How did less money become more? Viktor Orbán’s historic success in Brussels

This afternoon the new session of parliament began with a brief “victory speech” by Viktor Orbán. He described the “historic success” he managed to achieve for Hungary during the European Union’s summit that hammered out the new 2014-20 budget.

Considering that initially Hungary was going to receive about 30% less in European subsidies than in the previous seven years, one can be grateful that the actual monetary loss was only 20%–from 26 billion euros to 20 billion. However, for Viktor Orbán it is never enough to say: “We are very happy that the cuts were less substantial than we had feared.” He has to come up with a mathematical trick that can make less more. The trick lies in the fact that when the Hungarian prime minister announced his phony figures he was calculating in forints per capita. According to him, while between 2007 and 2013 660,000 forints per capita arrived, between 2014 and 2020 that sum will be 712,000 per capita. Sure, but when Hungary received that money in 2007 one euro was worth 252 forints while today the exchange rate is to 1:292. And then there’s the very high Hungarian inflation rate that further reduces the purchasing power of the allocated funds.

While collecting material for today’s post I realized that Ferenc Kumin, a fairly recent acquisition in the Office of the Prime Minister from Századvég, the Fidesz think tank, has changed his focus in the last few months. As assistant undersecretary for international communication he was first entrusted with making propaganda in the United States. Among other things, he paid a visit to the Democratic Convention, acting as if he were an important guest there. But now Kumin seems to be a spokesman for the government in connection with Hungary’s position vis-à-vis the European Union. In this capacity he extolled the virtues of international cooperation. Hungary, together with Poland, Romania, and France, lobbied hard for high agricultural subsidies. He naturally didn’t mention that Poland, Romania, and Slovakia received more money than in the previous seven years. Hungary was also pleased that the share of EU monies remained 85% instead of 75% of the total cost of projects, as had been talked about earlier. As it  is, the Hungarian side has difficulties coming up with its 15% share, and thus a lot of available money is never used.

But there is another way of looking at the “historic success” that is much less encouraging. While the overall EU budget was reduced by only 2%, Hungary lost 20% of its subsidies. In fact, Hungary could have done much worse because the sums allotted were based on a percentage of the countries’ GDP, and Hungary’s GDP actually shrank in the last few years. If the EU had adhered to this principle Hungary would have been deprived of a huge amount of money, a move that Brussels considered too extreme.

jackpotAnd now let’s see how wisely successive Hungarian governments have used these subsidies in the past. Not wisely at all. A great deal of the money was spent on swimming pools, wellness centers, and repaving and redoing the central squares of practically all mid-size towns in the country. And no one should think that there is any major change being contemplated for the future use of cohesion funds.

The latest brainchild of the Orbán government is a “museum quarter” around the present Szépművészeti Múzeum (Museum of Fine Arts). Only yesterday Zoltán Balog announced this huge project, which will be completed in five years. It will involve the complete renewal of Budapest’s City Park (Városliget) and the construction of several new buildings to bring practically all important galleries and museums currently scattered around the city into one “Museum Quarter” (Múzeum Negyed). The government is planning to spend 120 billion forints on the project, which will make it “the biggest cultural development in a hundred years in Budapest.” The area will look like at last “what the city planners dreamed of in 1898 at the time of the millennial celebrations.”

Indeed, it will be a big project: new buildings will be needed for the Museum of Ethnography, the Hungarian Museum of Photography, a new National Gallery, the Museum of Hungarian Music, and the Hungarian Museum of Architecture. In addition they plan to restore a wing of the Museum of Fine Arts that was badly damaged during World War II. This time the government promises an international competition given the importance of the project.

For the buildings of the Museum Quarter the government is planning to spend 70 billion forints. But, don’t fret: 90% of this sum will be “financed from EU sources.” Another 50 billion will be spent on the City Park where they will enlarge the zoo. In addition they will redo the Petőfi Csarnok (Petőfi Hall) which in the future will be a kind of Disneyland, Hungarian style, for youngsters.

