The non-existent IMF/EU demands in exchange for a Hungarian loan

Viktor Orbán is making a liar out of me. Just twenty-four hours ago I gingerly put forth my opinion that the Hungarian prime minister may at last have realized that he is at the end of his rope and that an agreement with the IMF/EU is absolutely necessary for the sake of Hungary’s economic health. I was encouraged by Péter Szijjártó’s announcement that Viktor Orbán will pay an official visit to Germany and will have a lengthier talk with Chancellor Angela Merkel. I also thought that the Azeri fiasco made Orbán understand that a return to orthodox, well tested policies is the only solution to Hungary’s economic ills.

And then came this morning when I learned that Viktor Orbán is refusing to negotiate on the basis of a list of demands that the IMF allegedly handed to Mihály Varga, the chief Hungarian negotiator. The first question that crops up: when did this letter arrive? After all, only yesterday Orbán talked most optimistically about the negotiations. He emphasized that the positions are not too far apart and that there is a desire on both sides to conclude the deal. If all was well yesterday, then this letter had to arrive sometime late evening. Most unlikely.

Moreover, and much more important, the IMF doesn’t normally hand a laundry list of specific demands to the negotiators of a country asking for a loan. Instead, the country’s financial team puts forth proposals that they hope will satisfy the IMF’s demands for a sound economic policy. The finance minister with the assistance of the staff of the ministry works out a plan that best suits the particular country.

The Fidesz-KDNP parliamentary delegations gathered yesterday for a two-day retreat in Sárvár, close to the Austrian border. According to information received after the conclusion of the afternoon meeting, although Orbán gave a fairly lengthy talk he said nary a word about the Azerbaijan fiasco. On the other hand, it was known already yesterday that the IMF negotiations would be discussed. Antal Rogán, the new whip, “asked [Orbán] to inform the parliamentary delegation about the demands the IMF and the European Commission presented to the Hungarian government.”

Not surprisingly, it was Magyar Nemzet that already yesterday managed to get the list of alleged demands which they published in this morning’s print edition. According to this published list, the IMF demands a decrease in pensions; raising the retirement age; lowering the size of child support; raising the VAT; a privatization of state properties; restricting the number of travel allowances for selected groups; a decrease of the bureaucracy; the introduction of property taxes; lowering the expenses of local governments; a repeal of the bank levies; and government assistance to ailing banks. In addition, Magyar Nemzet noted that the transaction tax might be a problem.

By this morning the list grew even longer. Some of the people present who talked to members of the media mentioned a very long list of perhaps 20-25 items, including several that Magyar Nemzet reported: a cutback in the salaries of government and public employees; a generally applied property tax; the lifting of state control of energy prices; the privatization of state properties; and a decrease in expenses at the local level.

Doubts surfaced very quickly about these so-called demands of the IMF, especially since members of the media remembered that Mihály Varga, undersecretary in charge of the negotiations, specifically denied that the issue of property taxes was even mentioned during the talks. All in all, most reporters doubted that the Hungarian government had received any list of demands yesterday, certainly not these demands.

Then I remembered that András Simor, chairman of the Hungarian National Bank, mentioned on August 27 that the negotiating IMF-EU team had left a letter with the Hungarian government back in July and that the continuation of the negotiations would depend on the government’s response. At the time rumor had it that the Hungarian government hadn’t responded at all. I asked myself: could that be the list of so-called demands?

Viktor Orbán didn’t ponder the niceties of historical accuracy or internal consistency. This morning he received “the endorsement” of the parliamentary delegation and this afternoon he announced his decision on Facebook to “reject” these demands. He announced that the steps the IMF requires are not in the interest of Hungary and “at that price” the Hungarian government is not interested in a continuation of the negotiations. The Fidesz-KDNP delegation “authorized” the cabinet to work out an alternative plan in the next few days.

It took only a few minutes after that announcement for the forint to drop as much as 1.7 percent before paring its losses. Investor belief that Hungary will conclude a deal with the IMF has kept the forint strong. Just this year the forint has gained 9.5 percent against the euro. But gains, as we all know, can quickly turn into losses if the investing rationale becomes a fairy tale.

Both AP and Reuters immediately reported on Viktor Orbán’s decision and the news reached all the major newspapers within minutes. The funniest headline describing the affair appeared in the online paper Business Insider: “Hungary Just Flipped the Bird to the IMF over Bailout Terms.”

