest

“I just heard that even Putin didn’t dare to do this with an independent radio station called Ekho Moskvy.”
No, Putin just arranges for journalists to be killed.

Sandor
Guest

As it happens, I had the pleasure of interviewing Mihaly Varga, as minster of finance, some years ago. The interview was as nondescript as could be, my mandate excluded antagonizing him. However the only thing he said that struck me as remarkable was that as a presbyter of his church, his religious principles guide him in his economic philosophy.
Now, there is a good egg, to replace the other maniac.

peter litvanyi
Guest

Dear Eva,
guess my apology about the last post. Should have been to S. K. /again who the hell he is?/ When you read a lot you tend to skip; a bad habit. You fell victim to that yourself, no doubt.
Since you are fine and shipshape /no seasonal disorder and power outages etc./ you might want to translate/ publish the following article that cuts to the bone of our differences:
http://www.nol.hu/archivum/20111203-kedves_ellenseg
Somehow I don’t think nol.hu would object on a copyright basis.
Even better, you might consider TMG to write some of your posts.
Then we would get what one might call fair coverage.
This is where it begins or ends.
Besides am one of your customers here so am always righ, no?
Sincerely:
Peter Litvanyi

dani
Guest

Hi Eva,
Do you think the arguments of Kim Lane Scheppele in her second post on Krugman’s blog legitimize a strong stance against Mr Orban’s government by the EU and IMF – even if that will lead to an economic crisis in Hungary having defaulted on its debt?
the post: http://krugman.blogs.nytimes.com/2011/12/20/more-hungary/
thx,
dani

Eva S. Balogh
Guest

To Dani, the brief answer is: yes!

nwo
Guest

I think the Government (as Origo explained) is very much preparing for life without the IMF and EU, and maybe even outside the EU. Why do you think they have to change the National Bank law? The 35 bn Euro sitting in reserves is just too tempting. Orban knows i think it is highly unlikely that there is a deal to be done with IMF on Hungary’s terms. Instead, taking the foreign reserves is the easy back up plan. The move to total lawlwssness is in full swing. Only the removal of the PM can stop the onslaught ( if anything).

Eva S. Balogh
Guest

nwo: I think the Government (as Origo explained) is very much preparing for life without the IMF and EU, and maybe even outside the EU.”
Suicide! The 35 billion will not last long. Especially the way they are spending the non-existent money.

Paul
Guest

Thanks for the link Dani. Unfortunately even more depressing than her last piece.
I’m constantly fluctuating these days between optimism that some incident or action gives us a glimmer of hope that Orbán can be stopped before he does too much damage, and deep depression that not only can’t he be stopped, but what he’s doing is even worse than I feared.

Paul
Guest

As for Klubrádió – there is a comment at the end of the Kruman piece from ‘Hungarian Democrat, Budapest’, dated yesterday (20th), that claims it has already been closed down:
“I should add as an update to Ms Scheppele’s very welcome piece that the Orban government have tonight closed down the last opposition radio station in our capital, Budapest.
We now have Michael Jackson, Rolling Stones, REM and UK rave.. which is quite relaxing but…”

Paul
Guest

Although…
I’ve just checked their online stream (and, yes, I should have done that first!) and Klub still appears to be on air as normal.

Eva S. Balogh
Guest

Pauk “Although… I’ve just checked their online stream (and, yes, I should have done that first!) and Klub still appears to be on air as normal.”
As I mentioned they will be on this frequency until February

nwo
Guest

Eva-of course the cash wont last. Most will go to renationalizing some core energy and banks asstes. The rest probably will find its way into the pockets of related parties.

Member

Regarding the European Commission letter, the Financial Times has a brief article about the subject today. Apparently the aspect of the Financial Stability law objected to was the proposal to enshrine the flat tax in a cardinal law.

Andy
Guest

Orban is finished for good. Period.