This project, like practically all others, will undoubtedly be carried out by Hungarian companies favored by Fidesz. How much of the EU monies will actually end up in the coffers of the party no one knows. Yes, the project will employ people in the building industry, which has been badly hit in the last five years. But, beyond this, it is hard to justify spending EU monies for such an undertaking. The man who is in charge of the project claims that the very existence of the City Park and the Museum Quarter will bring 1-1.5 million tourists to Hungary. I very much doubt that claim.

Meanwhile the towns cannot keep up their new stadiums and swimming pools, the fancy stone pavers in the main town squares are becoming loose and starting to look shabby. These projects might make town centers a little more attractive, but they do not facilitate Hungary’s cohesion to the more developed parts of the European Union.

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Gomez2
Guest
Oh my god, the Hungarian Museum Project will be a giant money syphon if there ever was one. Concrete is the name of the game. Simicska’s (Hungary’s main oligarch, closest ally of Orbán) Közgép Inc. or Demján’s (an old school, but Fidesz-leaning oligarch) Arcadom Inc. are well-positioned to build these huge buildings which are completely unnecessary for a number of reasons. Similary to the new National Theatre and MÜPA (both were built by Arcadom), they will be built quickly and the operational costs will be burdened on the taxpayers (crowding out subsidies for smaller projects). The operational subsidies of National Theatre equals to all other theatres in Budapest, MÜPA (Palace of arts) takes away more than complete sectors of culture. Every ticket sold at MÜPA is subsidised by not less than 8000 HUF (that is 35 USD) by the famously rich Hungarian taxpayers. At the same time, other museums, especially in the countriside are closed for days every week to save costs, attendace is down, reaserch work at museums, acqusition of artifacts are all down — and we need to burn hundreds of millions of USD on new museums. And we need to spend the money in Budapest, when the… Read more »
An
Guest

An added plus that Orban can finally move in to the Castle, as the museums currently in the Castle area will be relocated 🙂

Member

An :
An added plus that Orban can finally move in to the Castle, as the museums currently in the Castle area will be relocated

This is behind the huge expenditure indeed – Orban wants to occupy the Royal Castle, so he expels the museums from there.

Member

Net receipt of Hungary from EU
in millions of euros; % of GNI

2004= 193.4; 0.25%
2005= 590.1; 0.70%
2006= 1,115.0; 1.32%
2007= 1,605.9; 1.74%
2008= 1,111.7; 1.13%
2009= 2,719.4; 3.11%
2010= 2,748.4; 2.98%
2011= 4,418.3; 4.67%

see Annex 3 at http://ec.europa.eu/budget/library/biblio/publications/2011/fin_report/fin_report_11_en.pdf

Member

Hungary has to contribute 0.61% of the EU budget in 2014-2020 as opposed to 0.80% before

see Annex II at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/135344.pdf

Wondercat
Guest

The facelift given smaller cities has, at least, made them more attractive, more pleasant. Prof Balogh, had you had the spending of those EU funds, on what would you have spent them?

Guest

Two remarks:

Every time we “commute” from Hungary to Germany or back we pass a new Spa/amusement center/whatever in Körmend (Müxxxx – forgot the exact name). It’s been built around five years ago and now has been empty for two years – slowly rotting away …
Though I don’t know whether it was built with state funds or with private money.

Here in Western Hungary, especially in Zala Megye there are several small historical museums/archeological sites from the first millennium. We visited as many as we could because the husband of one of my sisters is really interested in Roman/Goth/Avar history.

Many of them were a sad sight, one could see that they would need more money to be able to present their findings better.

Totally OT:

Did you know that there was in Isis Temple in Savaria (now Szombathely) in Roman times ?

Zweimal
Guest

Yes, Orbán wants the Castle, remember that he reconstructed the Sándor Palace for billions but ultimately he could not move there because he lost the 2002 elections.

It’s the president’s office now. But if they slowly move everything out of the palace (the national library too, national galery, other museums) then it will be great opporunities for cronies to build giant concrete stuff again and again and then Orbán can move there and see the world from the top of the hill.

I guess this visceral feeling that literally everybody is physically below you is very attractive, tickles his fantasy very much. (I guess he is a sick dictator, who has feelings related only to power and money).

