Guessing game: how long can Viktor Orbán last?

Although the forint stabilized and the cost to insure Hungarian bonds receded somewhat, Fitch Ratings, the third credit rating company, downgraded Hungarian government bonds to junk status. The government spokesman was instructed to inform the world that Viktor Orbán’s team was terribly surprised about the move. The Ministry of National Economy headed by György Matolcsy, the right hand of the prime minister, announced that there was no reason whatsoever for the downgrade because the fundamentals of the Hungarian economy are solid. Analysts, of course, were expecting the downgrade. After all, as long as negotiations with the IMF and the EU are hanging in the air one couldn’t expect anything else, especially since Fitch had already announced before Christmas that in the new year it would decide on Hungary’s fate.

The optimists took it as a good sign that the prime minister, flanked with his closest economic advisors–György Matolcsy, János Varga, and Tamás Fellegi, met with András Simor, the governor of the Hungarian National Bank. The optimism of some of the observers was based on what Viktor Orbán had to say after the meeting. For example, Bloomberg‘s reporter took Viktor Orbán’s words at face value. She reported on Orbán’s statement at a press conference he held alone after his meeting with Simor. He claimed that “it’s our joint position that the government and the central bank must cooperate in the closest possible way for the sake of confidence in the forint.” He added that the government will support the central bank “in everything” that does to ensure the forint’s stability. Orbán, who has been doing his darndest ever since the elections to get rid of András Simor, suddenly became outright chummy with him. Simor “can count on the support of the government, including his [Orbán’s] personal support.”

He also said a couple of other things Bloomberg didn’t report. For example, that “the Hungarian government has done everything in its power to make sure that the negotiations [with the IMF-EU team] may begin and be completed as soon as possible.” He also announced that he saw the possibility of successful and speedy negotiations.

Well, as usual, Viktor Orbán isn’t telling the truth, the whole truth, and nothing but the truth. Either about the talks with András Simor or about Hungary’s prospects for successful and speedy negotiations with the IMF-EU delegation.

Let’s start with the meeting. As it turned out, the meeting was held at the request of the governor of the central bank who was mighty upset at what János Lázár, head of the Fidesz parliamentary delegation, had to say about Simor and the Hungarian National Bank. Lázár claimed that it is Simor who is the obstacle to the country’s economic growth, and he accused Simor of acting as if the central bank were his own personal bank. The Hungarian National Bank immediately published a communiqué in which they denied Lázár’s charges and emphasized that the central bank’s cooperation with the government strictly follows the duties prescribed for a central bank.

Then came a more detailed description of the meeting in Magyar Nemzet, which is usually a good source for information about the government. Apparently, Orbán asked Simor to do what the U.S. Federal Reserve and the Bank of England are doing, specifically, to supply Hungarian banks with liquidity. From the description it seems that no agreement was reached. Simor promised only to think about it. Not much was said about the controversial bank law. The question of the central bank’s reserve of 35 billion euros didn’t even come up although earlier the government had talked about the use of these reserves to jumpstart the country’s economic growth.

Simor left the meeting early and there was no joint press conference. Later a very brief communiqué was issued by the Hungarian National Bank that said practically nothing about the meeting. But the picture taken as Simor was leaving is telling.

 

Varga standing at the door, Fellegi looking out the window, Matolcsy looking on 

In addition to the prime minister’s optimistic announcements that took a successful outcome of the negotiations with the IMF-EU for granted, the government spokesman gave the impression that Fellegi will go from Washington to Brussels “to negotiate.” Later in the day it turned out that this wasn’t true either. Fellegi is going to meet with Ollie Rehn but, as Rehn’s spokesman said, it will be a courtesy call where no specifics of the negotiations will be discussed. We know that the European Commission’s staff is busily studying the text of the Hungarian constitution and the cardinal laws, but the full Commission will meet only on January 11, at which point some decisions might be made. In brief, there will be no early beginning of or early conclusion to the IMF-EU negotiations.

Viktor Orbán’s face belies his feigned optimism. Here is a man who is deeply worried, although I suspect that he refuses to see the real causes of his and his country’s troubles.

 

What is going on in Viktor Orbán’s head?

It is becoming obvious that Viktor Orbán has completely lost credibility. Moreover, however slowly, it is sinking in west of Hungary that Viktor Orbán is leading Hungary away from the democratic principles on which the European Union was built.