But just as the press got excited about Viktor Orbán as one of those Europeans who are getting fed up with austerity measures, it turned out that the “list of demands” by the IMF is a figment of the Hungarian prime minister’s imagination. In no time Index got hold of the letter András Simor mentioned a couple of weeks ago. It was this letter, it seems, that Orbán decided to call a list of hard-and-fast demands on the part of the IMF. It turned out that there are no specific demands in the letter, only the long repeated request to implement measures the IMF and the Commission have been urging for years. There is nothing in the letter about the overhaul of the personal income tax regime or social spending. They do, however, want a restoration of the rights of the Constitutional Court, a demand blithely omitted from the official Hungarian reading of the text. The letter also asked the Hungarian government to give up the idea of a transaction tax on the Hungarian National Bank.

I really don’t know what to think. Magyar Nemzet, most likely relying on government sources, publishes a bogus list that the prime minister of the country confirms as genuine.

So, what are the specific suggestions that the IMF made in July? When the ball was then in Hungary’s court?  There were three items: (1) an exemption of the Hungarian National Bank from the financial transaction tax; (2) phasing out the special tax on banks and telecom companies;  and (3) a restoration of the rights of the Constitutional Court in dealing with budgetary issues.

In general terms, the IMF/EU want to see: (1) expenditure cuts; (2) a simplified tax system that burdens the private sector less; (3) incentives to boost employment and economic growth (partly through taxation); (4) lower burdens on companies and banks so that lending may start to grow; (5) regaining investor confidence; (6) transparent and calculable medium-term economic policy and regulatory environment; and (7) reforms (public transport and the curtailing of local government spending).

I think it is worth mentioning that Index makes it clear in the article on the true content of the IMF/EU letter that it is a highly guarded document handled as a secret record. Yet the reporter of Index was allowed to read the five-page letter and to take notes. Surely, there are some, most likely highly placed individuals in the government who consider the policies of the Orbán government so injurious to the country that they are ready to bring secret documents to light.

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Paul
Guest

A strange picture to pick, Éva. I don’t understand the significance of the torn Asda pharmacy bag at all!

Petofi1
Guest

Let me take a shot at explaining: it’s widely known that Orban has a psychiatrist he visits
in Vienna. A standard Hungarian joke when Orban does something crazy goes like this
in Hungarian: “Ell gurult a pirulaja!” which means, “His pills are rolling away.” To whit, it
imagines a bumbling Orban who’s dropped his pills and they’re rolling all over the place.

spectator
Guest

“..he announced his decision on Facebook ..”

– Is this for real?

I mean, a PM of the EU-member Hungary send a politically and economically loaded message through an online community site, on his personal Facebook page?

Someone please, call 911..!

Otherwise the illustration totally adequate, I wish it wasn’t

An
Guest

The alleged list of IMF demands is missing one: all first-borns should be sold to slavery 🙂
What scaremongering… but this whole tactic is so typical of Orban.

He may actually starting to seriously consider entering into some kind of deal with the IMF (as he has no other options) and he needs to prepare the Hungarian electorate for his victorious deal (which of course won’t be as bad as the alleged list may suggest).

I wouldn’t put past him that even if he strikes a deal with the IMF eventually, he will violate the agreement after the first installment of money arrives. I know, the IMF can suspend a program in that case, like they did in Ukraine, but hey, he’ll have at least some of the money that will carry him through till he has his own man at the national bank.

Petofi1
Guest

How can sane, well-schooled adults still believe in Orban after the last few days?

Where is a Kemal when we need him?

Sandor
Guest

The very fact that the letter is secret, gives a good reason to suspect that the government intends to manipulate the facts.
It occurs to me that they fabricated the list of demands in order to reject it and use it as an excuse to break off the talks and at the same time restate their “liberation” philosophy.
They are weaving a tissue of lies for which they don’t have the brains and the unity to keep on maintaining.
I am waiting for the IMF now, to disassociate from the list publicly.

Csoda. Kegy
Guest

Great Picture, Eva.

I noticed a few days ago that I felt I understood the situation much better if I just negate every statement the PM makes.

Clearly I am not alone.

