Hungary and the IMF negotiations: An impasse?

Today ATV, the television station that is no friend of the current Hungarian government, dropped a bombshell: there are some non-negotiable items among the many demands the European Commission presented to Hungary many months ago.

A list of Hungarian counter-proposals was rejected already at the end of February by Brussels. So, the Hungarian government took another stab at satisfying the European Commission by making minor changes in the laws Brussels objected to concerning the independence of the Hungarian National Bank, the so-called reforms of the judiciary, and the position of the ombudsman in charge of data protection. Tibor Navracsics announced on March 22 that he was “cautiously optimistic.” In his opinion the Hungarian government gave “good answers to the objections of the European Commission.” However, he added, Hungary refuses to make any changes in the forced retirement of about 300 judges who either reached or soon will reach their sixty-second birthdays. As far as the Hungarian government is concerned, the question of retirement is not an issue connected to the judiciary.

Two weeks after Navracsics’s expression of “cautious optimism” Népszava reported that the Hungarian answers might not satisfy the commissioners in Brussels. A few days later Bloomberg reported that “Hungary probably failed to meet bailout-talks terms.” The news to that effect came from the Eurasia Group. One of the Group’s New York-based analysts claimed that the EU “continues to hold the bar high, suggesting agreement on preconditions still have some way to run.” Yet, Hungarian government officials made optimistic statements about the imminent start to the negotiations. Or, occasionally, for home consumption, members of the government told outright lies. In January András Giró-Szász, the government spokesman, flatly denied that the European Union laid down any preconditions to initiating official negotiations. At the end of February Zoltán Cséfalvay, undersecretary in the Ministry of National Economy, announced that negotiations could begin at the end of March or early April.

The latest and most flagrant lie came two days ago from Foreign Minster János Martonyi who claimed that Hungary is totally ignorant of any preconditions to negotiations for a loan. As if he never heard of the infringement proceedings levelled against Hungary that have been dragging on for months because of Viktor Orbán’s reluctance to give up his dictatorial plans for the “renewal of Hungary.” Moreover, suddenly Martonyi discovered that “political preconditions are unacceptable” altogether. So, if we take Martonyi’s words as the manifestation of the official Hungarian position, Hungary can forget about the line of credit it is hoping to get from the IMF. Clearly, Orbán wants the money but with no strings attached. Or, more crudely put, he wants the International Monetary Fund and the European Union to finance his “war of independence” against the Union and the building of a Hungary that refuses to share the values the European Union holds dear.

This latest argument that the infringement proceedings and Hungary’s inadequate answers to them is a separate issue from the loan negotiations was further emphasized today by Enikő Győri, Martonyi’s undersecretary in charge of European affairs. She acted as if she had just discovered an unfair connection between the political demands and the IMF negotiations. She expressed her hope that “no one wants to mix up things that are not necesarily linked to starting the credit talks.” If I understand her correctly, the latest Hungarian position is that out of the three infringement proceedings against Hungary only the one that concerns the Hungarian National Bank has anything to do with the loan negotiations. The other two, the independece of the judiciary and the position of the ombudsman in charge of data protection, are political issues that are utterly unrelated to matters of finance.

This is where we stood early this morning. But around noon ATV published an article that reported on a document that originated in Brussels and was sent to the Hungarian government in late March. It was a non-paper or, as it is better known, an aide-mémoire. This document catalogued five points that are non-negotiable as far as the European Commission is concerned. In the case of the first three points Hungary has no elbow room at all. The Hungarian government either accepts the dictate from Brussels or “the “European Commission will use other means at its disposal” to solve the problem.

