The beginning of the end: The final days of Orbán’s Hungary?

Today was again a crowded day. Although the forint weakened a bit already yesterday, by this morning its fall was rapid and spectacular. At one point one had to pay more than 321 forints for one euro and even now it is still over 320. This is an all-time low. The Hungarian forint hasn’t been so weak since the introduction of the euro as the common currency of the eurozone countries.

How does the Ministry of National Economy explain the sorry state of the Hungarian currency? The ministry’s answer, as one is accustomed to by now, is simple. The only reason for the Hungarian forint’s rapid weakening is the uncertainty surrounding the date of the negotiations between the IMF/EU delegation and Hungary over a loan that would bolster Hungary’s financial well being.

Hungary has also been having serious difficulties selling its bonds. On December 29 several financial papers and television stations reported that the Hungarian government had to abandon part of a debt auction. Hungary raised less than half as much as planned.

In the new year the trend has continued. Hungary was either unable to sell its bonds or, if it managed, the yields were extraordinarily high. Here is an example. The yield on 10-year bonds rose to 10.3% yesterday, and even the three-month treasury bill’s yield was 7.67%. Meanwhile credit default swaps have gone sky high, with the 5-year spread pricing in a probability of default north of 36%. So, surely, there is a general distrust of the Hungarian government’s economic policies and the country’s financial well being that is causing this situation. The weakening of the forint is part and parcel of this economic climate.

At the same time Tamás Fellegi, who by now has to occupy himself solely with laying the groundwork for the stalled negotiations with the IMF and the European Union, most likely has difficulty convincing the leaders of the IMF or the EU to start even informal talks with him. He managed to secure an appointment with some of the more important members of the IMF on January 11. According to the Hungarian papers, he will even have the opportunity to talk with Christine Lagarde. But as of yesterday he still  hadn’t managed to convince the more important politicians of the European Union to give him an appointment. It is obvious that the more difficult negotiating partner will be the European Commission.

Fellegi also said today in an interview in Figyelő that he would like to ask for the help of the French, German, and Austrian governments in his quest for an understanding with members of the European Commission. However, I have my doubts about Fellegi’s success in Paris, Berlin, or Vienna.

Let’s start with the French government. The spokesman of the French Foreign Ministry announced on January 2 that the French government “will support the European Commission in its effort to assess the details of the new Hungarian constitution.” Moreover, the French government will also adhere to any sanctions the Commission comes up with against the Hungarian government. The message of French Foreign Minister Alain Juppé concerning the lawfulness of the new Hungarian constitution was “categorically rejected” by the Hungarian Foreign Ministry the very next day. So, if I were Fellegi, I wouldn’t be too optimistic about French assistance.

Juppé, Alain

                French Foreign Minister Alain Juppé

As for Germany, the situation there is no better. The deputy spokesman for the government announced today that “the German government welcomes the European Union’s decision to investigate the new Hungarian constitution.” Therefore it is most unlikely that Fellegi could find assistance in advancing the Hungarian cause in Berlin.

As for Austria, I think Fellegi’s attempts in Vienna are pretty hopeless. Not just because the Austrian government has been mighty upset over the difficulties Austrian banks have been encountering in Hungary but also because it was only yesterday that Foreign Minister Michael Spindeleggert publicly criticized the Hungarian constitution and disclosed that he had talked to János Martonyi about the Austrian government’s objections to certain aspects of the new constitution.

Spindeleggert, Michael

Austrian Foreign Minister Spindeleggert

Although in the past there has been a lot of criticism of the European Union as an organization that is incapable of keeping its house in order as far as the internal affairs of the member states are concerned, it seems now that the European Commission means business. According to observers in Brussels, Hungary could face a bailout freeze and legal action unless it abandons some of the cornerstones of Viktor Orbán’s “revolution.” Moreover, it seems that the Commission will not be satisfied with a mere change in the two cardinal laws mentioned by José Manuel Barroso: the law on financial stability and the law on the central bank. The final text of the new constitution arrived in Brussels and experts are going through it with a fine-toothed comb. Thus the whole constitution and the cardinal laws are under scrutiny. Hungary’s constitution and its cardinal laws will be the topic of discussion at the very first meeting of the European Commission on January 11, a week from now.