Very few people outside of Hungary realized in the spring of 2010 that Viktor Orbán’s acquisition of such an overwhelming majority in parliament signaled trouble. One of them was Jacob Kirkegaard of the Peterson Institute who put it as kindly as possible: Orbán “is not your arch-typical European democrat. He is no Václav Havel, let’s put it that way.” Zoé Chase of National Public Radio now calls him a megalomaniac which, given the difficult economic environment, makes for “a classic European disaster story.” To drive home her point Chase used a recent picture of Orbán in front of one of those nineteenth-century romantic canvases depicting Hungary’s greatness.

 

Prime Minister Viktor Orbán stands in front of a bloodbath

Indeed, Orbán has managed to create a political and economic bloodbath, and by now he has no friends who could help him out. Until now at least the European People’s Party to which Fidesz belongs tried to defend him. As of today Wilfred Martens, chairman of the party, and Joseph Daul, the leader of the party’s parliamentary delegation in Brussels, jointly announced that they will support the decisions the European Commission reaches on the fate of Hungary. That is very bad news for Orbán because the Christian Democratic People’s Party is in the majority in the European Parliament.

Meanwhile, Figyelő learned what the IMF will most likely want from Hungary in return for a standby loan. In the first place, a decision about the negotiations will not take place until January 18. So, the IMF is definitely not in a hurry. Apparently, those in charge of Hungarian affairs at the IMF are thinking in terms of a thorough undoing of some of the Orbán government’s sweeping and undemocratic changes. The Budgetary Council that was created to be a completely ineffectual body of three men without a staff will have to be strengthened, giving it real teeth. The IMF will apparently demand a substantial decrease in the “crisis levies.” They want an end to unpredictable ad hoc economic decisions. The structural reforms which the Orbán government refuses to tackle must be introduced. They are expecting a complete reorganization of public transportation (MÁV, BKV) which piles up incredible debts every year. The government should also put in place a bankruptcy law for individuals, which still doesn’t exist in Hungary.

But that’s not all. The IMF document at Figyelő mentions the real possibility of the European Union depriving Hungary of the very substantial subsidies it receives from Brussels. These subsidies amount to 2% of the country’s GDP yearly.

In brief, Orbán’s situation is dire. There are still many observers who claim that he will weather this crisis, but I’m less convinced that the deliberately slow-moving IMF and the European Commission will be merciful. The financial pressures in the coming weeks might be so substantial that Orbán’s “friends” will have to put out feelers to ascertain whether the IMF and the EU would be perhaps more comfortable with a more moderate Fidesz politician as prime minister. Although as István Vágó, the television personality, said on Facebook, having Mihály Varga instead of Viktor Orbán would be like having Ernő Gerő instead of Mátyás Rákosi. Gerő followed Rákosi as party secretary in July; the Hungarian Revolution broke out on October 23. Not a nice prospect.

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anecdote
Guest
Mr.V.Orbán, the Hungarian Prime Minister, is clearly suffering from what I have diagnosed as “Walesa” syndrome. This syndrome, in its benign form, is not particulary dangerous but rather a form of irritant (“fidgety” but not painful). However, in its malign form — i.e. that with which the Hungarian PM seems to be afflicted — it can have very serious consequences indeed. “Walesa” syndrome takes time to develop. Its initial stages involve the sufferer making a quite to very big impact on the political scene.Explaining this briefly, the sufferer begins to feel that the political scene cannot exist at all without him. In its benign form the patient will eventually begin to see reason and be satisfied to move into the backgroud, rest on his laurels, and accept the respect bestowed upon him due to his earlier achievements.(Of course “respect” and “achievements” can also be interpreted as “opprobrium” and “non-achievements/misadventure”, depending on the course of the sufferer’s career. In its malign form it can end with disastrous results, not just for the sufferer, but for all those around him. The afflicted individual develops a “My country, right or wrong” mentality (or, rather, “My country as I envisage it”). In its very… Read more »
Wondercat
Guest

@Prof Balogh: Following your blog — and then reading the usual press, listening to the usual broadcasts — two or three days later, when the media catch up with you, makes me feel wonderfully clever. (“Smug” is among the best emotions in my repertoire.) But of course it’s you who are the clever one, the person who collects the facts, achieves the synthesis, and masters the perspective. I just puff along in your wake trying to keep up!
Thank you.