Bowen
Guest

Another ‘Peace March for Hungary’ to express support for Orban Viktor’s struggle against the evil IMF coming soon, surely.

cheshire cat
Guest
Eva, where is this video about Orban’s strange tongue movement? Could you give us the link, please? Everybody here seems to be able to watch him make his speeches – why can’t I? 🙂 An – my thoughts exactly. This is Orban’s way of entering the negotiations. What’s not to understand?… And to Kirsten (for when you arrive): you have been commenting lately about Orban’s opposition arriving from within Fidesz. I have also thought that there can be two real sources of stopping Orban: the EU and Fidesz itself. After all, Orban’s power is dependent on this massive party behaving like one huge robot. Fidesz MPs and politicians will support Orban blindly but only as long as the party is successful. Winning the 2/3 was total success – but by now it is getting clearer and clearer that Orban has been making one mistake after the other, the country is in recession – THAT everybody understands. His behaviour is getting more and more irrational and I’m sure more and more Fidesz party people are watching him in disbelief. Fidesz might simply fall apart if Orban fails, after all Fidesz has been identical with Orban for more than a decade. But… Read more »
cheshire cat
Guest

Oh, by the way, it’s never difficult to find out what the EU-IMF-ECB troika suggest.
The EC published their “country specific recommendations” in June (June?). For some mysterious reason, the one for Hungary is very similar to Index’s to do list. They are very boring and predictable, really, repeating the same stuff over and over again…
And didn’t the ECOFIN Council in Brussels (with Matolcsy in it) accept the country specific recommendations in July, and promise to keep them?

An
Guest

Also, by painting the IMF worse then it is, he can come out of the whole IMF business looking good, no matter what the actual results are… if there is a deal, he is the tough negotiator, who managed to get a decent deal, if negotiations fail, then well, he just saved the country from the evil IMF.

petofi
Guest

“Fidesz MPs and politicians will support Orban blindly but only as long as the party is successful.”–Wrong.

They will support as long as Orban funnels cash. Unless my guess is wrong, Orban has unlimited funds for which the baying, salivating, Hungarian politicians would trample kid and kin to stay close to.

Lulu
Guest

If you feel like freaking out a bit more, check the comments on Orbáns facebook page… People really buy his bs. Among other things, this little jewel : ” ha nincs fidesz akkor nincs Magyarórszág” (without fidesz, there is no Hungary).

Lulu
Guest
Zsuzsa
Guest

I watched the video. The madness of King George is out of the bag. Orban is sick and in the most literal sense. He might not even be wholly responsible for his actions. At first I didn’t get Eva’s picture either, but now it makes sense.

Wondercat
Guest

A woman walks in front of OV, he licks his lips. Later in the same video a man walks in front of OV, nothing happens. Unregenerate, even lewd, perhaps. But falling short, I think, of tardive dyskinesia… and we have drugs better than phenothiazines nowadays.

Turkmenbasi
Guest

Éva: This was a top-level PR stunt serving the interests of speculators close to Orbán’s spin doctor, Árpád Habony. To become credible, even the PM had to play his pathetic role. Habony’s friends shorted the HUF and OTP in the futures market the day before and then pocketed the well deserved billions within half and hour yesterday. The case is very similar to the artificial HUF panic created by Kósa and Szíjjártó in the summer of 2010 when they compared Hungary to Greece, creating an immediate 10% drop in the HUF. That alone must have resulted in tens of billions of HUF in windfall profit for this gangsters. This game is simply about extra profit for the organised criminals, Éva.

Hungary is not alone in this service industry niche. The political elite of Ecuador did the same back in 2007. Banana republics of the world, unite!

Cherry17
Guest

Isn’t it absurd that a psychopath is able to hold a whole country hostage without anybody trying to stop him . Do we need Mohács really? I’m sure Hungarians understand what it means.

Piroska Markus
Guest

I live in England (moved here in 1978), and the list Orban mentions as an IMF demand-list is more-or-less how we, ordinary people see the policies of the English government, which I oppose. I have never supported FIDESZ and I completely oppose this Hungarian government too. Evan I generally like most of your recent articles, but I have a feeling that in this one you are presenting the IMF as reasonable. I am convinced that the IMF is generally not reasonable at all and globally it has a very negative effect. It has enormous power influencing the countries which desperately need a loan. If by chance some of the IMF demands would be OK for Hungary, it does not make the IMF into a Father-Xmas. Just because Orban is trying to re-create himself as a Hungarian folk-hero from one of our old fairy tales, e.g. the youngest son of the poor man who leaves the poor village to fight alone and bravely against dragons, and he presents the IMF as a dragon – it does not follow that the IMF is OK in any sense. My enemy’s enemy is not necessary my friend.