But that’s not all. On January 25 the sorry state of the Hungarian media, including the case of Klubrádió, will be the topic of conversation. Back in October a work-group was set up by the Commission to concentrate on questions of the Hungarian media. The Hungarian media situation since then has only deteriorated. The public television coverage of news is greatly slanted in favor of the government and outright deception was discovered when the images of certain people appearing in the background of a picture were blurred out at the direction of the news editors. Since then there has been a long hunger strike by two employees of the state television station. And thousands demonstrated for the freedom of the Hungarian media in front of the parliament building.

I wrote about the case of Klubrádió about a month ago. The outcry at home spread abroad and got as far as the European Commission in Brussels. I think that the employees and listeners of Klubrádió are surprised and grateful. And perhaps somewhat more hopeful about the future of their station than they were a few days ago.

But let’s return just a bit to Tamás Fellegi’s trip to Washington on January 11, the same day the European Commission will take up the Hungarian constitution and the cardinal laws. From what Fellegi had to say about his goal in Washington, I got the distinct impression that Viktor Orbán hasn’t moved an inch from his original position on the subject. He refuses to negotiate about a “stand-by credit line,” the only one Hungary could possibly get from the IMF. He is still talking about “precautionary credit” without any oversight by the IMF/EU of Hungary’s economy. Admittedly, he did say that Hungary is “ready to accept the suggestions of the international organizations” but I very much doubt that Viktor Orbán would be ready to scrap his whole constitution, the magnum opus of his life, for the sake of a stand-by credit line. Fellegi mysteriously added that he is envisaging “a compromise between a precautionary and a stand-by credit line.” The problem is that there is nothing in between the two.

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Ron
Guest

Eva: On January 25 the sorry state of the Hungarian media, including the case of Klubrádió, will be the topic of conversation.
Hopefully, not only Klubrádió. I noticed that my cable was changed as well. I can still receive ATV, but CNN is gone. In place is now BBC World service.
But the biggest surprise was ParlamentTV. Apparently, it is a Fidesz controlled channel, financed by Gabor Bálintfy, the billionaire lawyer is owner.
It use to be a public service to receive the debates in Parliament, but now it is a commercial channel, which covers not only Hungarian Parliament, but also the European Parliament, give information about the Metropolitan Assembly and the provincial assemblies in the activities of national importance, and analyze the events of the world economy.
I could not find too much on this on the internet, but this is what I found:
http://index.hu/kultur/media/2011/09/06/senki_nem_kotott_szerzodest_a_parlament_tv-vel/
http://www.pecsiujsag.hu/pecs/hir/vilag-bulvar/uj-televizios-csatorna-indul—a-parlament-tv-t-a-jobboldal-penzeli

GDF
Guest

I suggest the following article from a Financial Times blog:
http://blogs.ft.com/beyond-brics/2012/01/04/hungary-forint-fading-fast/#ixzz1iXFo4tVq
that ioncludes the following quote from Benoit Anne of Société Générale:
We are very near boiling point in Hungary with a crisis that may escalate into something much more serious than a simple macroeconomic crisis (which mind you is already pretty bad). For I fear this crisis now encompasses many dimensions beyond the short-term view on HUF assets. On the currency side, the HUF is now trading at record lows and given the huge financial stability risks that this raises, the central bank is now quite likely to go ahead with an emergency rate hike, November 2008-style. But the crisis has also become political. The EU is extremely concerned about the latest political developments and the potential EU response will – no doubt – be harmful to investor confidence.

Kirsten
Guest

“But the crisis has also become political.”
Hopefully the ‘opposition’ managed to exchange phone numbers already and that the preparations for the ‘disaster’ include more practical considerations than eg the New Year’s message of the dissidents…

Csoda. Kegy
Guest

“But the crisis has also become political.”
Agreed totally. It is not simply to do with idealist objections to the new constitution.
Has no one noticed that it is in the EU leaders’ interest NOT to be accommodating to peripheral little Hungary? Clearly not to Orban.
A (further) collapse in the Forint and a default in servicing government debt would help Merkel in getting Eurozone countries to sign up to a tough fiscal framework; and the others would not take Hungary’s case as they have no wish for competition for scarce EU funding. It might also be the best chance of accelerating the exit of Orban, perhaps remaining merely as ” Father of the New Hungary” party leader
But don’t count the days – quarters are more likely (my rationale is under yesterday’s blog). And I would not underestimate what other wheezes he may come up to put blame on others and cling to power.

