After the Orbán-Barroso talk: Did Orbán win?

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

Capitulation during negotiations

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.

Sort by:   newest | oldest | most voted
An
Guest
As I said in one of my earlier posts, I don’t think OV has any intentions to actually CONCLUDE the talks with the IMF, he only wanted to START them, as a way of reassuring the markets. And he did achieve that. Now he can go on putting on a nice act, and look serious about negotiating with the IMF. Negotiations will be lengthy, and while OV will try to avoid agreeing to anything that binds him, he’ll try to sell to the outside word that he is seriously working on getting a deal. And he gets what he wants right now… TIME. Why do I think that this may be the plan? The government has no intention to actually give in on the remaining issues regarding the Central Bank. After the Monday meeting in Frankfurt described by Eva, Matolcsy presented a modification of the central bank bill to the Parliament on Tuesday night(!) in which none of issues that were discussed in Frankfurt was addressed… in fact, it was the very same version of the bill that was criticized in Frankfurt. http://index.hu/gazdasag/magyar/2012/04/18/jegybanktorveny/ So they were acting nice and cooperative in Frankfurt, but that may have been only acting. Then,… Read more »
Guest

London Calling!
Orban is being backed into a corner. He is making the required changes.
The endgame has started and the EU holds all the cards.
Revenge is a dessert best eaten cold – and the EU will calmly pile on the pressure.
Orban will still bluff and bluster but the ‘domestication of the polecat’ will be a sight to watch!
What are you going to tell the people of Hungary now, Orban?
Regards
Charlie

Member

Sounds like the Kalman Szel Plan 2.0 amybe written by Schmiit as his last contribution and Matolcsy forgot to fill out the blanks.
Well, they Adler was capable to throw together a new constitution in couple of months on an iPad, I am not so surprised that offical document coming out of government are missing filled out pages. Maybe the dingo took them….

Paul
Guest

Unfortunately, the facts fit An’s analysis rather better than Charlie’s (or Éva’s).
OV has bluffed and won. He’s playing a long game – there may be setbacks over the next few years, but overall he will continue to take the country in the direction he wants to take it in.
And none of us knows where this is going to end – but I fear it’s going to be a very nasty end, quite possibly involving more than just Hungary.

Nwo
Guest

I understand that the US Government view is that Orban won this round. Barrosso had no more ammunition and was basically forced into a corner. However, a new facility is still not a foregone conclusion.
As for Szell Kalman 2, it will further slowdown growth, it wont change the real trajectory of fiscal deficits. It may forestall a total near term blow up, but no more. These guys have no ideas. Maybe that is why OV is flirting again with the Russians (oh the irony). Maybe when there is no deal with the EU, he believe Putin will come to the rescue. Treason.

cheshire cat
Guest

There was an interesting talk with economist Peter Rona on “Egyenes beszed” tonight.
He seems to know for certain what exactly Orban promised to the Commission.
1. the two main problems about the MNB are: 2 extra members in the monetary council and 1 extra vice-president.
Orban promised to
– continue the negotiations on them directly with the European Central Bank
– he will NOT introduce these new laws while Simor is the president
2. the two smaller issues are sorted out as follows
– the oath on the constitution can go ahead
– Orban promises to accept Simor’s offer to give up his salary altogether, and the EC accepts this as a solution
How much of this Orban will actually do is unfortunately an open question. “An” might be right, he might just want to buy time and pacify the markets, and not willing to sign anything with the IMF at all.

LwiiH
Guest

OV 1, EU 0… HU losses.

petofi
Guest

@ Now “…he believes Putin will come to the rescue…”
Please check out ‘the collected blogs of Petofi’,
wherein I’ve stated roughly a year ago that a Hungarian with the stripes of Orban would never allow 10 million euros pass under his nose to Szanader without getting ‘a taste’ himself. Along those lines, I’ve also suggested that the Russians have been behind Orban’s belligerence all along. That’s to be seen. What do the Russians get? Well, have there been any further talks about Baltic accession to the EU or Nato? That’s for starters….

Member

I agree with An.
As unfortunate it is, by the EU not sticking to its gun, it opened itself for further “negotiations” by all member countries in the future. Although each member states of the USA have their own state law the basic concept of governing internal law is in the hands of federal government. By the EU allowing Hungary to make its own way in the EU’s “Bill of Rights” they are setting a precedent to all member countries to allow the actual governing party’s interest to precede not only the best interest of the whole EU but the interest of their own country. It is a shame, and I am utterly disappointed in the EU.

