No surprise: György Matolcsy will be the new chairman of the Hungarian National Bank

One can only marvel at the speed at which nominations for high positions are approved in Hungary. Early this morning we learned that the inevitable had happened: György Matolcsy was nominated to be the new chairman of the Hungarian National Bank, with his post as head of the Ministry of National Economy to be filled by Mihály Varga. Two or three hours later we heard that the parliamentary committee had found both candidates to be outstanding. On Monday, I’m sure,  the House will confirm them and members of the government parties will stand and rhythmically applaud the excellent job Matolcsy did in ensuring Hungary’s “economic success” in the last three years.

How subtle. The capitons read Greetings to Mr Matolcsy / At last the Hungarian National Bank is in Hungarian handsPhoto falramentaparlament.blog

How subtle! The posters read: Greetings Mr. Matolcsy / At last the Hungarian National Bank is in Hungarian hands
Photo falramentaparlament.blog

Although the final result was never in question, there was some heat during Matolcsy’s confirmation hearing. Even outside of the chamber the MSZP spokesman called Matolcsy a “ridiculous public figure”; inside, members of the opposition questioned Matolcsy’s suitability for the post. Fidesz members of the committee welcomed Matolcsy’s assurance that he plans to pursue a conservative monetary policy. He emphasized his determination to keep inflation in check and promised to stop the spread of bank loans in foreign currencies. On the other hand, Tibor Kovács (MSZP) envisaged a bumpy road for the new chairman because of his reputation. His appointment holds not so hidden dangers for Hungary’s financial stability, he added. Gábor Scheiring (PM = Párbeszéd Magyarországért) also had a few harsh words to say about the appointment of the least successful member of the cabinet to be head of the central bank. MSZP, Jobbik, and independent members voted against him but naturally it didn’t matter.

During the hearing Matolcsy talked a lot about the sins of his predecessor, András Simor. According to him, the Hungarian National Bank didn’t fare well under his six-year stewardship; Matolcsy promised a bright future for the bank over the next six years. Well, we know how much Matolcsy’s predictions and promises are worth. Otherwise, he tried to calm nerves as much as possible and gave the impression of a man who knows his job. The trouble is that Matolcsy really doesn’t have any banking experience. But he sounded, at least on the surface, knowledgeable and responsible with a couple of incomprehensible sentences. He promised to achieve price and financial stability while supporting the government’s economic policies. He added that he will safeguard the independence of the Hungarian National Bank, something a lot of people doubt at the moment, both in Hungary and abroad.

Matolcsy’s nomination and confirmation hearing didn’t roil the currency market. As almost every commentator pointed out, the markets had already priced in Matolcsy’s appointment. But even if the forint didn’t budge, credit default swaps (CDS) did rise. During the month of February they fluctuated between 290 and 305; today they moved up to 310. Not a steep rise but perhaps significant nonetheless. In any case, according to domestic and foreign commentators Matolcsy will be cautious for a while, testing the water before he makes any significant changes in the bank’s policies. But then he will probably stir things up. For example, in the past he talked about the desirability of weakening the Hungarian currency. Peter Attard Montalto of Nomura is convinced, as are most economists and opposition politicians, that the Hungarian National Bank will cease to be an independent institution. Montalto is also certain that Matolcsy will make decisions that may not be beneficial to the Hungarian economy but will further the political goals of Fidesz.

We don’t know yet what will happen to the two vice chairmen. Will they be fired or left in place for the sake of appearance? The two current vice chairmen always voted with the chairman, but since the appointment of five extra members of the monetary council they were consistently in the minority. In the past Viktor Orbán insisted on appointing a third vice chairman, but that plan was thwarted by András Simor and the European Central Bank. Now it seems that a third vice chairman will be appointed after all. Matolcsy handpicked his favorite man from his ministry, Ádám Balog, assistant undersecretary in charge of taxation. Balog was instantly replaced by another government official. So, the appointment of a third vice chairman has been in the works for some time.

Some people jokingly call Matolcsy’s economic theories “esoteric” in the sense that few people understand them. Matolcsy wrote several books that presumably offer some inkling of his thought processes. In the near future I will try to summarize what I can find on the subject. One of his “discoveries” is that “success is sometimes invisible, sometimes incomprehensible, unusual, or at times painful.” Here are few of his ideas: Only people matter and not governments, companies, or financial institutions. What matters is what people believe in, what moves them and how they behave. So, what is important is whether success and accomplishment are associated with us.

These are just a few of Matolcsy’s ideas that one can only hope he will not carry with him to the Hungarian National Bank.