I love Hungary
Guest

Not sure I understand this, but the Hungarians want the Germans to help them convince the EC that the New Constitution, which basically lays the blame for the eager-beaver Hungarian role in the Holocaust on the Germans back,…..hmmmm… The Hungarians want the Germans to help them convince the EC that the New Constitution is a good document?
Here’s a way the Germans could help the Hungarians: tell them the name of the therapist the Germans used to deal with their past.

Ron
Guest

On Euractiv an EU representative mentioned that on January 11 the College of Commissioners will meet, and they may sanction legal action.
Further it was stated that IMF/EU might meet in Budapest on the 19th, but this will not happen if the implementation of the new rules causes a loss of independence to the Bank of Hungary.
http://www.euractiv.com/euro-finance/hungary-face-bailout-freeze-legal-action-news-509961

Ron
Guest

As per Euractiv (bottom of above link) on January 6 the Commission will complete the assessment of the Constitution.
Seems things move quickly now.
Btw the prices of foods in general went up with 5% compared to period before Christmas. Eggs went up with 20%.

Living with it in Hungary
Guest
Living with it in Hungary

Economics seems to have overshadowed all of the other things that this government is up to. The new curfew laws, the laws on defending one’s self. I was driving through a small city in Eastern Hungary a few days ago and I saw the “special guard” patrolling the streets wearing uniforms that looked very similar to those worn by legitimate police. It is unclear to me how this militia group can get away with patrolling very peaceful “Gypsy” area’s in the name of keeping the peace.
The new “secret” police powers that basically strip away all rights to privacy, interference with neighbouring countries sovereign affairs. Lack of any opposition and even if there were an opposition, the lack of independence of any body or structures that could be used to challenge anything.
The level of brokenness in the governance of this country goes beyond the current happenings. Aside from the election, there was a lack of accountability in parliamentarians to their consistency when Gyurcsány was in power and this has only gotten worse.. I fear the only short term hope is that the EC has the fortitude to not cave on it’s demand change in the face of the upcoming crisis.

Ron
Guest

EUR/HUF 9.26am Hungarian time 323.39

Leo
Guest

I think this news item was a good illustration of Fidesz mentality: http://www.politics.hu/20120103/only-ten-politicians-donated-to-debt-reduction-fund-last-year/
Now where are our brave patriots? Orbán, Kôvér, Lazár … ?

Kirsten
Guest

“tell them the name of the therapist the Germans used to deal with their past.”
Allied Forces;
US, UK, France

Johnny Boy
Guest

Hi there. I’m just paying a short visit to share a link to an excellently written short piece (in English) on what is really happening in Hungary.
I have no doubt that you won’t agree with the article, but it sometimes helps to see other points of view. It can be helpful even for you.
Have a good read:
http://www.brusselsjournal.com/node/4891

Ron
Guest

JB are you now on the Jobbik side. This brusselsjournal is part of Vlaams Belang, which is far right, similar to Jobbik.

Johnny Boy
Guest

Ron you completely failed to argue anything that is written here, you are only labelling, as usual.
Let me quote the most important passage that perfectly depicts what you (all) are doing:
“For me, the most striking thing about these complaints is that they do not even acknowledge the validity of socially conservative views on marriage and abortion. In fact, they barely acknowledge their existence. Such opinions, especially when they are written into law, are not regarded as disputed views which can be debated rationally, but as self-evidently evil and fascistic, something to which all right-thinking people ought to be opposed. Is that “democratic”? Of course not – it’s downright totalitarian.”
You cannot even argue with this passage because this is so evidently true.

Paul
Guest

“self-evidently evil and fascistic, something to which all right-thinking people ought to be opposed”
Some sanity at last from you JB.
I really didn’t think you understood the basics of progress and civilisation, but this gives me hope.

Thomas
Guest

Thanks Johnny Boy for proving that the only voices actually defending Orban are far-right “give us weapons to defend ourselves against immigrants” webistes 🙂
With friends such as you, Orban does not need enemies.

