S&P’s justification for downgrading the Hungarian sovereign debt and its Hungarian “translation”

Yesterday’s big news was S&P’s decision to downgrade Hungary’s bonds to junk status. Thus, out of the three credit rating agencies, two have already moved to warn investors about the risks they take when they buy Hungarian government bonds even though the yield might be high. Just today one could buy 12-month bonds with a yield of almost 8%. But there were relatively few takers.

 

What did S&P give as the reasons for its decision? First and foremost, the Orbán government’s economic policies “are increasingly erratic” partly because of the actual steps the government has taken and partly because of the questionable independence of the very institutions that are supposed to supervise the government’s financial decisions. S&P specifically noted that the recent changes in the constitution and within supposedly independent organizations have weakened the effectiveness of the country’s institutional system. S&P brought up the question of the new government-appointed members of the Monetary Council of the Hungarian National Bank which in their view further weakens the independence of the central bank. But that is not the only problem. In the pending bill on the status of the central bank further “innovations” are planned. The deputy governors who are currently chosen by the chairman of the central bank from now on would be appointed by the president of the country on the recommendation of the prime minister. Two new members would be added to the Monetary Council, which would make it a body of nine members instead of seven.

S&P also pointed out that some of the government’s moves instead of encouraging economic growth in fact retard the country’s growth potential. The agency specifically mentioned in this respect the high extra levies on the communications industry, the energy and retail sectors, and the financial institutions. Next year, when Hungary will have to start paying back its debt to the International Monetary Fund and the European Union, the country may have serious financial difficulties in meeting its obligations.

These were rather specific complaints pointing to an economic policy that is erratic and works against economic growth. Therefore, it is interesting to see how these reasons for the downgrade were interpreted by Péter Szijjártó who is more and more often described as “Viktor Orbán’s Hungarian voice.” In “translation” interesting things can happen.

According to Viktor Orbán’s personal spokesman the downgrade was “in no way justified by the real economic processes.” The downgrade “is more about the crisis of the euro than about Hungary.” After explaining the downgrade to the reporters who gathered to hear “Viktor Orbán’s Hungarian voice,” he outlined the tremendous accomplishments of the Hungarian government. Hungary managed to decrease its debt load, it will be among the very few countries whose deficit will be under three percent, and “many thousand more people work today than a year ago.” It would be nice if if these assertions were true. But the national debt in fact has been growing in the last few months due to the weakening of the Hungarian forint. As for the deficit, analysts are almost sure that it will be 3.5%, above the threshold that would put Hungary on the road toward joining the eurozone. As for the thousands of additional people working. Yes, it is true in the private sector but fewer people are working in the public sector and thus the level of unemployment hasn’t moved at all since the Orbán government took over the reins of power. I may also add that, according to some, the inflation rate might be around 5%. Much higher than originally anticipated.

Finally, Szijjártó reiterated that these successful policies will be continued unchanged in the future. The country’s “renewal and reorganization are continuing and thus Hungary will be one of the most competitive countries in Europe.”

As to the question of when Viktor Orbán will answer José Manuel Barroso’s letter, “the answer will be sent in due course.”

But what will the answer to Barroso’s demand “to withdraw the two cardinal laws [on the Hungarian National Bank and the law on financial stability] from Parliament” be? Viviane Reding, EU commissioner for Justice, Fundamental Rights and Citizenship, also urged the Hungarian government in her letter to Deputy Prime Minister Tibor Navracsics not to introduce the new constitution and the cardinal laws accompanying it on January 1, 2012.

Szijjártó didn’t reveal the secrets of the Prime Minister’s Office but János Martonyi, foreign minister, spilled the beans yesterday morning in an interview with a reporter of Magyar Rádió. The new constitution will be effective as of January 1, 2012. No postponement and therefore, according to Martonyi, neither the law on the status of the national bank nor the law on financial stability can be postponed. They can be amended or parts of them changed but all this has to be done by the end of the year.