Gábor
Guest

It is quite ironic, the picture behind Orbán depicts the entry of Charles of Lorraine into the reconquered Castle of Buda in 1686. At last the Holy Alliance liberated the country. 🙂

Mouse
Guest

I’m not sure what I find more depressing the continuation of Fidesz and Orban in power or their removal at the behest of the IMF / EU and replacement with technocrats. Neither serves democracy particularly well but at least Orban has the excuse of having been elected.

tttt
Guest

.

Sophist
Guest

“Neither serves democracy particularly well but at least Orban has the excuse of having been elected”
Orbán wasn’t elected prime minister, he was chosen as prime minister because he was the candidate of Fidesz the largest party in parliament. If Fidesz in parliament choose another candidate, that candidate will have been just as much ‘elected’ as Orbán.

Paul
Guest

Sophist, you are of course correct, but I suspect a large number of Fidesz voters, perhaps a majority, actually voted ‘Orbán’, not Fidesz.
How will these people react when their Saviour is removed by his (now their) enemies?
My wife, for instance (and most of her family) is/are still convinced that Orbán is the saviour of Hungary and will outwit his (their) enemies. Apart from Kósa, I don’t suppose many of them could name another Fidesz politician without having to think about it (and, in my wife’s case, not even then).
To many Orbán IS Fidesz, to some he is Hungary. The trauma of seeing him removed will be deep and long lasting for these people.

GW
Guest

Orbán has proven himself incompetent in policy, but I honestly believe that he has the political cards (loyal party, favorable laws, weak and disunited opposition, tons of well-paid PR) in hand to sustain himself through this election period and quite likely through the next. Inasmuch as I’d love to see him gone, and even though his failure would be the best opportunity for an opposition victory, the welfare of Hungary in the meantime is far more important than the particular personnel in office, so for that reason it is crucial to concentrate on the analysis and critique of policy, to proffer better alternative policies, to insist on transparency, and to call out corruption when it is found in terms of governing competence rather than partisan ideology.

Sophist
Guest

Paul,
“How will these people react when their Saviour is removed by his (now their) enemies?”
A very pertinent question: especially as a significant percentage of the population don’t care whether Hungary is a democracy or not, and are susceptible to seeing Hungary as a victim of foreign intrigue.
Against this you have the Orbánista’s who simply saw Orbán as more likely to line their pockets. I have a close friend like this who is so disappointed with the economic outcome of voting ‘Orbán’ that he promises never to vote again !?! But generally they can probably work out that a future in Europe is likely to be more renumerative than Hungary becoming a Belarus or a North Korea.

Member

I had a nice brisk walk this morning (beautiful day btw) up to the Korut to change our surplus forints into Euros and GBPs… not that we don’t believe Vik’s reassurances but just in case, obviously;)
Now, there weren’t rows of desperate grannies with their savings in CBA bags in front of us but according to the guy behind the counter, business had been brisk. And there are next to no tourists in town so that business has been local.
If the *little* people are starting to take precautions, then I’m sure the people who can genuinely affect the economic situation are also already or on the point of doing so.
I personally think the regime is seriously scared- one more daft communication, a la Orban’s “war on the banks” 12/9/2010 (check the graph of Euro/HUF after that date) and the whole edifice could come crashing down round their ears.

Member
Sophist: “Orbán wasn’t elected prime minister, he was chosen as prime minister because he was the candidate…” I was thinking the same. THanks for putting it down so well. WHat this really means that Fidesz can select an other PM if Orban will finally “resigns” (fingers crossed). Mouse: “I’m not sure what I find more depressing the continuation of Fidesz and Orban in power ” Actually what I find most depressing is the indifference of Fidesz supporters, their “buried their head in the sand” attitude. I am also saddened by the fact that the number of young people, who’s future in Hungary is actually at risk, have no interest in getting involved. Of course we read about those who actually active, but trust me, those are the exceptions. It seems to me that non of “thinkers” are able to mobilize (and I do not mean physically) the younger generation. When you look at he photos you do not see to many under 25 or even under 30 years olds. On a certain way I think the only thing that would make them think if the EU membership would be at risk, I mean just as with Orban’s rich supporters if… Read more »
luigi
Guest

‘Simor “can count on the support of the government, including his [Orbán’s] personal support’
Wrong translation, better learn Hungarian before publishing hysterical articles.