Kirsten
Guest
Johnny, you are in one sense correct. Yes, there are tensions between ‘free speech’/’freedom of opinion’ and ‘how to deal with those people who use this freedom to restrain the same freedom of other people’. Abortion or divorce are good cases in point. Even with abortion allowed up to some point in time or legal divorce, it is not forced on anybody. Those who are opposed to abortion or divorce are entirely free not to do that but they wish to restrain OTHER people, ie not to allow abortion or divorce in nearly any case. Do you see the difference? (And BTW ‘liberals’ also are married and have children.) Or freedom of speech. To some people (and the legal system of many countries) this can border on insults, which is why you can sue people for eg libel. I think that judges who deal with that could give you more precise information about the difficulties in determining exactly what it ‘free opinion’ and what is an ‘insult’. Typically it will be also judged on how much people get damaged by being the object of such ‘liberties’. The problem is that ‘opinions’ (on dirty Roma, Jews, tóth, pick any from the… Read more »
I love Hungary
Guest

@ Kirsten, The Allies were not a “therapist” they were more or less a surgeon that removed a cancer.
The Germans did a very good job of dealing with their guilt, which is why, a couple generations on, one could suggest that the are fully recovered.
Hungarians, especially the Right Wing are still in denial that they comitted awful crimes of their own voilition.
Hence the preoccupations of “crimes comitted under the communist regimes”—- but no responsibility for the atrcities comitted by the Crossed Arrows.
It is really a sort of weird, collective psychosis, that is.
This denial is actually enshrined in the New Constitution, which is why I call it a sick document.
Those who don’t remember their history are condemned to repeat it.

Gábor
Guest
Let’s see the minor positive signs as well, especially in Fellegi’s round trip in Europe. It was clear from the beginning that Orbán wants to corner the EC and put pressure on them with the help of the IMF (that’s why they always spoke of negotiations with the IMF and that’s why Fellegi initially planned to visit Washington only). For now they probably realized it won’t go and try to find support in Paris and Berlin. It can still easily be a manoeuvre to win some time, but anyway it suggests they didn’t decide yet to accept the full blow from a head-on-collision, neither leaving the EU or announcing default. Furthermore, they will certainly try to find a compromise with the Austrians that won’t go without giving concessions to their banks. And it is an excellent opportunity for the French and the Germans to convey to Orbán and/or some of his followers a message strong enough to convince them they have to bow or break, without humiliating them publicly. Orbán, probably unintentionally, gave a small leverage to these governments and they can use it further, for example inviting him for personal negotiations etc. I wouldn’t be very happy if I… Read more »
LT
Guest

@Johnny Boy, the Conservative Christians or the right wingers among them do favour the Hungarian Constitution. I know some Fascists who cherish Franco’s Regime also hail the new Constitution. The Brussel Journal is though not directly fascistic but it belongs to the conservative Christian league.
Those Christians who talk well of the new Hungarian Constitution are not necessarily fascists but most of them know very little about Hungary, what they see is just the mentioning of God in the new constitution and the definition of marriage as between a man and a woman.

Leo
Guest
JB’s article tries to show that the foreign critics of the new constitution are insincere because “draconian anti-discrimination laws that exist in their own countries … make even the most authoritarian aspects of the new Hungarian Constitution seem effusively liberal in comparison.” Three examples are cited to prove the case. But it appears that one is just rubbish (Blaire’s alleged conspiracy to promote immigration), one very doubtful (a rejected proposal in Germany to shut a right-wing newspaper, although there was violence from the ultra-left) and only one that may deserve discussion (anti-discrimination laws in Norway). So no, I’m not convinced of the effusively liberal nature of Orbán’s constitution. Interesting bedfellows though, the anti-Muslim Vlaams Belang and anti-Jewish Jobbik. I am not so sure they really understand each other, but in the end political choices are to a large extent a matter of attitude. And in a way JB may have a point, because there is also a ‘political correct’ attitude. A tendency among liberals and left-wingers to shut themselves up in a tower of self-righteous moral indignation, making an effort to understand the enemy not only unnecessary, but even wrong. It is rather rash to compare the myopia of the… Read more »
An
Guest
It’s pretty obvious that with OV running the show, a deal between the EU-IMF and Hungary that is to the satisfaction to both parties is impossible. OV would have to give up too much of his “achievements” or the EU should compromise too much of its principles. A deal has to be struck, though; it is the best interest of both parties. Hungary cannot risk bankruptcy and Hungary’s bankruptcy would hurt the EU as well (if nothing else, through all the Austrian banks that invested in the country), so the EU won’t readily push Hungary towards bankruptcy, unless it exhausted every other possibility. One possible scenario is that the delegation may deviate from official Fidesz lines and some kind of unofficial or even official coup is formed against OV through these negotiations. Fellegi, leading the Hungarian delegation, seems to be one of the more level-headed of the Fidesz officials who does not seem to share OV’s delusions. He has also been widely recognized as the man of the “business circles” behind Fidesz, which are also more likely to think more rationally than OV. And with OV running the country to bankruptcy, they too have a lot to loose. The question… Read more »
An
Guest

I meant of course “lose”, not “loose”… somebody really should invent an intelligent spell-checker.

