Bad news all around: Economic and political troubles brewing in Hungary

I have the feeling that the Regime of National Cooperation is falling apart at the seams. Or at least there are signs that point in that direction. The CEO of MTI, the tsar of official Hungarian news, announced his resignation. He is leaving his post at the end of the year. One of the  assistant undersecretaries in charge of education also said that he was leaving, but it looks as if Zoltán Balog, minister of the mega-ministry to which education belongs, must have put pressure on him to stay until spring. I guess the assistant undersecretary no longer felt that he could lie into the faces of the teachers.

Oh, yes, because the ministry’s officials in charge of education have been lying all along to the teachers about the salary hikes. György Matolcsy and Viktor Orbán on their own volition decided to offer a postponement of the salary increases to the European Commission in exchange for lifting the excessive deficit procedure that has been in effect against the country since 2004. The two teachers’ unions were already on the verge of deciding on a strike. As soon as they learned the news from Népszava this morning they decided that they will indeed call for a strike.

Then it looks as if MSZP is beginning to regain its former strength. Ipsos came out with its latest poll and 33% of the active voters would vote for the socialists as opposed to 41% for Fidesz. The gap between the two parties is narrowing every month. In addition, Medián, another pollster, measured Gordon Bajnai’s popularity against that of Viktor Orbán among voters who still haven’t made up their minds about their party preferences. Bajnai beat Orbán 38 to 22. Not good news considering the size of the uncommitted voting bloc.

Then there is the issue of the alleged negotiations with the IMF. Benoite Anne of Société Générale, a specialist on the economies of the region, severely criticized the Hungarian government strategy concerning negotiations with the IMF. Investors might be misled for a while, but because of  the Hungarian government’s shenanigans in the end “the poker game will be lost.” Half a year from now the situation with the IMF will not have moved an inch. What Hungary is doing is a gamble which will result in a “bloodbath.” That is, the whole shaky financial edifice built on sand will simply collapse.

Even the conservative Polish paper Rzeczpospolitausually very friendly to the current Hungarian government, claimed that Orbán miscalculated the situation. The IMF has time while Orbán doesn’t. If  two years ago, or even a year ago, Orbán had decided to make a deal with the IMF, today he wouldn’t have to raise taxes that will slow the economy and give rise to popular discontent.

Oh yes, discontent. I already mentioned the impending teachers’ strike, but I should add that the contour of future cooperation among the opposition groups is shaping up. Gordon Bajnai, according to people close to him, “is preparing an important speech” for his appearance at the Milla demonstration. Moreover, as of today Bajnai’s foundation “Haza és Haladás” (Homeland and Progress) became an “association.” The founding members of this association, besides Gordon Bajnai, are Péter Oszkó, finance minister in Bajnai’s government; Péter Balázs, Bajnai’s foreign minister; Viktor Szigetvári, MSZP’s campaign manager in 2006 and 2010; Péter Felcsuti, former head of the Bankers’ Association; and T. Károly Vörös, former editor-in-chief of Népszabadság. The aim of Bajnai’s new association is to act as a catalyst for wider cooperation among the diverse groups and to assist in bridging the political and ideological differences among them. I’m a bit more optimistic now about a possible common front than I was a few days ago.

Viktor Orbán at the press conference in Brussels
MTI / Tibor Illyés

But I left the best to last. Viktor Orbán is in Brussels again at the summit. There he made wise comments about the “complete financial, economic and political integration of the eurozone.” Every time I hear Orbán say such things I can hardly believe my ears. But I guess he promised Angela Merkel that he would support her at the summit, and since Hungary is so beholden to Germany he obliged, although who knows what he will say tomorrow once he is back in Hungary.

But the really important news from Brussels was the surprisingly speedy reaction of the European Union to the second Matolcsy austerity program. Who says that the European Union is a sluggish organization? It seems that there are times when the bureaucrats can make up their minds really quickly–when they don’t like something. Well, this is what happened to the latest Hungarian attempt at avoiding losing billions and billions of euros as of January 1, 2013. Whatever Matolcsy came up with is not quite enough. We don’t know exactly what the objections are to the latest budget proposals. According to Orbán, the European Commission found the planned measures to be “almost enough.”