Disagreement2

Disagreement

Here are the five points: (1) The president of the National Judicial Office must justify its decisions and must provide legal remedy following a decision. (2) The president of the National Judicial Office, after her nine-year term, cannot be reelected. She cannot serve even in an interim capacity after the conclusion of her term. A vice-president must be nominated who can run the office while waiting for a new president to be nominated and elected. (3) Neither the president of the National Judicial Office nor any other judicial leader can have the right to move cases to other courts because this provision of the new Hungarian law violates the basic law of fair judicial treatment. (4) The current system of the president of the republic appointing judges for brief durations and many times for “trial periods”  must be stopped. (5) Transfer of judges against their will must cease and the automatic termination of their services be forbidden.

These are only five points but we know from Olivier Bailly, the spokesman of the European Union, that there are some thirty odd items that Brussels finds objectionable. Bailly also added at yesterday’s press conference that to start negotiations there must exist trust, and in their “opinion that trust is still lacking” in Brussels and in the financial world toward Hungary. The problem according to the European Commission is not just the specific infringement proceedings against Hungary but that Viktor Orbán’s government policies frightened off foreign investors. According to Bailly the Hungarian government should take steps that “would make the return of the investors to Hungary possible.”

When will the European Commission give an official answer to the latest Hungarian counterproposals? They are not in any hurry. This week they don’t meet, next week they will be Strasbourg, but perhaps in May there will be some word. However, we just learned that on April 23 Viktor Orbán will be able to meet with José Manuel Barroso, the head of the European Commission, in Brussels. Will he be able to charm Barroso? I somehow doubt it.

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petofi1
Guest

@ Eva, “Clearly, Orban wants the money…”
No he does not.
I guess you don’t like Thomas Bauer (who seems like a knowledgeable economist) because he went on Kalman
Olga’s show and clearly stated that Orban’s tricks show that he doesn’t want the IMF loan. To the question of what he wanted, Bauer answered: “He wants to get his hands on the central bank’s money.”
Orban’s ‘back-and-forth, now I’m nice, now I’m insulting
you’…are not the actions of a man looking to agree on anything–just machinations, mostly for local, political benefit. “He, he. There’s our man sticking it to those
bloody EUs again!” But behavior aside, Orban has gone out of his way to pass anti-democratic legislation that would preclude Hungary getting any money whatever.
He knows that. Moreover, he’s now got his government cronies outright lying to the media. How much clearer can Orban make it that, not only does Hungary not deserve credit, but that they ought to be hoofed out of the EU altogether. Why?
Anyone speak Russian…?

LwiiH
Guest
@ petofi1, I agree, OV doesn’t want the IMF but he needs the IMF and is trying to get to the IMF pie but with no strings attached. The problem is countries looking to fund sovereign debt though the bond markets are having to complete with companies who are increasingly funding themselves from that same trough. Quite a few of these companies have bigger economies and have more cash in the bank than Hungary has. Kind of makes it hard for Hungary to compete especially when they are seen as being unpredictable where as investors completely understand how Siemens or Apple or .. behaves. Hence the large premium (float around 9%). More over, if he tries to pay FX debt coming due with HUF he’s going to completely crash the HUF. So he *needs* to float an FX bond offering and if he does under the current economic conditions without IMF backing… well it’s not going to be pretty. The lies are an attempt stabilize the market with the promise of an IMF backing without actually having to follow through. The problem is, the chasm in the press reports make by government officials, the EU and the IMF are so… Read more »
Litvanyi
Guest

This all seems so irrelevant. Perhaps I should refrain from any of this, all of this.
Yet do I have a choice? A Marai poem if you wish:
http://www.facebook.com/home.php?clk_loc=5
Sincerely:
Peter Litvanyi

Lutra lutra
Guest

It might seem irrelevant from your side of the pond but it’s fundamental from here. Maybe Europeans have the same perception of the “irrelevance” of the expensive, ostentatious circus of the Republican nominations.
Successful negotiations over a loan will reassure investors that Hungary is a safe place to do business, which will stabilise the forint, reduce inflation and preserve (if not generate) jobs.
It might be frustrating and worrying but Dr. Eva’s analyses, in my view, are never dull or irrelevant.