An
Guest

According to Origo, the downgrade from Fitch is coming very soon…. hm… wonder how reliable this info is, but we’ll know very soon.
http://www.origo.hu/uzletinegyed/hirek/20111221-leminosites-a-moodys-utan-a-fitch-is-ront-a-magyar.html

Member
The Fitch news is *not* that surprising, if true. One of the reasons given should give the more mentally stable and economically literate members of the Orban entourage food for thought, i.e. it is believed the regime’s attempt to bully the remaining members of private pension fund into the state system is “a brutal intervention into the economic and legal relationships” “a wrong message to investors that alone could be enough for the automatic downgrade.” (if my translation skills are up to scratch). Suffice to say that if the regime think the 100,000 people, who like my wife refused to surrender their hard earned private pension to their thieving, corrupt hands last year will now simply roll up the white flag and hand it over just like that, then they will shortly be getting a sharp reality wake-up. More pertinently, something I have mentioned before is Orban’s reliance on the right-wing business moguls. In that regard, two recent stories are interesting. First apparently it was Csanyi who brought Orban (no doubt kicking and screaming) to the table with the banks for agreement. Both logically needed that agreement but more importantly, it was Csanyi who “persuaded” Orban to the table. Secondly… Read more »
Eva S. Balogh
Guest

according to Népszabadság, S&P put Hungarian government bonds into the junk category.

Eva S. Balogh
Guest

Orbán’s “speculative attack on Hungary a few days after the 15th” began. The forint is falling and falling. Now it stands at 307 to 1 euro. Orban managed to create an attack all right.

Kirsten
Guest

nwo: “Most will go to renationalizing some core energy and banks asstes.”
I wonder whether this will be necessary. Why not – in accordance with communist tradition – nationalise by decree? Being OV and totally disregading law, I would not spend 35 bn euro on compensation for nationalisation. Surely, this means that the EU should be quit asap but that appears to be the objective anyway.

Ron
Guest

Eva: Orban managed to create an attack all right.
It is no longer an attack, but attacks.
http://www.politics.hu/20111220/orban-tells-fidesz-mps-to-expect-more-attacks-from-abroad/

Paul
Guest

A little light relief:
The new sign for ‘Magyarorság’ (i.e. Not the Republic) on the Ukrainian border has the red and white bit of the shield upside down!
http://www.politics.hu/20111221/a-bad-sign-for-flag-waving-hungarian-patriots/

Paul
Guest

“The forint is falling and falling. Now it stands at 307 to 1 euro. Orbán managed to create an attack all right.”
The XE site has it closing at 304, and it’s been oscillating between 300 and 305/6 for the last three weeks, so that’s hardly “falling and falling”.
Although it’s a mystery to me why it isn’t dropping through the floor, especially with the latest news on government bond ratings.

Eva S. Balogh
Guest

Paul, I have here the exchange rate in real time. Believe me it was 307 ten minutes ago

Paul
Guest

It seems to be ‘stuck’ at about that rate, though, Éva. And that’s still a better rate than just 12 days ago (it was over 208 on the 9th) – and considerably better than in mid/late November, when it hit 316 and then nearly 318.
I’m not arguing that the Forint isn’t in a bad way or that it doesn’t ‘deserve’ to fall (if you remember, Mark always argued that it was artificially high, even in the ‘good’ times). I fully expect it to collapse after Christmas/New Year, perhaps even before.
But to me, the intriguing question is why hasn’t it already collapsed?
The IMF have pulled out, after one too many stupid OV moves, the agencies are dropping their ratings for Hungarian government bonds almost by the week, the government has massive loans to pay back next year, and Orbán shows no signs at all of changing his behaviour. What more do they need before everyone decides to sell Forint?!

An
Guest

@Paul: Traders/investors do not know Orban. With all this pressure they think Orban will do what every person in their right mind would… accept the conditions and sign the deal the IMF.
(Regardless, you’ll probably see some more down movement with the forint exchange rate tomorrow morning, as the news of the downgrade came after the European markets were closed).

Paul
Guest

An – you could be right. After all, if they did know him, the Forint wouldn’t be trading at all! No one in their right minds would be holding Forint at the moment.
I’m actually getting quite stressed about our Hungarian savings account (never mind the value of our flat!) – there isn’t that much in it, but it’s still enough to hurt if 10-15% (or more!) disappears.
Even the change we brought back with us in September is stressing me out. I’ve got about 50,000 Ft in the drawer behind me, which cost me about £160 and is now worth £140 – in little over 3 months. I might as well have chucked 2,000 Ft out of the window every month!

Gábor
Guest

There is an interesting development regarding the effects of deteriorating exchange rate. The new agreement with the banking sector on the fx-loans presumes that the government takes pőart of the burden between the fixed rate and the actual one.And with the extension of the possibility to freeze the ecxhange rate on 180 HUF to 1 CHF the burden is a lasting one. It is a significant modificaton of the original situation when only the banks were hit. As a consequence now the weaker the forint the larger the losses it inflicts upon the budget.
It seemes the government will have to renege its pormise and effectively anull the agreement or take into consideration how it affects its own finances. Did they trapped themselves unintentonally?

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