Odin's Lost Eye
Guest
I think that neither the Viktator or his henchmen have yet learned is that BOTH the IMS and the EU Commission are just bureaucrats and have to remain within the remit laid down by their political masters. Of course Christine Lagarde of the IMF will see him and listen to him and will then explain why he cannot have what The Viktator wants –it is just not available, end story. The EU now has the final version of the new Hungarian Constitution and other laws. I can sense the anticipation in the hearts of the ‘Legal Eagles’ ordered to examine it in detail. These folk will have a ‘field day’. Oh yes! When their report has been looked at by the ‘top brass’ of the EU, Hungary will be asked to establish its defence. The ‘Legal Eagles of the EU will be itching to demolish the Hungarian defence. Some bits will go to the European Court, other items will go to the EHCR. Somewhere I read that the Viktator has spoken openly that he wants to leave the EU. He is hoping to wrong foot the E.U., but the exit negotiations will be fraught and expensive for Hungary. I see… Read more »
Gábor
Guest
@An: He has also been widely recognized as the man of the “business circles” behind Fidesz, which are also more likely to think more rationally than OV. According to a lengthy article in the Magyar Narancs’s Christmas edition Fellegi was used as a counterweight of Simicska end Nyerges and his departure was the sign of the latter group gaining ground. (Later corroborated by the nomination of Mrs. László Németh.) The article – referring to earlier ones as well – claims that Orbán tries to avoid being fully controlled by Simicska but he is clearly losing. Nevertheless, Matolcsy and his ministry is a last bastion of resistance. (Again corroborated by the fact that the trusteeship of the Russian-Hungarian and Russian -Chinese realtions went to the Ministry of Economics from the Ministry of Development, now entirely occupied by Simicska and Co.) So, it seems a coup led by Fellegi would mean getting rid of Simicska or an unexpected ceasefire of the concurrent business groups. Not impossible, as long as Simicska and Co. can retain their controll over the EU funds – and exactly the latter is the factor that could probably entice Simicska into a coup. If there is an imminent or… Read more »
Kirsten
Guest

Gabor, I was wondering wheter anything could be gained by a coup of Mr Simicska? I thought he is part of the same system that OV has been building since May 2010, why should he have more inclination to cooperate with the EU/IMF? Which means strict control of the money sent to Hungary and not ‘free access’ to the funds in return for getting rid (formally) of OV (but not of his ‘system’).

Kirsten
Guest

I love Hungary: The Allied Forces were surgeons during WWII but afterwards during the occupation the US in particular did a lot of re-education. This is what I meant with ‘therapist’. It is easier to ‘supply’ a society with a ‘therapy’ if it has no choice but to accept it. I have strong views about how strongly Germany would have managed a therapy under its own power but perhaps it is safe to say that it would have been at least much less likely to end in a success as it is often called now. Which does not mean that there were not important parts of the German society that used the chances offered by the allies, but I think you meant the whole society and the stability of the political institutions. The therapy that I meant started in 1945.

Paul
Guest

Ironic that it was the US forces who ‘reeducated’ the Germans. I wonder if this task was given to the all-black regiments or the all-white ones?

Kirsten
Guest

I found this publication to be an interesting example of how Americans approached the ‘problem’.
http://www.historians.org/projects/GIRoundtable/GermanReEd/GermanReEd_TOC.htm

Gábor
Guest

@Kirsten:
Actually Simicska and Co. fared quite well during the Socialist governmetn and mainly from the EU funds. Juts one example is the outrageous reconstruction of the Margit bridge, executed by Közgép and highly overpriced, finished well after the initial deadline, but still paid by the EU. As long as there are EU funds they can lay their hands on it because they built a large construction corporation. Without the money it is hard to see who would finance any major construction project.
However, I’m also not sure they could be convinced and I treat Ms. Németh’s appointment as a worrying sign. Together with the payouts from the budget in the last days of the year (hundreds of billions!) it can signal Fidesz’s desperation and with desperation their willingness to gamble. Instead of planning for the next two years they could have decided to dismiss any consideration of what will happen after July 2012 and will try anything to cling on to power…

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