LR1
Guest

OV 1, EU 0… HU wins 🙂

petofi
Guest

@ LR1
Welcome, LR1.
When clicking on your username the FREE HUNGARIAN VOICE
website popped up. I presume that you are one of the two responsible members for the website, right? The one named “Istvan” has an interesting cv–the list of accomplishments (ie. degrees) are there..but never a mention of which universities granted the degrees. Now, where have I seen that before?
Oh, yes, when researching the cv of Mr. Voluble, Zoltan Kovacs, who mentions various British locals that he attended but not a one that had granted him a degree of any sort.
Shades of the manner and accomplishments of Herr Schmitt Pal!

petofi
Guest

@ Addendum for LRI…
When I clicked on “istvan”s ‘View my complete profile’, there was the heading “About me”…followed by a completely blank page.
Wow. I just flashed on the origins of the movie title:
“DUMB AND DUMBER”

GW
Guest

Petofi wrote:
“Well, have there been any further talks about Baltic accession to the EU or Nato? ”
What are you talking about? Estonia, Lithuania and Latvia are all members of the EU and NATO and their membership is not a matter of discussion between Russia and anyone.

Lutra lutra
Guest

I can’t imagine the ECB going along with Orbán’s promise not to undermine the independence of the MNB, the Hungarian National Bank, for just as long as Simor is in charge – its independence is written in law and therefore not negotiable. Maybe Orbán has bought some time and investor confidence, but it also means the EU, ECB and IMF can make sure it’s physically (never mind legally) impossible to get his grubby paws on the MNB’s money and that proper and effective oversight of Hungary’s budget planning can be written into any deal.

The Hungarian Comedian
Guest
The Hungarian Comedian

Thanks Eva, for the great summary!
You ALL have to understand one thing. That Orban doesn’t want IMF, and never wanted IMF in the first place.
Dealing with the IMF means that you have to be submitted to control of your finances and long-term planning, how could he then do football stadiums, Kossuth square and all the single tender bids to consultancies and companies?
Orbans primary objective is to make it to 2013 where he can then elect a new central bank director and have access to the so called federal reserves or whatever you call it.

Guest

London Calling!
The Hungarian Comedian.
I will wager a bet with you and anyone – (for a multi-pack of Turu Rudi, Palpusztai Sajt and a Jar of Meggybefott – well I might as well put my money where my mouth is!)
By the close of 2012 Orban will:
a) get his IMF loan after meeting most of the conditions.
b) have the cohesion funds reinstated
c) have not been able to get his grubby hands on the Central Bank’s Forex reserves
d) will have had successful bond sales
without recourse to Christine Lagarde’s largesse
e) have the Forint below 260 Euros
Any takers?
If you have any spare GBP or Euro’s – change them now!
Regards
Charlie

Csaba
Guest

I am afraid this time neither Éva, nor the commentators have managed to capture the motivations behind the Commission’s green light. Indeed, this has been a setback for all in Hungary who believe in the protective power of EU institutions. The Commission has effectively rubberstamped the semi-feudal power structure, which has been created in the last two years. The reason for this withdrawal are the major political developments taking place in Holland and France in the last couple of days. The Dutch Government collapsed, while in France the radical right reached a staggering 17.9% in the first round of the Presidential election. In both countries populist rethoric against the EU’s fiscal pact is rapidly gaining ground. So all in all, the shell-shocked Commission has let Hungaran government off the hook in order to try to pacify the Eastern front. Turbulent times, desparate moves.

The Hungarian Comedian
Guest
The Hungarian Comedian

@ CharlieH
No taker here, because the appointment of the central bank head is appointed in 2013.
I strongly believe that Orban will never take an IMF loan. He rather make money of bonds.
I hope the Forint will be under 260 though! That would be nice!!!

Guest

Right now I don’t know whom to believe. Whether Orbán and Fidesz really want the help of the IMF and the EU(which means they have to accept their conditions) or not …
Time will tell!
On the other hand that new plan, especially the “transaction tax” and the tax on mobile phone calls and SMSs are so idiotic …
As a computer person (now retired) I can’t believe anyone could come up with that kind of crap – taking thousands of programmers’ time to realise …
These taxes would also be felt by everyone, adding another percent to inflation maybe – just unbelievable!

petofi
Guest

@GW…
Thank you for the corrections. I’m presently re-tooling my Baltic outlook….
But the Baltic errors aside, the basic theory still holds: the Russians have a great interest in weakening the EU. If you can pry one country loose, it would send reverberations throughout the EU membership.

The Hungarian Comedian
Guest
The Hungarian Comedian

Well, if the following is in place I couldn’t care less about who’s in power anymore:
1) Judiciary is not tainted, and abused.
2) The economical policies are based on sound economical theories, long-term transparent strategies.
3) The laws and constitution are fair to the single individual.
4) Free media is preserved.
5) Human rights are upheld to the highest standards.
5) Freedom of speech and expressions is upheld.
6) Power is not centralised.
7) Anti-corruption is a primary focus on all levels of government and private sector.
8) That the election is fair and square without single individuals doing the actual counting in anyway favour their party. Let the party that wins, win fair and square.
9) The input from TI, UN, Amnesty, and other organisations will be taken seriously, and reviewed properly by whichever government is in power.
10) All politicians and government must have an independent committee evaluating every step from spending tax payers funds on infrastructures, to law fees, promotional material, and political consultancy etc.
Other than that, I couldn’t care who’s in power.

Member

LRi: “OV 1, EU 0… HU wins ;)”
No, no, you got the whole equation wrong!
OV 1 + EU 5 = Hungary looses
I feel sorry for the decent Hungarian people, the rest and the dumb will strive.

