Ever since the Hungarian government was forced on November 17 to turn to the IMF for a “safety net,” as Viktor Orbán prefers to call a desperately needed loan, we hear nothing else but that Hungary actually doesn’t need cash because the country is able to finance itself from the market.
More and more analysts in Budapest and elsewhere have the distinct feeling that IMF-EU negotiations might be postponed indefinitely. If the politicians in Brussels come to the conclusion that one cannot deal with Viktor Orbán, they can simply refuse to negotiate with him. At the same time it is becoming increasingly clear that Hungary cannot finance itself from the market.
The IMF is certainly not in any hurry. While Orbán talks about the resumption of the talks in January in definite terms and expresses his firm belief that the negotiations will be successful, Christoph Rosenberg, the chief negotiator, is not at all encouraging or supportive. On the contrary, he told Reuters that no date was fixed and talked about the possible negotiations in the vaguest terms: “if and when negotiations resume the subject will be a stand-by arrangement with quarterly monitoring and agreed conditionality.” And this is what Orbán doesn’t want. He just wants the money without any obligations or oversight.
Early this morning CNBC announced that Hungary’s debt management agency scrapped a three-year bond auction and reduced its original offer of the ten-year bonds, while it sold 10 billion forints worth of five-year bonds as planned. The auction yield jumped to 9.70% on the 10-year paper from 7.78% at the last auction about four weeks ago. The five-year bonds were sold at an average yield of 9.63%, up from 8.72% only two weeks ago. These are horrendous rates that a country is simply unable to bear. BBC also considered the story noteworthy and added that the last time the Hungarian government had to abandon part of a planned bond auction was in 2008 when it was forced to seek IMF help.
But Fidesz politicians are not caving in the face of market pressure. Just today János Lázár, this time as the mayor of Hódmezővásárhely, handed Erste Bank an ultimatum: the bank is supposed to share the cost of loans to the city amounting to 64.9 million Swiss francs. Hódmezővásárhely is the most heavily indebted town in Hungary in relation to its population, and because of the weakening of the forint against the Swiss franc the financial burden is considerably higher today than it was a couple of years ago. Both the IMF and the EU objected to the government’s decision to force banks to accept payments of mortgages and loans in general in one lump sum at lower than the current forex rates. Now, Lázár demands the same treatment for his city. If Erste Bank doesn’t oblige, he is threatening the bank with new legislation that would force banks to extend their agreement to cover municipalities as well as individuals. If other cities demand the same treatment and if the Hungarian government obliges, that would practically wipe out all Hungarian banks.
Despite this Fidesz bravado the fact remains that Viktor Orbán is in trouble. Hungary cannot finance itself from the market and the prime minister has managed to alienate both the European Union and the International Monetary Fund. And we can add the United States, a country that has a large say in the affairs of the IMF.
What if the European Union blocks negotiations as long as Hungary’s prime minister is Viktor Orbán? The IMF-EU delegation already refused to accept György Matolcsy as the head of the Hungarian negotiating team, and when Tamás Fellegi assumed the position of chief negotiator he was sent there by Viktor Orbán with no authority to negotiate on any terms other than the prime minister’s unbending position.
I think the IMF-EU team at the express instruction of the European Commission can stay away indefinitely. Or until the members of the Commission in conjunction with the U.S. State Department are satisfied with the state of affairs in Hungary. And yes, that may mean the removal of Viktor Orbán and his replacement with someone who is more willing to negotiate and who doesn’t threaten the democratic process in a country that belongs to the European Union.
This picture depicts Viktor Orbán’s situation quite accurately at the moment
But will he be ready to retreat? Will the western politicians and the markets trust him? It is worth repeating that it was reported that to a small circle of friends he announced that if the IMF was coming, he was leaving. During his forty-minute-long interview on HírTV the reporter asked him whether this “rumor” was true. His answer was telling: What a question! After all, the IMF has never left! To my mind, that was an admission. But at the same time this exchange indicates to me that he really didn’t mean what he said. When the chips are down he would rather stay. However, by now I have the feeling that it is not his choice.
The question is when the rest of the Fidesz leadership will come to the conclusion that “the beloved leader” must depart. Surely, at the moment the support seems to be strong and united. As Adam LeBor recalls in his latest article in The Economist there is a joke circulating in Budapest:
Q: What is the difference between a flock of sheep and the Fidesz parliamentary fraction?
A: Sheep have a mind of their own.
Mind you, one has the feeling that these “supine MPs” as Adam LeBor calls them don’t even know what they are voting on. Here is a typical late night scene from the Hungarian parliament:
Some of “the Fidesz flock”
Pressure or no pressure, nothing seems to wake up Viktor Orbán and the men and women who blindly follow him. Thousands are demonstrating against the Fidesz MPs in front of parliament, and the crowd calls the government “bóvli,” the Hungarian word for junk bond. It is not enough for them that two employees of state television have been on a hunger strike for nineteen days; yesterday the CEO of the organization responsible for all the public media stations fired them. And after they blasted “Jingle Bells” day and night to drive the demonstrators half crazy, this morning they decided to put a high fence around them.
And then there are the heroes of the hunger strike, Balázs Nagy-Navarro and Aranka Szávuly, both as of yesterday former employees of MTV. The two have been on a hunger strike for nineteen days. At the beginning they were sitting practically alone at the entrance of the Public Television Bureau along a busy road with lots of cars zooming by but few people around. But lately crowds are gathering there. Hundreds and hundreds of people came to give them blankets and hot drinks. By now five more people joined the two.
Nagy-Navarro was not seeking any kind of political leadership yet he has become an emblematic figure of the protest. Today he announced a huge demonstration in front of the parliament building for December 31. As he said this afternoon, he and Aranka Szávuly began their hunger strike on account of the manipulation of news but by now their protest has been widened. Their aim is the removal of Viktor Orbán’s undemocratic regime. They are ready to unite with all who are ready to fight.
Balázs Nagy-Navarro and Aranka Szávuly a couple of days ago
Orbán Viktor received New Years greetings from the Belgian prime minister and leader of the Liberals in the European Parliament, Guy Verhofstadt. It wasn’t exactly the usual message at this time of the year. Verhofstadt wrote that “cutting back on media freedoms, independence of the Constitutional Court and Central Bank, freedom of religion and sexual orientation drives you closer to the communist past.” I may mention in passing that the newly appointed CEO of the organization that is responsible for all the public media outlets has an informer past. Details can be read even in Heti Válasz. Orbán is not finicky when it comes to his followers’ less than immaculate past. At any event, it is this man who is now defending Orbán’s “democracy” against the hunger strikers.