So its the best thing. He can get what he wants, the Castle and his pals (and I also assume he somehow) will get tons of money from the constructions. Yippi.

Ron
Guest
Sarcastic mode on: Eva when you start to learn that VO is never lying, always telling the truth, although I must admit he is not telling everything. For example: The calculations mentioned are not phony, but correct. HUF 616,000 is simply divided by 253 to get the EURO amount times 10,000,000 people is EUR 26 billion. As to the HUF 712,000 divided by 273 (a figure used in the calculation of the Hungarian budget earlier) times 7,668,535 people is EUR 20 billion. But what VO did not inform us is that the population of Hungary is 7.5 million. Which is the estimated 9.5 mio (CIA factbook July 2012, because the census 2011 are not published yet) minus the Hungarians emigrated to the rest of the EU, USA and Canada around 2 mio.,(see previous article about Roma in Canada). Eva: But there is another way of looking at the “historic success” that is much less encouraging. While the overall EU budget was reduced by only 2%, Hungary lost 20% of its subsidies. The Budget was not decreased by 2%, but increased by 1.3% (http://www.euractiv.com/priorities/2014-2020-budget-figures-news-517725). A large chunk of increase is caused by Sub-heading 1a (Competitiveness for growth and jobs) increase of… Read more »
Ron
Guest

Eva: Hungary was also pleased that the share of EU monies remained 85% instead of 75% of the total cost of projects, as had been talked about earlier. As it is, the Hungarian side has difficulties coming up with its 15% share, and thus a lot of available money is never used.

Economics Hungarian way. Increase the budget to 100% and on paper Hungary is financing the 15%, but in reality the entire project is financed by the EU.

Paul
Guest
Wondercat : The facelift given smaller cities has, at least, made them more attractive, more pleasant. Prof Balogh, had you had the spending of those EU funds, on what would you have spent them? I think this was actually money well spent. In Debrecen and (to a lesser extent) Szeged (just two cities I happen to know) this made a huge difference. It is not only better for tourism, but also lifts people’s spirits (such a change from the grey, grim, run-down state these places were in under communism) and gives them a sense of pride in their city. In Debrecen’s case, it’s turned an everyday, boring city centre into a really pleasant place to visit and spend a few hours. We often go in just to walk around or sit and watch the world go by, and the kids love the place to ride their bikes in (in safety) or roller skate. The combination of trees, flower beds, open spaces and fountains, not to mention some of the beautiful buildings that have been very nicely renovated, is so superior to any city centre I can think of in the UK, and many others I have visited in Europe. And… Read more »
Paul
Guest

Completely OT (my apologies), but we need some help re Wizz Air flights. Has anyone on here flown Wizz Air much? If so, is it normal for prices to drop as you get nearer to the flying date?

Despite living in Debrecen, we’ve continued to fly into Budapest and get the train, simply because the Wizz Air flights are always so expensive. But we cocked things up a bit this time and ended up booking our Easter flights very late – only to discover that easyJet prices have gone up and Wizz Air’s have come down – so WA is now considrebaly cheaper.

Thinking WA had seen the light at last and reduced their fares, we then went to book flights for the summer, only to discover the opposite – eJ prices much as normal and WA flights very expensive. Obviously we’d rather fly direct to Debrecen, so is it worth waiting for the WA prices to come down (and taking the risk of higher prices on eJ if they don’t)? Any advice/experiences would be most welcome.

(Sorry for hijacking HS, Éva but I couldn’t think of where else to ask.)

Ron
Guest

Paul: I do not have experience with Wizz Air as such.

However, I use to fly a lot with discount airlines and “normal” ones. The prices are decided as and when other people book, yes or no. Therefore, you need to see it as an auction, the more people use that particular trip it becomes more expensive, if less people are using it, it becomes cheaper.

Also you may want to use some programs such as skyscanner or cheapflights.com etc.

Member

@WizzAir

They make money on the luggage. Upgrade luggage size online, if you can (sometimes you cannot). At the airport, they charge much more – more than they advertise on the internet.

Member

Recent experience – 1 checked-in small bag (because you cannot have 2 carry-on bags at all) cost $70 at the airport, one-way.