GDF
Guest

The body language on the photograph of Simor leaving speaks volumes.
I am shocked the MTI published it…

Paul
Guest

oneill – I bet the Fidesz money men don’t have much of their money in forint – or in Hungary.

Joseph Simon
Guest

This Spectrum is out of focus, as usual. It is the country that is in a dire situation, and it has been since 1956 when a defunct regime was restored. There is very little what Orbán or anyone for that matter can do.

Member

I bet the Fidesz money men don’t have much of their money in forint – or in Hungary.
Paul,
Not since September 12th (the day Vik declared war on the banks) last year.

Member

Joseph Simon: You wrote the same thing twice now. Can you come up with something new?
You say there is very little that anyone for that matter can do.
Guess what, it is Orban who pushed the country into this position. He is responsible, and that this point there are still many things that can be done. So you say that is was harder in 1956 to “restore ” the country then in 1989? Who was restoring the defunct regime in 1956?
Revoking the ad-hoc constitution and start to work on a real one that everyone can respect would be a good starting point to restore democracy.
If you are referring to the economical problems, maybe listening to others than Matolcsy would be a perfect start up and anyone can do that. Giving some credits to Simor instead of tirelessly trying to discredit him would also be great. Do you feel that is above the head of Orban? If you answer is yea, the you should stop advocating for him. If you think he can do it, then why would you say it is impossible?

Odin's Lost Eye
Guest
I think Paul has identified the real problem. It will be those Fidesz supporters who believe that the Viktator is the Messiah. When and if (and it is a very BIG IF) the Viktator is disposed of, these people will blame EVERYBODY (except the Viktator) They will invent enemies who, in truth do not exist, and will try to punish those who are not 110% supporters of the Messiah. This is going to be a big problem that is being laid up for the future. Mouse you are quite correct the removal of the Viktator, which will have to happen to literally save Hungary from sliding into the pit will be just as dangerous as letting Hungary slide into the pit under the Viktator In the former case it was his enemies who did it, in the second it was the enemies of Hungary caused it. The only hope is that the Viktator will lose support in the ‘House’. He cannot lose support in Fidesz because the party structure and rules do not allow. As Sophist remarks he is only P.M. because the majority in the house –Fidesz- say so. Some 1 yes you are right Orban Viktor knows only… Read more »
Gábor
Guest

Just a minor observation, not necessarily as important as I would like to see, but anyway very interesting. Even a month ago Orbán promised that even though 2012 would be a tough year 2013 would bring relief. And Lázár already in the end of the last year and now even Orbán promises that this relief will come this year, in the second half of the year. Maybe it is the sign of growing tension and pressure from inside, people feeling it is impossible to survive a year without an economic turnaround and Orbán tries to reassure them.

kormos
Guest

Economic turnaround????
Since 1966, the New Economic Mechanism led to mounting foreign debt incurred to shore up unprofitable industries.
While some previously Russian satellite country (s) denied paying back such debt, Hungary never opted for this solution.
Since then Hungary (which was governed by left wing (liberal??)Governments most of the time) built up an enormous debt. There is debt on every level of the society. Municipal, private and state(sovereign) debt should be added up to see the real picture.
Where did Hungary get the funds from to join the IMF?
Please do not tell me that the present Hungarian approach is not the solution. I know that. Specifically their communication is incredibly poor, but this problem exists since 1919.

Cirmos
Guest

How bizarre for “kormos,” of all people, to complain about the government’s “incredibly poor” communication after he or she leaked Szapáry’s letter to Scheppele, thereby inviting her devastating rebuttal and her pointed questions (which Szapáry still hasn’t answered)…

kormos
Guest

Kormos’ action (or mistake? if you will) was not needed for Ms.Scheppele to formulate a reply. Kormos is still wondering about conversation(s) between Ms. Balogh and Ms. Scheppele.
And… the last sentence was not the salient point of my post.