Orbán took the news meekly. This time there was no sign of his usual militant response. On the contrary. He announced that the Hungarian government will do everything to satisfy the demands of the Commission. I assume that the Commission’s response came as a surprise to the Hungarian prime minister. Otherwise he wouldn’t have had to hold a conference call with his cabinet.

The Hungarian government is asking the Commission “to give the exact amount” it deems sufficient to keep the deficit under 3%. Where is Matolcsy going to come up with the necessary amount? From the same sources that most likely will further slow the economy, already in recession: taxes on banks, utility companies, energy, and the online gambling.

But I have the feeling that better economists in Brussels than György Matolcsy would most likely suggest an entirely different approach to the deficit. Perhaps someone could explain to the Hungarian prime minister that György Matolcsy’s retirement would be a good first step. Because according to most people trust in the current Hungarian government cannot be restored. But that would be only a first step. The next would be a complete turnabout in Hungary’s economic policies. But I don’t think we can expect that as long as Viktor Orbán is the prime minister of Hungary.

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Jano
Guest

Just a minor correction. It’s not online lottery, it’s online gambling, mostly online poker which is pretty big in Hungary. Even though this time I agree with the effort (I have a friend e.g. who makes a living on online poker not having payed a single fillér on taxes for five years), I have no idea how is he planning to enforce that.

petofi
Guest

Jano :
Just a minor correction. It’s not online lottery, it’s online gambling, mostly online poker which is pretty big in Hungary. Even though this time I agree with the effort (I have a friend e.g. who makes a living on online poker not having payed a single fillér on taxes for five years), I have no idea how is he planning to enforce that.

Could be taxing net gain over 1 week/2 weeks/or a month.

bernard de raadt
Guest

Eva as every day you optimism just makes me lugh

Paul
Guest

Much like your ‘English’, bernard.

cheshire cat
Guest
The Hungarian government is asking the Commission “to give the exact amount” it deems sufficient to keep the deficit under 3%. 1.Unfortunately it’s a little bit more complicated than that. Brussels will not accept a budget plan in which there are taxes that will slow down economic growth eg. bank taxes. They want growth enhancing structural changes, they want expenditure cuts not just tax increases. In fact, Orban knows exactly what Brussels want – the economic affairs commission have recommendations for every member state called “country-specific recommendations”. The recommendations were accepted by the Ecofin Council in the summer, with Matolcsy present, and each member state has signed up to carry out their country specific recommendations, including Hungary. Brussels is not expecting Hungary to do anything on top of what the government has already promised to do, but that they do want. The country specific recommendations are available on the Commission’s website, you can download them in English or Hungarian. It could hardly be more transparent – all this speculation on what Brussels want is really beyond me.. 2. Orban was so meek in Brussels today because well, he is a coward and he always plays the EU tune on his… Read more »
cheshire cat
Guest

(The first sentence should be in quotation marks, sorry.)

Kingfisher
Guest

Orbán actually had the temerity to say yesterday that the last “Peace March” successfully staved off an EU coup against him! The sight of all those angry Hungarians was sufficient to deter the aggressors it seems.

He is now entering Hugo Chavez territory

Paul
Guest

That’s a bit harsh on Chavez!

petofi
Guest

Eva S. Balogh :
I forgot mention in my post that MSZP is leading in Budapest over Fidesz. Not terribly surprising but interesting. Tarlós is obviously trying to balance between the two as an independent person but I wonder how much damage he did to himself with his performance on Olga Kálmán’s program.

No damage at all. I think it was Olga who suffered.
Tarlos seemed calm and said some good things, for example: that he represents the people of Budapest and not the wishes of one party. I think it went something like that.

Ferdinand
Guest

Is it only the extreme left that comments on this blog ?

Member

Ferdinand :
Is it only the extreme left that comments on this blog ?

Most people are not one-dimensional here. I would like to see democracy restored in Hungary. Isn’t it ironic that in Hungary the only television channel that gives voice to the ‘left’ is owned by an evangelical church?

Wondercat
Guest

@Ferdinand: No; Prof Balogh has a chorus of those who largely and loudly agree with her, a distraction really: She marshals observations, her own and those garnered from reportage, in my opinion quite successfully to support and to defend her interpretations of events, needing no help; and the noise from that chorus may skew your impressions. But views that differ from those of Prof Balogh appear regularly.