HU1867
Guest

Orban is not the real problem. There is some kind of clique of demagogues and economical crooks who are taking down Hungary on the way to their own enrichment.

The old guard Hungarian circles are paralyzed. Their patriotic myths are more important to them than the welfare of the people.

The progressive but not extremist Hungarians must rise up again to prevent genocide and loss of freedom to tyranny.

petofi
Guest
Piroska Markus : I live in England (moved here in 1978), and the list Orban mentions as an IMF demand-list is more-or-less how we, ordinary people see the policies of the English government, which I oppose. I have never supported FIDESZ and I completely oppose this Hungarian government too. Evan I generally like most of your recent articles, but I have a feeling that in this one you are presenting the IMF as reasonable. I am convinced that the IMF is generally not reasonable at all and globally it has a very negative effect. It has enormous power influencing the countries which desperately need a loan. If by chance some of the IMF demands would be OK for Hungary, it does not make the IMF into a Father-Xmas. Just because Orban is trying to re-create himself as a Hungarian folk-hero from one of our old fairy tales, e.g. the youngest son of the poor man who leaves the poor village to fight alone and bravely against dragons, and he presents the IMF as a dragon – it does not follow that the IMF is OK in any sense. My enemy’s enemy is not necessary my friend. This is an unwelcome… Read more »
Miklos
Guest

@Piroska Markus
I’ll make it simple for you so you can understand it too. The IMF is good. Hungary and Orban are BAAD. It just depends whose side you are on.
Just have a look at the IMF list in Greece, Romania eg. six-day work week in Greece etc. Isn’t that nice?
I think Orban is lying. The IMF list he presented is nowhere complete and it’s not tough enough. Orban is not man enough to present the whole IMF list.

Eva is quick to call Hungary’s PM a liar. Based on an article from Index.hu (remember the non-free and undemocratic Hungarian media!!??)!!! WOW. Can you get lower than that?

Marcel Dé (@MarcelD10)
Guest

@Piroska Markus & @Petofi

The main issue in general with IMF conditions are that they mostly, if not only, measure success by macro-economic criteria (I still remember the former director of the fund praising Tunisia’s Ben Ali for his economic achievements in 2008).

Had O.V. and his majority a social ambition for Hungary, projects for inclusion and cohesion, then it could be argued that he’s fighting for the right reasons, and is actually trying to negociate… but there isn’t any ambition in that department. On the contrary, I’m afraid. Which is why the IMF is only used as a convenient punching ball.

An
Guest
Piroska Markus : I live in England (moved here in 1978), and the list Orban mentions as an IMF demand-list is more-or-less how we, ordinary people see the policies of the English government, which I oppose. I have never supported FIDESZ and I completely oppose this Hungarian government too. Evan I generally like most of your recent articles, but I have a feeling that in this one you are presenting the IMF as reasonable. I am convinced that the IMF is generally not reasonable at all and globally it has a very negative effect. It has enormous power influencing the countries which desperately need a loan. If by chance some of the IMF demands would be OK for Hungary, it does not make the IMF into a Father-Xmas. Just because Orban is trying to re-create himself as a Hungarian folk-hero from one of our old fairy tales, e.g. the youngest son of the poor man who leaves the poor village to fight alone and bravely against dragons, and he presents the IMF as a dragon – it does not follow that the IMF is OK in any sense. My enemy’s enemy is not necessary my friend. You can have your… Read more »
Member
Piroska, I would agree with you regarding the IMF if it would simply a welfare association, but it is not. They will not hand out money without making a profit (welcome to capitalism) and they also intend to stay in business. By no means the IMF loan is forced on any country. It is a choice. Obviously if Orban would have other route he would go on an other route and not because it would make financially mores sense, but because he could remain in full control. Orban in fact publicly stated before that he would make financial deal with anyone so he does not need to go with the IMF. Now, how would that benefit Hungary? It is very clear now, that Orban and his experts are economically challenged. THey will stay on a course that as we see is not working. As Einstein said “”Insanity is repeating the same mistakes and expecting different results”. THis is exactly what the Orban Government is doing. Are the IMF demands are reasonable? I am going to be honest, I do not know, but it seems to me that what they are asking for is NOT what Orban tells people, and it… Read more »
Ron
Guest

Here is the interview in Koszeg. After the august 20 celebrations. Look at his left wrist.

https://www.youtube.com/watch?v=NGSKkbU0QXw&feature=related

What is this yellow band. From the all-inclusive park or hospital.

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