Ron
Guest

tappanch :
Recent experience – 1 checked-in small bag (because you cannot have 2 carry-on bags at all) cost $70 at the airport, one-way.

A friend of mine sent his luggage by courier from USA to Hungary. Saved him a lot of money. He has a family of father, mother and two small kids.

Guest

@Paul:

I often use Matrix to search for cheap flights, but it seems Wizzair isn’t in their scope:
http://matrix.itasoftware.com/
Funnily enough, when I enter DEB the software offers me flights with TAROM from Oradea (OMR) to LCY as an alternative …

If you use Matrix you can choose to include “airports in the vicinity” and Oradea is only 40 miles away …

Member

Eva S. Balogh :

tappanch :
Recent experience – 1 checked-in small bag (because you cannot have 2 carry-on bags at all) cost $70 at the airport, one-way.

That is steep. I just checked here from Connecticut to Florida and back and I was told that the bag would cost me $50.00. That would include to and fro.

The low-cost WizzAir charged this $70 (15,500 HUF) at Ferihegy a week ago.

Ron
Guest

wolfi :
@Paul:
I often use Matrix to search for cheap flights, but it seems Wizzair isn’t in their scope:
http://matrix.itasoftware.com/
Funnily enough, when I enter DEB the software offers me flights with TAROM from Oradea (OMR) to LCY as an alternative …
If you use Matrix you can choose to include “airports in the vicinity” and Oradea is only 40 miles away …

It is a good software, it is excellent. Thanks.

Sackhoes Contributor
Guest

Although other infrastructure improvement projects would be wiser, I am not necessarily against upgrading Budapest’s museums. In theory at least, they contribute to the tourist trade and help the construction industry. BUT… what happens to the old buildings? If they will be used to house more government offices and officials, then it is a waist of money.

I can’t help sometimes to compare the size of the Hungarian Government and New York City. Both administer to about the same number of people, yet NYC is satisfied with a relatively small City Hall, where the mayor and his staff share it with a 35 member City Council. The Mayor resides (officially) in a modest historic mansion, Gracie Hall, which would dwarf beside any of the palaces in Budapest. Of course, we too have bloated organizations housed around the city, but I doubt they are as large as the Hungarian state. Plus we are hosts to the world’s largest useless sloth, the United Nations and the 200+ diplomatically immune “embassies” who clog up our streets without contributing tax revenue.

Hjjhkj
Guest
OT: have you checked the home page of the constitutional court? Yesterday, it had too interesting cases on its agenda at the conference meeting of the full fifteen members. One was the constitutionality of the communist red star. It is currently a crime to wear it in Hungary, but according to the case law of the European Court of Human Rights it cannot be a crime. Second case was the constitutionality of the current Hungarian church registration system. While previously churches were regulated by law and the general courts registered (gave them the status of) a church, today the Parliament decides in its sole discretion whether an organisataion may be called or have a status of a church or it is only a simple associataion. As you know, a couple of days ago the Orbán government instroduced a piece of legislation to amend the constitution (which was to remain “more lasting than ore” to translate a Hungarian idiom) in a comprhensive manner. Most of the measures are clearly meant to override recent case law of the constitutional court. One of the proposed measure is the writing in (direct constitutionalisiation) of the current church regsitartion system (keeping it in th hands… Read more »
Bowen
Guest
Renovating streets is in theory a nice idea, but two things: they have to be renovated properly (i.e. not done quickly and on the cheap) and be maintained after that. Budapest has seen a number of streets renovated in recent years. But it seems that there is a clear difference in quality for high-profile streets and other areas. The streets around Egyetem Ter, St. Istvan Ter and the northern end of Kazinczy utca are beautifully done, and look great. I suspect these were part-financed or project-managed by various religious groups. On the other hand, the newly renovated Kiralyi utca started falling to bits not long after it was finally completed in 2004. The same is true of various streets in the Palotanegyed and the southern part of Kazinczy, which – after a year or two – are now cracked and stained, with missing paving slabs and potholes in the pavements (sidewalks) as well as the road. Perhaps the project took the EU money gladly and did the job with the cheapest labour and materials possible. In the 8th district, a few months ago (I don’t know about other districts), ‘disabled parking spaces’ suddenly appeared at random on every street. I… Read more »
Ron
Guest

Bowen: On the other hand, the newly renovated Kiralyi utca started falling to bits not long after it was finally completed in 2004.