Thus, Orbán will refuse Barroso’s request. The question is what kinds of steps will the European Commission take after this? Tibor Navracsics already refused to oblige Viviane Reding’s request for a postponement of these questionable cardinal laws. Now, after receiving Orbán’s letter, I think it will be crystal clear that the Hungarian government is taking a position that is not conducive to dialogue. Under these circumstances will the IMF-EU delegation return to Budapest in January as was announced prior to these exchanges between the European Union and the Hungarian government? The official word at the moment is that the negotiations are going to take place sometime in January. At least this is what Olivier Bailly, spokesman for the European Union, said this morning. This is also what one hears from the Hungarian government. However, tonight the Budapest representative of the European Union denied the news. According to him no decision was made as yet whether the negotiations will continue at all and if they do when these negotiations will take place. The news from Brussels is more and more ominous.

The Hungarians, according to an MTI headline, “have high hopes for the EU-IMF negotiations.” They may be hopeful but György Matolcsy’s statements of today lead me to believe that either these negotiations will not take place for a while or, if and when they do, they will be really, really rocky. Matolcsy is still talking about “a safety net” and about Hungary’s ability to finance itself from the market. As we know, the chance of getting a precautionary credit line that entails no conditions is out of the realm of possibilities.

The Democratic Coalition has an entirely different opinion from that of the government. Csaba Molnár urged Orbán today to invite the IMF-EU delegation back immediately. Moreover, he suggested that Orbán himself should head the delegation. He warned the government to give up its hope for a precautionary credit line. Hungary most likely will have to be satisfied with the kind of financing the Gyurcsány government received in 2008. If the Hungarian government hesitates or even worse refuses to negotiate with the IMF-EU delegation, Hungary may go bankrupt.

Viktor Orbán will indeed have to make a momentous decision. I admit I have no idea how he will decide. At the moment he doesn’t seem to have a firm grip on reality and it seems that there is no one in his entourage who would have the guts to confront him. Both Martonyi and Navracsics are considered to be among the more moderate Fidesz politicians and yet they slavishly follow the Orbán line. How long can that go on before the country really does collapse financially?

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Gábor
Guest

Éva, the official representative of the EU Commission in Budapest announced that Bailly’s statement was a “misundertsanding”, there was and is no decision on whether the EC will return to the negotiations in January and whther these would be informal or formal ones.
http://www.portfolio.hu/gazdasag/nem_szuletett_dontes_meg_a_targyalasok_folytatasarol_sem.160449.html

Eva S. Balogh
Guest

Gábor, thank you, I wrote the article about three hours ago and things happen so fast. I will add something to clarify the matter.

An
Guest

Well, Orban already answered Barroso. In an interview on HirTv he said he replied with a “polite no” to Barosso requests. He said that only legal technicalities are disputed by Brussels.
He also told Barosso that the 2012 Hungarian budget is “one of the bests in Europe”.
When asked about the IMF negotiations, he said that the importance of the IMF deal is exaggerated in Hungary and it is really not such a big deal. If the deal is made, then Hungary will have a safety net, if not, Hungary can survive without it (megall a sajat laban)”
So, we really need not worry, I guess 🙂
http://www.origo.hu/itthon/20111222-orban-elutasitotta-barrosot-meglesz-a-jegybanktorveny.html

Paul
Guest
As I see it, he has four options: 1) Toe the line, take the money. 2) Keep going as long as the money lasts and hope something turns up. 3) Try to run Hungary without IMF/EU loans. 4) Go down with the good ship Hungary. A Sane man would do 1). After all, although he loses face, this can easily be spun. And he won’t have to give up much to get the money, so he can more or less carry on with his mad experiment. 2) is a possibility, as it doesn’t involve taking any decisions and if anyone believes in the Good Fairy and magic, Orbán does. 3) would be interesting. Hungary spends more than it earns, so to do this he’d have to raise as much tax as possible and cut services to the bone. But it’s possible and it fits his rhetoric. And the world really needs two North Koreas. As for 4) – at one time I wouldn’t have thought even OV would go for ‘crash and burn’, but these days I no longer know what on earth he is going to do from one moment to the next. He is acting more and more… Read more »
Member

Mate Kocsis, FIDESZ MP inquired in writing Sandor Pinter, the minister of interior about how did the Barroso letter to Orban ended up in the hands of a journalist (Attila Mong, from the origo.hu). This moron wants to know if there is any ongoing investigation.
This is the freedom of speech in Hungary: Goverment politicians want to unleash the police to find out why the people know about letters to the prime minister.