GW
Guest

Petofi,
at this point, with the concerns about (1) countries already within the Euro zone and (2) the UK and Spain, despite austerity packages, returning to recession and (3) the fact that Hungary is a net recipient of EU funds, this means that Hungary could walk out of the EU and not be missed. Indeed, the consequences to Hungary of walking would give the core states considerable leverage with those states which, for internal reasons, toy with anti-EU themes.

Odin's Lost eye
Guest

@GW The consequences for Hungary leaving (or being pushed out of) the E.U. are horrendous (from Hungary’s point of view). Some 79% of here exports are to the E.U. so out of the 690 Million € pa trade surplus some 549 Million € would be affected. How bad this would be for Hungary would depend on the nature of the separation which could range from being the levy of ‘normal’ European duties for items which come into the E.U. to what is tantamount to embargo rates.
In addition the E.U. could effectively isolate Hungary from the rest of the world.

Paul
Guest
“You ALL have to understand one thing. That Orbán doesn’t want IMF, and never wanted IMF in the first place.” How many of us do you think don’t understand this? Of course he never wanted the IMF, but that doesn’t mean that his contacting them was some sort of Svengali-like cunning tactic. He would never had risked losing so much face if he hadn’t really badly needed the IMF. But, once he realised just how many strings any sort of deal would come with (and that this was the only way the EU could enforce changes on him), he couldn’t go ahead with arrangements without losing too much – so he stalled for time. And then he discovered that he didn’t need the IMF after all, he could fund the economy via bond sales. Expensive, admittedly, but just about affordable (especially if you care more about your ‘revolution’ than you do about the long term health of the economy). All he had to do was keep the markets reasonably happy so the Forint didn’t collapse. So he started playing a long game – keep the rhetoric up at home, play the blushing bride to the EU and IMF, drag it… Read more »
Jeliko
Guest

Hmmmm, the answer to your question is “affirmative”…at times the grapes are in fact sour. 🙂

Member

Whatever the outcome of this tug of war will be, one thing is sure. If this government gets money that will disappear in no time and only the national debt will rise. They will blame it on the evil anti-Hungarian world, but the result will still be the same. So we may succeed to keep some of our civil liberties (for a while) in exchange for monies that will help him to stay in power from 2014.
He will need money in 2013 at the end of the year to boost his numbers when the elections will be approaching.
Hungary is just a black hole for money.
An is right – they are trying to get more time. My feeling is so is the IMF. I mean it doesn’t matter how many times this moron LR1 and his peace marcher buddies get up clapping that fuhrer is winning – just don’t give them money. You don’t want to give money to Matolcsy.
Before LR1 will send out his children to sell apples on the side of the road he’ll tell them: “IMF 0 – Orban 129! Remember it children! We are still winning!”

The Hungarian Comedian
Guest
The Hungarian Comedian

Paul: “He can easily survive until 2014, and after the elections there’ll be hardly any MSzP and probably no DK or LMP.”
I wouldn’t go that far in a prediction Paul. It might take another form once they realise that they have to work together?
Paul: “The last two years have been pretty traumatic, but that’s only been the beginning – Orbán isn’t going away.”
I believe this, he will do anything to stay in power, even if it comes down to right out cheating. There is no way that he will let Hungarian voters mess up his election.

cheshire cat
Guest
@ Csaba, I don’t quite see it the way you do – it is true that the Eurosoap-opera has taken another formidable turn (France, Holland, Spain) and it might have motivated the EC to close down the case with a compromise and not be seen to have the sole responsibility for a country’s economic crisis. However, the infringement procedure is a legal one, and if by this stage Orban has changed practically all the worrying laws, they have to close it. The only alternative would have been to take it to court, but that would have been good to noone – Orban can simply implement the problematic laws and wait until Simor leaves. And with him saying “I have submitted the law, it will be accepted in a few DAYS”, the EC would have discredited itself by insisting on a court case. Instead now the EU say – if you do what you say you will do, we will also do what we say and close this infringement case. If – but the case can be looked at any time. Orban can now pacify he markets with the IMF deal but that’s only temporary. He will have to cooperate to… Read more »
Paul
Guest
“I wouldn’t go that far in a prediction Paul. It might take another form once they realise that they have to work together?” If Jobbik does get the second largest number of MPs, they will of course make a huge fuss about it and declare that they will oppose OV and ‘save’ Hungary. But this will just be show. Their leaders know very well that on most issues they and Fidesz are pretty much the same. And OV is certainly canny enough to manoeuvre Jobbik into supporting him (whether openly or not) when he needs it and publically opposing them when it suits him. He will only need their support at all if he fails to get two thirds of the seats and something comes up that needs a 2/3 vote. That isn’t going to happen too often, and when it does it will almost certainly be something that Jobbik will support anyway. It will be an interesting time (assuming we aren’t too distracted by the dismantling of democracy and destruction of the economy) as the history of extreme right-wing parties getting a taste of power is not good (from their point of view). Almost always the power goes to… Read more »
wpDiscuz