Nicole Waldner
Guest

Dear Eva,

I read your blogs every week and they keep me informed of the situation in Hungary. I’m very grateful to have access to such authoritative information in English. Thank you for your important work.

Regards,
Nicole (Sydney, Australia)

Jano
Guest

“Could be taxing net gain over 1 week/2 weeks/or a month.”

And how on earth are they going to get that data?? Most online poker websites reside in Gibraltar or other tax paradises, I doubt they will just send them a W2…

oneill
Guest

“This time there was no sign of his usual militant response”

No that will come on the 23rd when he speaks to the country bumpkins, fascists and assorted, bewildered coffin-dodgers at Kossuth Ter.

It is a very strange time economically at the minute.
Purely subjectively these last few months are the first time when little glimpses of impending financial doom can be seen in the capital- eg far more shops and restaurants closing than before. And the regime do seem to be panicking somewhat or at least much more eager than before to do the EU’s financial bidding.

Yet the currency is holding up well and sales of govt papers seem to be be doing much better than before. I don’t really get it

LwiiH
Guest
Eva S. Balogh : I’m terribly sorry about bringing up a somewhat different subject but I just watched “Upstairs, downstairs,” the very popular program on National Public Television in the United States. Orbán might be very proud of himself of fooling the IMF, the EU, the financial markets–for the time being–but at the end his strategy will fail. There is no way that this kind of behavior can succeed. OV hasn’t not fooled anyone.. Those negotiating (or not as the case may be) pretty much understand what happening here. Markets see risk and they see returns and so far the returns have out weighed the risks. In March of this year at the debt crisis symposium in Budapest all but one of the fund managers presented expected a deal to be inked by now. But they also weren’t so confident that it would happen and they all recognized the game being played. But, the returns outweighed the risks. On currency, HUF is a low volume currency which can easily be manipulated. In fact, one can speculate that people in the know use these manipulations to their advantage. OV has to keep cool until March and then after that he’ll have… Read more »
petofi
Guest

Jano :
“Could be taxing net gain over 1 week/2 weeks/or a month.”
And how on earth are they going to get that data?? Most online poker websites reside in Gibraltar or other tax paradises, I doubt they will just send them a W2…

You can block the website unless they reveal players’ records.

petofi
Guest

Ferdinand :
Is it only the extreme left that comments on this blog ?

No.
How about ‘extreme truth’…?
We already know that the extreme right is the home of Fantasy and Compulsive Lying.

petofi
Guest

Eva S. Balogh :
Tarlos v. Kálmán. The media reaction is not favorable to Tarlós.

Such as…? (web addresses, please)

Ron
Guest

petofi :

Jano :
“Could be taxing net gain over 1 week/2 weeks/or a month.”
And how on earth are they going to get that data?? Most online poker websites reside in Gibraltar or other tax paradises, I doubt they will just send them a W2…

You can block the website unless they reveal players’ records.

Blocking websites will not help. Look at The Pirate Bay, the impact of blocking torrent zero. And just Hungary to find the website owners or who is hosting it, look at this turul website of BV.

Besides that the NAV (new name of the APEH, Hungarian Tax authorities) do not have the power to enforce this yet. This power is with the media council.

petofi
Guest

Eva S. Balogh :

petofi :

Eva S. Balogh :
Tarlos v. Kálmán. The media reaction is not favorable to Tarlós.

Such as…? (web addresses, please)

Everywhere, including Heti Válasz. The Association of Journalists also condemned Tarlós. I didn’t read Magyar Nemzet or Magyar Hírlap but all the others wrote in a negative manner about the unspeakable performance of the mayor. It doesn’t matter how annoying a politician may find the questions of a journalist he must keep his cool.

Perhaps I over-value Tarlos’ attempts at independence in the face of heavy Fidesz pressures…

LwiiH
Guest

I asked my wife (she teaches) about the possibility of the teachers strike and she was fairly negative about it. She said that if there was a strike it would be optional and given that most are worried about having a job at all it is likely that very few would participate.. at least in this area.

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