LwiiH
Guest

The EU has made a mistake…
“”I’m afraid I cannot list a full 20 or 30 points that have to be met; it’s more a general environment that needs to be secured,”
and Fellegi has jumped all over it.
“”ensuring an appropriate legal environment” is too vague for the government to be considered a precondition, as it lacks a specific set of elements and the expected measures.”
It’s been days of news saying we don’t know what you’re asking for while the EU has been saying, yup, you do.
Lets see how long this tactic lasts… my guess not long as this really spells out the size of the divide between HU and the EU/EC and the markets will pick up on that very quickly. I’m guessing the HUF breaks 300 today.

petofi1
Guest
@ LwiH… Fellegi has now come out saying that he doesn’t understand the political prerequisites for an IMF loan. Now, that should effectively disqualify him as a negotiating partner at a later stage. This all seems orchestrated by Orban, or, whoever is guiding him. It’s quite simple, really, but the EU and the IMF are used to dealing with adults with good intentions, not obstructive 12 year olds…Anyway, if they were of the inclination, the IMF and the EU could detail in what regard Orban’s legislation has gone against EU democratic standards point-by-point. Then, like to a nine year old, say that in this case you have to do this; in that case you have to do that. All this, not for Orban or the government…but to make clear to the Hungarian populace that Orban is playing a dangerous game, against the established rules of the EU club and playing ‘dumb’ besides. If, in the future, Hungarians discover that they can’t pay the 9% on government paper that is presently used to finance the country, they should clearly know who to blame. The earlier this is done, the better. I’m quite surprised that the DK hasn’t already done this on… Read more »
petofi1
Guest

@ Litvanyi…” all so irrelevant”
Really, Mr. Litvanyi? A Prime Minister in the throes of unstoppable power fully committed to the deconstruction of Democracy and the country’s economic well-being…is irrelevant? What, sir, do YOU find important?

Curiosa
Guest

I’m terribly sorry if this is off-topic, but I was so shocked that the Hungarian state news would write such a headline:
“Szorul a hurok Bajnai nyaka körül?”
Translated by me (might not be spot on):
“Is the snare around Bajnai’s neck tightening?”
http://mno.hu/belfold/szorul-a-hurok-bajnai-nyaka-korul-1068044
I’m disgusted and outraged that they would write such an article, no matter whom the article would be about.

petofi1
Guest

@ LwiH…no IMF
Orban doesn’t need or want the IMF. He’s fiddling while Rome burns…playing dumb and doing whatever necessary to keep
the populace at bay while the clock ticks down on Simor Andras and he lays his hands on the central bank’s mulla.

Kingfisher
Guest

Curiosa, MNO is Magyar Nemzet Online, not the Hungarian state news.

diplo
Guest

“This latest argument that the infringement proceedings and Hungary’s inadequate answers to them is a separate issue from the loan negotiations was further emphasized today by Enikő Győri, Matolcsy’s undersecretary in charge of European affairs.”
Enikő Győri is the Undersecretary of State in charge of European affairs at Mr. Martonyi’s MFA…

Lutra lutra
Guest

The EU might as well be trying to negotiate with a tribe from the highlands of Borneo as the current cabinet.
I think Orbán genuinely divides people into “good folk” and “gazemberek”. Good people don’t do bad things, bad people can’t do good things (or not from good motives). He is one of the good people and therefore he cannot do wrong. Either the other party has misunderstood him or they are out to get him. The idea that trust has to be earned (or regained) is outside his frame of reference, because he is a good person and therefore implicitly trustworthy. I guess to him it’s like religious faith – you don’t need proof, you just believe. Until the EU come straight out and say “Vik, it’s not political, we simply don’t trust you” he will stay in denial and, if they ever do say it, maybe he’ll wail that this is the greatest sell-out of Hungary since Trianon.