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Member

God. Those two peace marcher sheep on the picture … Even if they would be dying from hunger they would still refuse to read about basic economic facts.

They remind me on this classic Hungarian skit. English subs by me (make sure the caption is on). An interview with a politician.

gdfxx
Guest

I just would like to know, if someone asked that guy with the sign (or those who put him up to this), what would he answer to the question: why wasn’t the National Bank in Hungarian hands until now, and in whose hands was it?

Member

Constitutional Revenge
Kim Lane Scheppele, Princeton University

http://krugman.blogs.nytimes.com/2013/03/01/guest-post-constitutional-revenge/

UU14
Guest

These idiots open the road to a dictatorship by an ultra rightwing clique Hamas style.

Member

Personally, I do feel sorry for those people with the sign. I am serious. How misguided and cheated you must be to actually march out and support Matolcsy the Hungarian, while the current Hungarian government gives away tax payers money to the churches, to “save” the cities, to give out as paycheque for contracts to Fidesz buddies. How much you must be in the darn not to know how much money those “foreigners” (like the EU) spent on Hungary to rebuild the streets, renovate buildings, and improve Hungarian life in general. THose people should be taken in a “Back to the Future” style to see, the what if… Maybe, just maybe, they would come to their senses.

PWT
Guest

During the hearing, was Matolcsy asked specifically about his policy plans for the foreign currency reserves? They are, after all, the bank’s instrument of last resort for stabilizing the HUF and the attractiveness to the government of gaining access to those reserves for immediate use in the budget is both self-evident and incredibly dangerous.

Member

Eva S. Balogh :

gdfxx :
I just would like to know, if someone asked that guy with the sign (or those who put him up to this), what would he answer to the question: why wasn’t the National Bank in Hungarian hands until now, and in whose hands was it?

I have no doubt that he would tell exactly what he has in mind.

Rhymes with shoes.

Guest

tappanch :
Constitutional Revenge
Kim Lane Scheppele, Princeton University
http://krugman.blogs.nytimes.com/2013/03/01/guest-post-constitutional-revenge/

If this professional analysis by Scheppele cannot wake up the EU nothing can.
Then Orban will be free to finish the job by adding to the constitution his appointment as lifetime regent of Hungary. Republic, kingdom or whatever.

Progger
Guest
Guys, worry not, the recession will continue. There are no monetary or budget policies which could reverse the trend, the problem is much more fundamental. Hungary is a small and very open economy, the policies which might work in the US (a huge and rather closed economy, meaning that a much-much higher percentage of GDP is generated by domestic consumption than in Hungary which is much heaviliy dependent on export and import, with an effective global reserve currency) will not work (and have never worked) in Hungary. Investments are low and are still (!) in decline, this means a sure GDP decrease in 2013 and perhaps beyond (crazily, it is the agriculture, with less than 4% of the GDP, which could be our ‘saviour’ as last year was very bad, so this year a 40% increase, which is not unlikley if we have a normal year, could mostly offset decrease in industry and services). The issue is trust. Nobody, not even Fidesz-leaning enterpreneurs trust this regime (the Simicska-Nyerges-Patonai-Nyúl-Demján line is different, they ae not enterpreneurs, they are simple oligarchs stealing money). The GDP will not increase just because we will have more loans from the National Bank to build new… Read more »
Member

Jean P :

tappanch :
Constitutional Revenge
Kim Lane Scheppele, Princeton University
http://krugman.blogs.nytimes.com/2013/03/01/guest-post-constitutional-revenge/

If this professional analysis by Scheppele cannot wake up the EU nothing can.
Then Orban will be free to finish the job by adding to the constitution his appointment as lifetime regent of Hungary. Republic, kingdom or whatever.

I think you’re maybe right!

An
Guest

Jean P :

tappanch :
Constitutional Revenge
Kim Lane Scheppele, Princeton University
http://krugman.blogs.nytimes.com/2013/03/01/guest-post-constitutional-revenge/

If this professional analysis by Scheppele cannot wake up the EU nothing can.
Then Orban will be free to finish the job by adding to the constitution his appointment as lifetime regent of Hungary. Republic, kingdom or whatever.

It is a shame, really, that the EU chooses to bury its head in the sand, instead. I don’t care about the talk how the EU has no real power in this matter, and that it is up to the Hungarian people to deal with this regime… Hungary is part of the EU, and if the EU tolerates this kind of shameful political manipulation of a democratic constitution and democratic principles within its community, it looks bad on the EU as well (not just on Hungary). Not to mention that it sets and encouraging example to follow to all wannabe quasi-dictators in the EU.