Lutra lutra
Guest

In case anyone missed it, here’s the full text of the ECB’s reaction to the revised MNB (Hungarian National Bank) bill that came out yesterday afternoon.
http://www.ecb.int/ecb/legal/pdf/en_con_2011_106_f.pdf
Hungary is in repeated breach of its obligations to consult the ECB before the relevant bills are brought to Parliament, though I have no idea what “special measures” they can take

Wondercat
Guest

HUNGARIAN SPECTRUM is finally being read on currency trading floors — HUF368 / GBP1 this morning.

Eva S. Balogh
Guest

An: “Well, Orban already answered Barroso.”
Yes, things move fast in Hungary. One can hardly keep up. Unfortunately.
I would like to call attention to a small but interesting point in wording. HVG reported that Orbán said in the interview that Barroso “had neither the right or the authority” to ask for the withdrawal of the two laws. About half an hour later MTI reported on the same speech. They left out the word “right.” Maybe they thought it was too strong and it might not help Orbán’s case in Brussels.
I listened to the speech later and naturally HVG reported correctly.

Member

Eva: “MTI reported on the same speech. They left out the word “right.” Well this exactly the problem. MTI can report whatever, however Orban wants Hungary learn about foreign and domestic affairs, while they are shutting and chocking other news sources. If there will be a revolt in Hungary it will not be against Orban, because most people believe that it is the rest of the world that conspires against Hungary, and Orban is the one who is there to save us. If the EU is not willing first to fix the censorship issue, and restore media freedom, they will be p for a huge surprise from the uninformed masses who they simply cannot blame.

Member

It is all happening in front of the parliament- chained protesters, police misbehaviour, Gyurcsany has been apparently arrested… and the day is far fromm finished. Let’s hope Orban’s BBC puppet, Nick Thorpe manages a report for the outside world.

Member

Sorry to go off topic, live videostream from the parliament here:http://www.ustream.tv/channel/sodi-live
Apparently Jobbik MP have been taunting the demonstrators with anti-semitic insults.

Member

Hungary just nationalized the mobile telephone (cell phone) payments. From now one the government will collect all the payments, they took away the subscribers data (talking about privacy) and money not used up by the private mobile payment enterprises will be taken away by the government. THey will also start a national mobile network (no joke).
“A törvény alapján az állami mobilfizetési monopólium egyszerűen elveszi az eddig mobilfizetéssel foglalkozó magánvállalkozások ügyfélkörét és eddig fel nem használt pénzét, hogy aztán a szolgáltatók „szigetszerű fejlesztésének” véget vetve „innovatív díjstruktúrákat” vezessen be. ”
http://index.hu/belfold/2011/12/23/allamositottak_a_mobilfizetesi_rendszert/

An
Guest

@oneill: on BBC http://www.bbc.co.uk/news/world-europe-16315137
Hungary police detain opposition MPs in chain protest

Member

An,
The story is presently featuring in well over 100 news sites, so I guess even Nick reckoned he should potter out from the Parlament Cafe across the road and file a few lines. Interesting to compare the tone with that of CNN’s though.

Member

Go to http://66masodperc.blogspot.com
Police brutality at 1 hr 15 min in the first video.
It’s not easy to be a cop in Hungary. Kicking your own countrymen on the orders of every monkey, now for this tomorrow for the exact opposite. By the way Gyurcsany was arrested for “restriction of personal freedom” (they were blocking a parking lot).

An
Guest

I really don’t understand how the police can detain members of the parliament. Don’t they have immunity?

Eva S. Balogh
Guest

An: “I really don’t understand how the police can detain members of the parliament. Don’t they have immunity?”
Good question. In addition a Christian Democrat MP out of Christian love and charity hit Gábor Vágó (LMP) with his brief case. Vago had to be either chained or being carried by the police.