Cirmos
Guest
@kormos: The salient point of your post, as far as I can make it out, appears to be a conspiracy theory about commies and liberals driving Hungary into debt. I don’t know what else it could be other than a conspiracy theory about a covert scheme implemented between 1966 and 2010; it is of course a widely-known and indisputable fact that the Kádár regime drove Hungary into debt. Less well known is the fact that the rise in Hungary’s sovereign debt began in 2001 when the first Orban government started throwing money at voters in the run-up to the 2002 elections; and that throughout the next eight years Fidesz encouraged and supported all the wasteful measures of the left-liberal coalition while sabotaging every attempt at cutting spending and reforming the public sector. In any case, the fact that Hungary’s sovereign debt has become unserviceable has nothing to do with the size of that debt. The size of the sovereign debt is well within the normal range and it is not what’s causing problems, contrary to the relentless propaganda of Orbán & Co. And since you mention municipal debts: most municipalities were in Fidesz hands already before 2010. Ask Tamás Meggyes… Read more »
Paul
Guest

The Guardian article I posted the link for last night – http://www.guardian.co.uk/world/2012/jan/06/hungary-viktor-orban-faces-protest – is actually pinted in today’s paper and looks very impressive. It covers two pages, including a large photo of a protestor holding up a placard with “Hey Europe, sorry for my Prime Minister” written on it.
And this from a paper that hardly ever covers Hungary. In fact they’ve sent their Berlin staffer to Budapest to cover events – an indication of just what a story OV’s madness is becoming.
Today’s Independent also includes a long piece on the current mess – http://www.independent.co.uk/news/world/europe/curtain-comes-down-on-liberal-hungary-6286332.html – including a lovely quote from ‘Attila Szervac – Teacher’ – “I believe Orban is a paranoid megalomaniac madman…”

Eva S. Balogh
Guest

Kormos: “Kormos is still wondering about conversation(s) between Ms. Balogh and Ms. Scheppele.”
I’m afraid you make too much of these so-called conversations. She is not the only one with whom I exchange letters. I usually write to people who publish something on the blog I find an especially valuable contribution. That’s what happened in Kim Scheppele’s case.
She wrote an excellent piece (no wonder) on the Hungarian constitution and I thanked her for it privately. It turned out that she also wanted to get in touch with me because she liked the stuff I write about Hungary.
So, here and there we exchange e-mails and certainly when I discovered Szapáry’s letter to the NYT I called her attention to it. After all, her name was mentioned in that letter.
Kim Scheppele is not the only person with whom I correspond. I could mention a few others: Mutt Damon, An, Some1, Paul, Mouse, and several others.
One more thing. I think that it is perfectly natural for two academics who are interested in the same country to correspond. I correspond with many, many people who are well known in Hungary and abroad.

Gábor
Guest

Kormos, I really don’t understand your vehement reaction? What’s your problem with an economic turnaround? Do you want Hungary eternally going downwards? Wouldn’t you like to see the country on an upward trajectory? Or are you dubious regarding Orbán’s capability to achieve such a fast change?
If you need some enlightment how one can use the phrase economic turnaround please take a look at this article of NYT:
http://thecaucus.blogs.nytimes.com/2011/08/27/bachmann-promises-fast-economic-turnaround-with-tax-cuts/

Member

Kormos, people do not live in isolation, does not matter how hard Fidesz is working on that. I applaud Eva Balogh for being able to reach out to foreign experts. (Something that Orban should of done long time ago. Imagine that if instead of spending all that money on a PR firm in London, he would of spent the money on real experts of economy?) I am sure Eva would be happy to correspond with any other conservative academics or politicians beyond the borders of Hungary who are in support of Fidesz. I think you should let her know on this blog who are those intellectuals, so they can be quoted and engaged.

Paul
Guest

Can anyone explain luigi’s post at 10:00 AM, Jan 7?

Member

Paul: “Can anyone explain luigi’s post at 10:00 AM, Jan 7?”
Nope. It is ambiguous. Its either mean that Bloomberg has no idea what they are talking about, as they did not consider the whole picture OR accuses Eva that she does not know what she is talking about because she does not understand Hungarian. Since Eva’s Hungarian is perfect, I assume the first scenario is the correct interpretation.

Paul
Guest

Thanks Some1, I’m glad I’m not the only one baffled!
I thought he was telling Éva she needed to learn Hungarian. Even JB wouldn’t go that far!

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