Kingfisher
Guest

I really don’t think Orbán has a thought-out ideology. I think everything he does has to be interpreted as the actions of a man intoxicated by his own power. I feel it is futile trying to identify ideological motivations behind his actions. I don’t think there are any. Often, he does things because he can, not because he has thought or considered them. And much of what is done is designed to ensure his power, be it trying to attract votes from the far right while at the same time, thinking he can retain support from other segments of society.
I used to work for someone just like this. He was bright, intelligent and shrewd. But was capable of the most extraordinary idiocy in the way he managed events, because he was intoxicated with a sense of omnipotence that his position gave him.

Curiosa
Guest

@Kingfisher: “Curiosa, MNO is Magyar Nemzet Online, not the Hungarian state news.”
That’s rubbish Kingfisher, look at where they get most of their funding from.

Kingfisher
Guest

Curiosa, the headline you objected to would indeed be out of place on Hungarian state radio or television. But just because Magyar Nemzet benefits tremendously from state advertising does not confer on it “közszolgálati” status, does it?

Eva Balogh
Guest

Diplo: ‘Enikő Győri is the Undersecretary of State in charge of European affairs at Mr. Martonyi’s MFA…”
Of course. However, occasionally I get confused with all the similar names. I especially have problems with the “Rét(s.” I have to look them up every time I mention them in order not to mix up one “Rét…..” with another.

Eva Balogh
Guest

Petofi1: “I guess you don’t like Thomas Bauer.”
On the contrary, I think very highly of him. I also watched the interview you are talking about and as usual I agree with him with the following addition. If he could get the money without strings attached that would be Orbán’s first option. If that doesn’t work out then he has to clean out the Hungarian National Bank. But that is risky. Free money from the IMF would be preferable from his point of view.

LwiiH
Guest

Here is the next quote of the day, “Political conditions to credit for Hungary would be blackmail”, OV…
So, now they feel they’ve gotten a mistake in Brussels they can work with to split things up… Again, don’t think it’s going to work but it’s definitely a new tact.

Member
Orban does want the IMF money alright. It is silly think he does not. WHy on earth would Orban and Martonyi would of made a fool of themselves first saying that they do not want the IMF, then a few months later going back to the table and explaining themselves? There was no reason to go back (if they did not need the money) as their status among the True Hungarians following their “kicking the IMF out” was great. THey thought they will be able to get financing w/o the security of the IMF but that proved not be the case. Do not forget that it is not direct money they are asking, they are asking for “security backup”. THis simply translates that investors do not trust Hungary enough to repay any loans , and they want to secure their investment. IMF is the securoty, but even the IMF feels at this point that Orban will bankrupt the country soon enough and their money, if they have to help out will be taken down with Orban. China is back at the negotiating table for investments and loans. Maybe this did not get so much press, but while they try to… Read more »
Member
Member

“WHy on earth would Orban and Martonyi would of made a fool of themselves first saying that they do not want the IMF, then a few months later going back to the table and explaining themselves?”
Perhaps to buy themselves some breathing space when things really did look very dodgy in January.
To be honest, they have (so far) achieved their objective no economic collapse coupled with not one meaningful law changed.
Also the longer he can stall the EU the more the changes become a fait-accompli, eg a judge being retired is going to find it very difficult to find his place again in 3/6/12 months if their is an unlikely change on the part of Orban.
The hilarious propaganda (ie no surrender to political blackmail) is aimed at the internal sheep pen not the IMF or EU. Maybe again as an attempt at pre-emptive self-justification before the whole thing collapses.

