In the first Orbán administration (1998-2002) the youthful prime minister came up with the idea that holding regular radio and television interviews with select reporters was a good communication tool. Today he continues the practice by giving an interview every Friday morning on “180 Minutes” (Magyar Rádió).
Orbán and his communication crew might find these sessions useful, but more independent observers think that the prime minister’s appearances on Friday mornings create the impression of total chaos in the Hungarian government.
This week is a perfect example. On June 13 Economics Minister György Matolcsy announced that in order to begin negotiations with the International Monetary Fund the current law on the Hungarian National Bank must be modified. Mihály Varga, the man who is now in charge of negotiations with the IMF, said the same thing on the same day. He also indicated that consultations were still underway with the European Central Bank on the subject of who would have executive power over the central bank’s international reserves. Varga said that the Hungarian government will have to clarify such issues as how many members the Monetary Council should have and whether a third deputy chairman should be appointed.
Antal Rogán, the new leader of the Fidesz parliamentary delegation, went even farther when he told Népszabadság that the cabinet will probably withdraw the proposed amendment to the central bank law and submit a brand new one. Parliament could vote on the new bill next week or the week after.
The upshot: only a few days ago members of the cabinet and the leader of Fidesz MPs unanimously agreed on changing the law on the Hungarian National Bank in conformity with the wishes of the European Central Bank and the International Monetary Fund. Yet two days later the prime minister announced that “the government isn’t changing the law on the central bank.”
Here are a few relevant sentences from Viktor Orbán’s conversation. “We have a law that allows us to appoint a third deputy chairman [of the Hungarian National Bank] and therefore we will not change the law [on the HNB]. On the other hand, we are ready to promise that we will not appoint a new deputy during the tenure of the current chairman.” This is straightforward.
So, although on June 3 Varga asked for a postponement of the final vote on the bill on the Hungarian National Bank in order to make the changes necessary to satisfy ECB and IMF demands, three weeks later the prime minister categorically declares that the Hungarian government has no intention of changing a word in the law.
And that’s not all. While a few days ago we heard from Mihály Varga that the government was consulting with ECB, yesterday we learned that these consultations are in no way binding. The ECB can only voice its opinions and might give advice but has no right to force the Hungarian government to do anything. “We will take their recommendations under advisement but we accept only those we find justified.” Furthermore, “the Hungarian National Bank is a part of the Hungarian financial system. No one can give orders to the Hungarian National Bank and that also means the European Central Bank.”
What is going on? Are we facing a situation in which the right hand doesn’t know what the left hand is doing? I think it unlikely. Is it a well coordinated game in which these three men are working on misleading the financial markets and keeping up the pretense of immediate negotiations with the IMF? Possibly. And finally it may be that there are serious differences of opinion between Mihály Varga and Viktor Orbán over the necessity of an IMF loan and Hungary’s obligations in return. Perhaps. But, again, it is hard to imagine that Varga asked for a postponement of vote on the bank bill without Orbán’s OK.
The mystery deepens if we consider that Mihály Varga only a couple of hours after the Orbán interview announced on MTV”s “Ma Reggel” that they are putting “the finishing touches on the new bank law.” So, after all, they are changing the law. But how much? It seems not much because the controversial appointment of a third deputy chairman of the bank would remain unchanged, just as Orbán in his interview indicated. But will the ECB and the IMF be satisfied with only a verbal assurance that while András Simor remains the chairman of the bank, that is, until next March, the Hungarian government won’t appoint another deputy chairman? Varga in the MTV interview indicated that the answer was yes. Or, more precisely Varga acted as if the ECB and the IMF never wanted more than a verbal promise to postpone the appointment of a third chairman. But this wasn’t the case. It was quite clear that the ECB and the IMF were worried about stuffing the Hungarian National Bank with government nominated people whose appointment depends on a parliament with a two-thirds Fidesz majority. Does that mean that these two financial organizations have softened their stance toward the intransigent Hungarian government? Did they give up the fight and are they now ready to support financially a government that in so many ways goes against the common Euro-Atlantic ideal of democracy? We don’t know because, I’m afraid, the words of the members of the Hungarian government cannot be trusted.
By now even the financial analysts are totally confused. Some think, like one of the analysts at Citibank in Budapest, that although the ECB might still be critical, the IMF will start negotiations with Hungary. An economist at Nomura specializing in the region is doubtful whether verbal assurances concerning the issue of a third deputy will satisfy the IMF. After all, their worry is about the long-term independence of the Hungarian National Bank. Analysts at Erste Bank are also skeptical. And finally, Timothy Ash, an economist at the Royal Bank of Scotland, still thinks that Hungary is playing the Turkish game–that is, they’re trying to fool the markets for a couple years about pending negotiations with the IMF that will never materialize but will keep the financial markets happy in the interim.
And one more thing. Viktor Orbán in the same Friday morning interview indicated that “in the next couple of years we will have to have serious discussions whether we want to join a fundamentally transformed eurozone.” When Hungary was admitted to the European Union it undertook the obligation to join the eurozone as soon as certain economic requirements were met. It now seems that Orbán on the pretext of a “fundamentally transformed” eurozone is thinking of not joining the currency union. Although the eurozone has monumental problems at the moment, I for one think that both the European Union and the euro will survive and that in the long run it is to Hungary’s advantage to join the zone. But Orbán doesn’t want “a more perfect union” that would lead the European countries toward closer cooperation and would here and there infringe on individual sovereignty, an arrangement that is necessary for the survival of a financially healthy European Union.
I wonder how long Orbán will be able to play his games with the European Union. He may win a battle here and a battle there, but I think his war is doomed.