Yesterday I said something to the effect that a very short official meeting can mean only two things: the participants agreed on all points and therefore there was no need to waste time or they disagreed on everything and, after acknowledging their differences, they concluded the meeting.
I should have mentioned another possibility: the real negotiations took place earlier and the meeting was organized simply to reaffirm the understanding of the participants. I believe that this is what happened in Brussels yesterday.
Let me emphasize that it is very difficult to have any clarity in this matter because at least one of the participants wants to make sure that the Hungarian people don’t understand exactly what happened. Therefore one has to gather bits and pieces of news, often contradictory, from all over to try to put together a full picture.
This morning, after it became evident that the European Union had given its blessing to the start of negotiations between Hungary and the International Monetary Fund, my kneejerk reaction was: “Brussels caved in, after all.” By the afternoon I changed my mind. I decided that the EU had simply changed tactics. Viktor Orbán in fact laid down his arms, as Portfolio rather vividly described the end of the Orbánite war of independence. Orbán came to the conclusion that Hungary could survive without an infusion of cheap money for only a few more months and therefore it was time to call back the troops.
Little attention was paid to the negotiations over Hungary’s national bank conducted by experts of the European Central Bank, the International Monetary Fund, the Hungarian National Bank, a representative of the Hungarian Foreign Ministry, and a representative of the Ministry of National Economy. The meeting took place in Frankfurt, the financial capital of the European Union. The Hungarian government certainly didn’t advertise these important negotiations that took place between April 16 and 18. Other than one brief MTI news report that appeared on the 18th and a short sentence on the subject by Foreign Minister János Martonyi I could find nothing on the subject. Martonyi, speaking on April 16, minimized the importance of the negotiations: “The event is important but the conditions for beginning the negotiations don’t depend on it.The decision is in the hands of the European Commission. The question is whether the Commission regards the Hungarian counter-proposals to be satisfactory or not.”
As it turned out, the changes that were made in the law concerning the Hungarian National Bank on April 17 didn’t satisfy the European Commission and it was at the negotiations in Frankfurt that the Hungarian government was forced to retreat on several points. Now it looks as if even András Simor is satisfied and believes that the independence of the National Bank is assured. Thus, Viktor Orbán’s only job was to tell José Manuel Barroso that he stands squarely behind the changes hammered out in Frankfurt. The spokesman of the Commission announced today that the Hungarian government at last is ready to satisfy all the demands of the Commission concerning the law on the Hungarian National Bank.
Capitulation during negotiations
So, what will happen as far as negotiations with the IMF are concerned? The negotiations can begin but not as soon as Viktor Orbán optimistically predicted yesterday. Today Tamás Fellegi talked about setting the date for some time in May. As for the duration of these negotiations? I suspect that it will not be a speedy process because the successful conclusion of the negotiations also depends on the Hungarian government’s fulfillment of all five demands of the Venice Commission. To remind everyone, 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. This will be a very hard pill for Viktor Orbán to swallow.
And we didn’t even mention IMF demands in the economic sphere. Tamás Fellegi, minister in charge of the negotiations, gingerly announced today that there might be an IMF demand to scrap the flat tax introduced with such fanfare by Viktor Orbán as the remedy for all of Hungary’s economic ills, the key to 6-7% economic growth and one million new jobs in ten years. Surely, Fellegi knows more than he is willing to say at the moment. If Hungary is forced to retreat here, it will be a terrible blow to Viktor Orbán.
In addition, let us not forget about the latest brainstorm of György Matolcsy, the so-called Kálmán Széll Plan 2.0. According to experts this new convergence program was thrown together in three weeks or so. The LMP spokesman described it as “a tale put together by Matolcsy and the Grimm Brothers.” There are pages that appear in the document at several places. There are subtitles that are not followed by any text. A quick look at the document revealed that three-quarters of the proposals are revenue-enhancing measures–the introduction of new taxes–and only one-quarter address cost cutting. And, by the way, this is the sixth time since December that the budget figures have been changed. Whether this will impress the members of Ecofin who are waiting for a creditable plan for reducing the budget deficit, I have no idea. Moreover, the IMF will undoubtedly also take a good look at the Kálmán Széll Plan 2.0.
The forced retirement of judges and the question of the independence of the ombudsman in charge of data production are not forgotten either. The European Commission is taking these cases straight to the European Court of Justice. Meanwhile the European Commission is asking the Hungarian government to suspend firing judges who reach their new compulsory retirement age.
So, all in all, I’m more optimistic than I was this morning. The ball is in Viktor Orbán’s court and the final decision is still in the hands of the Council of Europe and the Venice Commission. If Orbán doesn’t play ball there will be no money. And according to analysts Hungary would run out of juice by September without IMF help.