Odin's Lost eye
Guest
Hungary talks of negotiations with the E.U. This is just for internal consumption. There are certain things on which Fideszs and Orban Viktor will NEVER compromise on and that is that Fideszs and Orban Viktor shall never have to give up absolute power. When the New Constitution and the plethora of Cardinal Laws were passed the Government proclaimed that Hungary had done this because it was ‘Hungary’s Sovereign Right’. To my mind these will NEVER be changed and Hungary has imposed its will over all treaties and other solemn pledges it has signed or given. I suspect that E.U. knows this, but the E.U. has to follow its procedures as laid down in its standing orders. China will play along with Hungary in order to support demands on the E.U. China needs to expand its economy by at least 7% per annum just to adsorb its new school leavers into the work force and this means selling more to Europe and the USA. They are quiet prepared to jolly the Viktator along short of investing more than very moderate sums of money into Hungary. One must also bear in mind that once the Hungarian Government has filled its coffers to… Read more »
Member
Odin’s Lost eye: “One must also bear in mind that once the Hungarian Government has filled its coffers to the brim with all the money it can con out of the E.U. and the IMF it will invoke the Jobbik policy of defaulting on those and all other previous loans.” But this is exactly supports my point that he does want the money. First he needs to max out what he can borrow, then default. If the IMF will back up the borrowed money there will be no “hard feelings” left from the lenders as they will get their money back. He wants the money with IMF backing and put his hands on the reserves. He just realized in the process that he cannot put his put his hands on the reserve AND have the IMF money. THe IMF tries to make sure that Orban does not clear all the shelves, so if Hungary wants to default, there is some money they can pull before declaring bankruptcy. The whole brouhaha with the legal system also serves the purpose to remove all the obstacles from pulling a trick on all the lenders. THis is what the EY and the IMF tries… Read more »
petofi1
Guest

@Odin’s Lost Eye and Some1…
No Loan. Simple. Orban’s looking to blame the EU if economics cave in.
The Chinese connection is interesting. What are the Chinese doing in the traditional Russian sphere of influence? I suggestt: not without a nod from Mr. P. Please note that Mr. P. can get the Chinese to do most anything because they need his gas & oil so badly. So, the Chinese may be a cover for Russia. If, maybe as planned, the Chinese plans fall apart; the big-soulled Russians will step in as lenders of last resort. What’s 30 billion to Gazprom and Robonoexport, anyway? And when that happens, Hungarian Fideszers will have a new holiday–the return of the country to vassal hood.

Curiosa
Guest

@Kingfisher
Your narrow mindness is what is problem with this country today, you would rather debate a word “közszolgálati” than look at the reality.
Just because the reporters are paid through Nemzeti Fejlesztési Minisztérium, Németh Lászlóné, to their consultancy firms and don’t wear the tag “közszolgálati”, doesn’t mean that it isn’t working in the same way just another avenue to feed the funds.
If you want to debate a labeling word, you better show proof in practice, because theory is all good, but when it comes to reality it’s a completely different scenario.

Kingfisher
Guest

Curiosa, take a deep breath and just examine what we are talking about.
You posted a headline from MNO which appalled you because – or so I understood – it is not the sort of thing you would expect on Hungarian State News.
I pointed out that MNO is NOT Hungarian State News.
You are arguing, correctly I’m sure, that MNO gets most of its money from the Hungarian state. But that still does not make MNO “Hungarian state news” in the sense that I think most people would understand the term (i.e. the Hungarian equivalent of the BBC)

Curiosa
Guest

@Kingfisher
You can play with words, it still works the same.

Member

Curiosa, take your meds … You sounded like a foreigner who doesn’t know that the MNO is privately owned. Of course the government keeps it alive financially mostly through advertising money. Even foreign companies, in exchange of juicy projects from the government, advertise in the paper, like STRABAG.

Curiosa
Guest

@Mutt Damon
Just because you don’t know how much is going to the authors to MNO and their private consultancies doesn’t give you the right to trash talk others.
You take your meds Mutt Damon, don’t go calling people mentally ill when you have no clue what your talking about.

An
Guest

@Curiosa
Are you sating that MNO journalists are paid from the ministry (through private consultancies)? Interesting. So it’s not only the government-mandated advertising that is keeping MNO alive.
Not too surprised to hear that, though. But it still doesn’t make MNO an official state paper, even though in so many ways, the paper is plain government-funded propaganda.

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