I guess I could write about Tamás Fellegi’s Washington trip, but I don’t think that it is necessary to spend too much time on it. Christine Lagarde, managing director of the IMF, issued a terse statement right after the meeting that took place late afternoon yesterday. Lagarde “indicated that, before the Fund can determine when and whether to start negotiations for a Stand-By Arrangement, it will need to see tangible steps that show the authorities’ strong commitment to engage on all the policy issues that are relevant to macroeconomic stability.” The last sentence was perhaps the most important: “Support of the European authorities and institutions would also be critical for successful discussions of a new program.”
Reports from Brussels presented the story somewhat differently. A Reuters report assumed that Fellegi’s pitch must take place in Washington. However, it is becoming clear that there is perfect cooperation between the European Union and the IMF. After all, it was only a couple of days ago that Christine Lagarde talked in person with important politicians of the European Union, including Angela Merkel. Newspapers reported that one of the subjects of their conversation was Hungary. Just as Portfolio, a Hungarian economic website, reported that “Lagarde remained firm and Barroso resolute.”
The conversation between Lagard and Fellegi ended shortly after midnight Hungarian time. The next morning Viktor Orbán, who held his usual Friday morning radio-talk on MR1, claimed that although he and Fellegi are in constant touch he hadn’t heard anything about the outcome of the negotiations.
This is unlikely. Moreover, it is enough to look at Viktor Orbán’s puffy eyes to know that the prime minister didn’t sleep very much last night.
MTI’s official caption: Prime Minister Viktor Orbán is smiling before his interview on MR1
So, I think we can safely assume that Orbán knew that Tamás Fellegi was unable to convince the IMF of anything and that Hungary’s only remaining options must be found in Europe. But success there, according to most commentators, is close to nil.
If Orbán knew the outcome of the conversations, why was he so cocky during the interview? He emphasized that Hungary is still at odds with the European Union over the legislation on the central bank although he knows that this is one of the most important demands of the European Commission. As far as the judicial system is concerned, Orbán considers this a “Hungarian issue.” He specifically referred to the early forced retirement age of judges and expressed his surprise that the European Union had any problem with the new law considering that the European Union in general likes clear-cut and transparent regulations. This is what the Hungarian government wanted to achieve: everybody’s compulsory retirement age is 62. No exceptions. A statement that is, by the way, not true. As far as the position of the ombudsman for data protection is concerned, according to Orbán it is “only a speck of dust in the machinery.” The government wanted to reorganize the whole ombudsman system. The current holder of the office objected to it and didn’t want to remain if the office was reorganized. So, they simply named a new ombudsman. That’s all. They will explain the whole thing to the Commission.
He was asked about the possibility of bankruptcy, which Orbán denied adding that “it is easy to spread rumors whose ill effects the Hungarian people suffer … the foreigners bring their money here because in all of Europe buying Hungarian government bonds is the best deal. Meanwhile they scare the Hungarians with the possibility of bankruptcy who in turn begin to move their money abroad.” Finally he repeated that “speculative swindlers are pulling the strings.” This is what has an adverse effect on the European currencies. Orbán’s irresponsible xenophobic propaganda and his outright lies about the real reasons behind the problems of the Hungarian currency are really deplorable. This is demagoguery at its worst.
Orbán is trying to mislead the Hungarian people in other ways as well. For example, he indicated that the “negotiatiations with the IMF are only about one thing: what kind of economic policy is necessary for the repayment of the loan.” According to him there are two important factors in this respect, both of which already exist in Hungary: a low deficit and decreasing sovereign debt. If Orbán were right, Hungary wouldn’t have to do a thing. The money would pour in from the IMF as well as from the financial markets.
Finally, he repeated for the umpteenth time that he “can imagine only an agreement that serves Hungary’s interest. The IMF has no interest of its own that is separate from that of Hungary.”
And finally, I would like to share a picture of Tamás Fellegi with Christine Lagarde. I checked on the Internet and couldn’t find another picture of him where he is smiling. But look at this picture, taken before the meeting with Lagarde.
Tamás Fellegi and Christine Lagarde
Perhaps his smile is a little too forced. I have the feeling that in the next few weeks there will not be many reasons to smile.
The rats, by the way, are leaving the sinking ship. Zsigmond Járai a couple of days ago gave up his job on the Fiscal Council claiming that his business activities don’t leave him enough time to do a good job. By today, he quite openly admitted that he can’t support Viktor Orbán’s economic policies and that a complete change in direction is necessary. Otherwise, serious economic and financial troubles are in store for the country. In the past there was no one who so steadfastly supported Viktor Orbán as Járai. He even mentioned the necessity of a change in personnel. It is well known that he is not exactly a fan of György Matolcsy. But I have the feeling that it may not be too far from Járai’s thinking that there might be other victims of Hungary’s economic problems. And after all, he as a former minister of finance and governor of the central bank might have an important role to play. Perhaps in a technocratic government an economic and financial expert could end up as the new prime minister.