The EU may not have real power in this matter but has tremendous symbolic power and they could voice their disapproval in more certain terms.

Member

Great article from professor Scheppele! I strongly believe that her writings had an influence on the constitutional court. They are not alone. The world is watching.

Member

By the way the two turul troopers on the photo are from the Conquest 2000 Association (Honfoglalás 2000 Egyesület).

The same group nominated Rózsa Hoffmann last year to become president after Schmitt was bumped for cheating on his thesis. According to them “[Hoffmann] the educated, highly skilled professional, who speaks languages and has a representative appearance would have been a perfect choice.

Karl Pfeifer
Guest

gdfxx :
I just would like to know, if someone asked that guy with the sign (or those who put him up to this), what would he answer to the question: why wasn’t the National Bank in Hungarian hands until now, and in whose hands was it?

Well the fellow has it from Orban,” the Nation cannot be in opposition”. According to this logic, those who do not like Orban-Matolcsy economic policy are not Hungarians.

Guest

This seems to be a typical attitude of the right wing (also especially in the USA):

If you don’t agree with us/our politics – you’re an enemy of the state/nation/people!

An
Guest

The first measure taken by Matolcsy as the head of the national bank (though he hasn’t even started officially) is to change the operational code of the organization (“mukodesi szabalyzat” in Hungarian). The national bank had a multilevel- hierarchy, where the leader of each level was responsible for his own unit (hiring decisions, expenses, etc). Matolcsy’s first decision was to absolutely centralize the system, so that now everything needs to go through him, requiring his signature. Massive layoffs are expected at the National Bank.

So the destruction of the last professionally competent institution in Hungary has begun.

http://www.origo.hu/gazdasag/20130302-matolcsy-gyorgy-agressziv-mnbfoglalasra-keszul.html

An
Guest

I’m not sure, but from the article it sounds like Matolcsy changed the National Bank’s operational code a few days before he was even officially nominated for the bank’s presidency, in his capacity as the minister for economy and finance…. I’m not sure how he could do that… does this fall under the competency of the ministry? If yes, that’s very neat…. so in Hungary, if you are a minster , you can use that power to change a few rules here and there that will make your life in your new position so much easier.

Guest

The resident Fidesznik on pol.hu proudly declared:

“M will cleanse the MNB of Simor’s men”…

Typical Stalinist party language – it doesn’t look good for Hungary …

Member

An :
The first measure taken by Matolcsy as the head of the national bank (though he hasn’t even started officially) is to change the operational code of the organization (“mukodesi szabalyzat” in Hungarian). The national bank had a multilevel- hierarchy, where the leader of each level was responsible for his own unit (hiring decisions, expenses, etc). Matolcsy’s first decision was to absolutely centralize the system, so that now everything needs to go through him, requiring his signature. Massive layoffs are expected at the National Bank.
So the destruction of the last professionally competent institution in Hungary has begun.
http://www.origo.hu/gazdasag/20130302-matolcsy-gyorgy-agressziv-mnbfoglalasra-keszul.html

Localized Führerprinzip at work.

gdfxx
Guest

wolfi :
This seems to be a typical attitude of the right wing (also especially in the USA):
If you don’t agree with us/our politics – you’re an enemy of the state/nation/people!

In the USA the right wing has a whole range of representatives, from conservatives in the classic sense of the word (such as the late William F. Buckley Jr.) to neo-Nazis. I think the majority of this non-homogeneous group does not agree with this statement. They are the most ardent supporters of the Constitution, a document that that assures freedom of speech for everyone, even when that speech is detestable.

Kirsten
Guest
An: ” I don’t care about the talk how the EU has no real power in this matter, and that it is up to the Hungarian people to deal with this regime… Hungary is part of the EU, and if the EU tolerates this kind of shameful political manipulation of a democratic constitution and democratic principles within its community, it looks bad on the EU as well (not just on Hungary).” I think I am not the only one who wrote this repeatedly: also the EU has to be approached not from some romantic picture of mature democracy on the EU level as well as in all member states, ability to provide high standards even against the will of strong vested interests and so forth, but as an organisation that is subject to a number of influences and constraints. And that has been built on the expectation that all member states indeed do adhere to the most basic principles – because they really believe in these principles. The problems of Hungary are also not the biggest problems of the EU currently. The problems with the currency, with the UK, Italy or Greece appear more urgent than the problems of a… Read more »
An
Guest
@Kirsten: I am not saying that others should do something for Hungary, or for Hungarian democracy, just that the EU should actually raise its voice in a case of an obvious breach of those democratic principles, which are, as I understand, the foundations of the community. If they let this pass, the talk of the EU being founded on democratic principles is a joke and a hypocrisy. And they should protest OV, not because I expect them to stand up for Hungarians (Hungarians should stand up for themselves, in that we agree), but because they need to stand up for the democratic values of the EU. Sure, the EU have more important things to do, more pressing problems to solve, and there is plenty of good reasons why they don’t get involved in a more vocal manner. But how is this reasoning and behavior is different from the behavior of the average Hungarian? Just like the EU, the average Hungarian also has plenty of good reasons why he/she doesn’t stand up to the regime (fear of losing one’s livelihood being one) and more pressing things to do (finding a job, finishing school, figuring out how to pay next months’ bills).… Read more »
Guest