I use to work in that area. Btw this is so very typical. It is a case of bad planning. First they renovate the street, and some housing in the street. And once finished they start to do a major renovation of the udvar just behind the Madach Center, as well as the entire area between the Dob utca and Kiraly utca up to the Nagymezo utca.

Furthermore, I noticed, qua planning the following. towards the end of last year I spent a few week in various okmany irodak to arrange some stamps etc. Most of them had some kind of Magyarorszag renewed, mostly paid for by the EU. But all relating to administrative upgrade of the offices, new software or new computers, but the rest remain the same. As most of them do exactly the same why not invest in one project for all this type of office. In stead of one by one.

LwiiH
Guest

Bowen :
Renovating streets is in theory a nice idea, but two things: they have to be renovated properly (i.e. not done quickly and on the cheap)

The city is using EU funds matched by residence to install a new sewage system. The cheap piping they very quickly buried under our street was soooo bad that the street hired a lawyer to sue the city. Basically the system is so fragile that we’d be stuck with a maintenance problem for life. Someone said that this system is used in Germany but I can’t believe that Germans would accept anything like this. I’ve never seen anything like it and I’ve no intention in hooking up to it. I’ve no idea how much the EU is paying and I’m wondering if the EU even cares how the money is being spent.

OT, my father-in-law told me a while back that a car sales guy told him that model X, a car that I’d never heard of before, was one of the most popular in the US. I’ve no idea how many bought that pack of lies but… Germany story seems of the same ilk.

Member

The truth about Hungarian debt is here

Forint debt in billions of HUF
2010 May 10,572
2013 Jan 12,446

USD/EUR & other debt in billions of HUF
2010 May 9,109
2013 Jan 8,464

Total debt
2010 May 19,933
2013 Jan 21,188

They also used up the some 2,900 billion of nationalized private retirement funds.

So the Orban government has increased the total debt by 20.8% in less then 3 years (32 months)

http://www.akk.hu/object.c693e119-153c-49bc-bc3d-71f805d83db1.ivy

It is also true that the non-HUF debt has decreased, thanks to the retirement money.

Member

The foreign reserves of the Central Bank MNB have not changed significantly
2010 May 31 = 34.857 billion euros = 10,071 billion HUF
2013 Jan 31 = 34.397 billion euros = 10,059 billion HUF

http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Statisztika/mnben_statisztikai_idosorok/en0403_tartalek.xls

Member

I apologize for occupying too much space in this blog, but have you read this?

http://www.nepszava.hu/articles/article.php?id=621517

From March 15, 2014, one has to be careful to criticize government officials for fear of being penalized by the brand new Civil Code.

Minutes before the final vote, the Justice Minister wanted to take this out from the Code, but the Fidesz party overruled him. So freedom of speech can be restricted to protect those sensitive politicians of Orbanistan.

Bowen
Guest

tappanch :
I apologize for occupying too much space in this blog, but have you read this?
http://www.nepszava.hu/articles/article.php?id=621517
From March 15, 2014, one has to be careful to criticize government officials for fear of being penalized by the brand new Civil Code.
Minutes before the final vote, the Justice Minister wanted to take this out from the Code, but the Fidesz party overruled him. So freedom of speech can be restricted to protect those sensitive politicians of Orbanistan.

Presumably this is to help prevent ‘smear’ and ‘hate’ campaigns against Fidesz in the run-up to the election?

Member

Hungarian government issued dollar bonds today on the market
5 yr bond $1.25 billion paying 4.25% yearly interest
10 yr bond $2.00 billion paying 5.45% interest.

Suppose the IMF had given Hungary money for 2.5% interest.

The Orban government, or rather the Hungarian taxpayers will pay an extra interest of $80.875 million = 17.44 billion HUF every year for rejecting negotiations with IMF.

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