Member

Gyurcsany forfeited his immunity, maybe the others did the same on this instance.

An
Guest

@Some1: No, one cannot forfeit one’s immunity, only a parliamentary committee can remove that. Gyurcsany’s offer to forfeit his immunity was symbolic, though his immunity was then officially removed by the parliament. But not the others’.

Eva S. Balogh
Guest

I just listened to Gyurcsány on the Bolgár program. They did absolutely nothing. They were just there but they were arrested anyway. The MPs asked for the minister of interior. Huge confusion. They they were told that they can be released but the non-MPs can’t be. Of course, they refused to accept that.
New demonstration at 4 DK asked its members and supporters to join LMP action.

An
Guest

From the Hungarian Helsinki Committee
Absurd charges against opposition MPs after today’s protest
“CRIMINAL CHARGES ON ACCOUNT OF VIOLATION OF PERSONAL LIBERTY AGAINST PROTESTING MPS AND ACTIVIST OF LMP RUN COUNTER TO HUMAN LOGIC, SINCE NO ONE’S FREEDOM OF MOVEMENT HAS BEEN VIOLATED AND ANYONE COULD ACCESS THE PARLIAMENT BUILDING. THE HUNGARIAN HELSINKI COMMITTEE IS OFFERING FREE LEGAL ASSISTANCE TO ACTIVISTS DETAINED BY THE POLICE.”
http://helsinki.hu/en/absurd-charges-against-opposition-mps-after-todays-protest

Member
Member

An: “Gyurcsany’s offer to forfeit his immunity was symbolic, though his immunity was then officially removed by the parliament. But not the others’.” You are right.

Pete H.
Guest

Some of the protesters were charged with a felony:
Btk.175. § (1) Aki mást személyi szabadságától megfoszt, bűntettet követ el, és három évig terjedő szabadságvesztéssel büntetendő.
Depriving others of their liberty, which is punishable by up to 3 years in prison.

An
Guest

@Pete H. This charge is what the Helsinki Committee said that is absurd. See my link above.
“LMP members of parliament and activists, who earlier today have formed a human chain around Parliament, have been detained by the police on charges of suspicion of “violation of personal liberty”. Under the Criminal Code, the criminal act referred to by the police and which carries a sanction of up to 3 years of imprisonment, may be committed by a person “who denies someone their personal liberty”. In judicial practice, this is understood as conduct that leads to the victim not being able to exercise his/her freedom of movement or to choose his/her place of stay (by e.g. tying down or locking up the victim).
Since the LMP protesters did not hinder anyone in accessing or leaving the Parliament building, as people could freely do so on foot at any point in time during the demonstration, it is clear that the protesters did not breach anyone’s right to move freely.”

Member

Prof. Balogh, what’s your take on Schiffer’s speech?

Eva S. Balogh
Guest

Mutt Damon about Schiffer. Are you interested what I think of a referendum next year? I think that’s a pipe dream. The Elections Committee where Orbán’s men sit will say no to it.
But I think that something happened today. I think that the fractured opposition will get together. And it will be soon.

Pete H.
Guest

Thanks An, I saw what you posted and I wanted to provide the Hungarian version of the specific law.
Sad day for Hungary,

Member

But I think that something happened today.
Hopefully the start of a campaign of civil disobedience. Today proved that performed corrected such activities beyond the constraints of normal parliamentary regulations can grab outside media attention.
Loads of foreign coverage of the regime’s attempt to kill democracy and I don’t think that would have happened without the chaining episode.
If the regime kills all normal democratic channels of opposition, then the resistance has to come in different forms to have any affect.

Paul
Guest

At last! As I’ve said many times, protests and letters will make no impact on OV, the opposition needs to make his life as difficult as possible. Civil disobedience today might just avert bloody revolution ‘tomorrow’.
It’s also the only way to get decent international attention – even the BBC covered it! http://www.bbc.co.uk/news/world-europe-16315137 Warning, although it’s not got Thorpe’s name on it, it’s his style.
Nice to see opposition cooperation too – even if it is being arrested together!

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