@An: Bravo!

Kirsten
Guest
An, I do not say that the EU is an exemplary organisation in many respects. But what should be accepted first is that matters are as complicated as you described above and Europeans would really do themselves a favour if they eventually agreed what (except a place from where you can get money) they want the EU to be. The average European does not have very elaborate opinions on that. The EU has serious defects in its design to deal with problems of monetary union, energy policies, democracy within its member states and the like. I am certainly not opposed to more integration, including more rights for “Brussels” to intervene in countries when this appears urgently necessary (Hungary, but also Greece), but to arrive there you need the countries and the populations to agree on what exactly this shift of competences to Brussels should encompass, and – not less crucially – you need the support of the 27 or from summer 28 countries, either from the populations in referenda or at least from their representatives. This is where “Europe” stands. And as regards the point that the EU behaves exactly as the average Hungarian does, I my view there is… Read more »
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[…] This week, Mr Simor’s term as Governor ends. The Prime Minister’s choice for his replacement is György Matolcsy. Mr Matolcsy is an experienced civil servant who served as an economic advisor and minister under successive center-right governments. Mr Orbán has called him his ‘right hand’ and most analysts consider him a devoted member of the ruling Fidesz party. Mr Matolcsy has often criticised both international institutions and Hungary’s cautious monetary policy. Most recently, he claimed the Central Bank’s forecast of possible future growth in public debt was ’unethical, immoral and harmful.’ In the eyes of some investors, Mr Matolcsy intention may be to inflate away Hungary’s public debt with policies aimed at a weaker Forint. […]

Paul
Guest
All this talk about the EU doing something misses one rather important issue – who or what exactly is the ‘EU’ in this context? Who is it that we expect to ‘do something’? I only have the vaguest idea of how the EU works, but I suspect that it is far from simple to work out who we would expect to be the one (or the committee) to seriously criticise Hungary. Various ‘heads of departments’, ‘ministers responsible for’ or chairs/representatives of committees might comment on Hungary, but they are only able to do this within the context of their specific brief/subject. At the parliamentary level, presumably any attempt to censure Hungary would run into political problems, with the right tending to defend one of their own. And at the country/member level, I suspect you are never going to get all the Central/Eastern countries to vote against Hungary. So, we need someone who has a wide enough brief to be able to comment on Hungary generally, and who isn’t held back by left-right political considerations, or country level politics. Does such a person exist? And, if they do, wouldn’t they have enough on their hands already with the Euro crisis, Greece,… Read more »
Guest

Thirteen years ago the EU initiated some “sanctions” against the Austrian government for its involvement with Jörg Haider – mainly ceremonial, but effective:
http://www.wsws.org/en/articles/2000/02/haid-f22.html
They just refused to speak with him …

PS:

Many right-wingers believe in a conspiracy: Haider’s fatal accident was somehow arranged y secret services, the “usual suspects” are the Israelis.

Ron
Guest

Slightly Off Topic.
Last Sunday we were walking in Szentendre for the first time in two years. Long Coffee 550Ft (2011: 350Ft). One ice ball 200Ft. (2011: 150Ft). Lots of people walking, but no sitting in cafe, pubs, etc.
Btw More than a year ago I mentioned that the koscma went bankrupt, than an ital diskont took over, and after three months there was a 100Ft shop. This shop just finished this morning.

Guest

Yes, Ron, the situation is bad!

We’re also hoping that all our favourite places will still be open/open again this Easter when we return to Hungary.

Even in Szentendre and Héviz the economy is almost collapsing – you should hear the stories my wife’s sister tells about Eastern Hungary!
http://www.portfolio.hu/en/economy/hungarian_retail_sales_just_would_not_pick_up.25678.html

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