The Orbán regime’s reaction to the scandal at the Hungarian National Bank

The Hungarian National Bank cagily released the documentation on its foundations’ grants and contracts Friday night after 5 p.m., but the timing didn’t help much. The outcry was immediate. And ever since, more and more revelations have been adding fuel to fire, from the grants given to relatives of György Matolcsy to the extra money that went to the wife of Chief Prosecutor Péter Polt. (In addition to her regular job as one of the department heads of the bank she also sits on the boards of several foundations.) The opposition, including Jobbik, is up in arms. All parties demand an investigation as well as the abolition of the six foundations which, by all accounts, were established illegally.

News travels fast, especially nowadays. The Financial Times carried the story of the resignation of the journalists at vs.hu on its front page. The New York Times and the Washington Post also covered the story.  Bloomberg had a complete rundown on Chairman Matolcsy’s machinations with the almost one billion U.S. dollars that was moved from the assets of the National Bank to private foundations. If something like this had happened in western Europe, it would undoubtedly have resulted in the resignation of the chairman of the central bank and perhaps even the whole government. In Hungary, however, nothing of the sort will happen. As Lajos Bokros, the former finance minister, put it when asked about the consequences, “I have no illusions. As long as we are saddled with the Orbán regime, nothing will change.”

Despite the many juicy stories surrounding this case, we shouldn’t get bogged down in details. The important thing to keep in mind is that the very establishment of these foundations was illegal. Bokros in a post on Facebook summarized the legal objections to Matolcsy’s “unorthodox” handling of the assets of the central bank. (1) All money that is accrued over the fiscal year by the bank must be put into the budget of the Hungarian state. Matolcsy, in office now for three years, has not been doing this. (2) The National Bank cannot establish foundations because by doing so it siphons public funds from the budget. (3) The Bank cannot utilize funds for public purposes because the utilization of public funds can be done only with the approval of parliament. (4) The Hungarian National Bank cannot get involved in the formulation of fiscal policy. Its only job is the formulation and execution of monetary policy. (5) The National Bank cannot attempt to transform public money into private funds because that is intentional theft and fraud.

Péter Róna, another economist and banking expert, in a conversation with György Bolgár on Klubrádió this afternoon added that the only assets Matolcsy could have used to buy works of art, musical instruments, or even to establish foundations were the bank’s private “income” from dues paid by banks and entrance fees to view the bank’s numismatic collection, which when Róna was a member of the board of directors a couple of years ago was no more than 4 billion forints a year. The foundations received 260 billion forints, more than 17 billion went for real estate, and an incredible amount of money was spent on artwork, including a picture by Titian for 4.5 billion forints.

From the general silence, it is apparent that members of the government and Fidesz-KDNP MPs find the whole scandal most unfortunate. When journalists asked questions of László Kövér and Viktor Orbán in the corridors of the parliament building, the politicians just kept going, eyes fixed on the floor. They refused to utter one word. Some of the lesser characters tried to act dumb. The excuse of one of the Fidesz deputy chairmen, Szilárd Németh, was that since he has only a simple cell phone, not like the journalists with their smart phones, he had heard nothing about the whole thing. I suspect that they were told to remain silent in the hope that eventually the whole scandal will just die down. However, I would like to remind Árpád Habony and Antal Rogán, head of the propaganda ministry, that this kind of strategy didn’t work in President Pál Schmitt’s plagiarism case.

Behind the stony silence I suspect fear because journalists of four independent organs were told yesterday that they will not be able to enter the parliament building for an unspecified duration. The four publications are Népszabadság, HVG, Index, and 24.hu. Letters notifying the editors-in-chief of the decision asked the editors to instruct their colleagues to obey the rules governing the presence of journalists in the parliamentary building “in order to maintain your publication’s parliamentary accreditation.”

In addition to the silence, the decision must have made somewhere high up, most likely in Fidesz, to leak a ten-year-old story according to which Péter Medgyessy, prime minister of Hungary (2002-2004), received 597,000 euros from the French company Alstom while he was serving as “traveling ambassador” for the country. After Medgyessy resigned, his successor Ferenc Gyurcsány named him to the post as a kind of consolation price. At the same time, however, Medgyessy returned to his old consulting business. Magyar Idők claims that the money Medgyessy received from Alstom was not compensation for his consulting services but a bribe in connection with Alstom’s bid for the metro cars for the new M4 metro line negotiated in and around 2006. Alstom was found guilty of paying more than $750 million in bribes to government officials around the world in December 2014. To make sure that the story sticks, a few hours later Magyar Idők also published a tabloid-like editorial.

Lajos Kósa, leader of the Fidesz parliamentary caucus, announced that “no prime minister in the 25 years of our democracy was accused of such a crime. Péter Medgyessy must give an account of that sum.” The prime minister’s office immediately joined the chorus, and its spokesman promised an investigation into how “this money is connected to the governance of the left.” They will investigate not only the affairs of the former prime minister but also those of former Budapest mayor Gábor Demszky. As for Medgyessy, he admits that he received almost 600,000 euros from Alstom through a Danish and Austrian company but claims it was all on the up and up.

Of course, at this stage we have no idea what transpired, but I must admit that 600,000 euros for a consulting fee is pretty steep. I heard Csaba Molnár (DK) contemplate the possibility that the reason for Medgyessy’s rather sympathetic attitude toward the Orbán government of late might have something to do with Fidesz’s holding this information over his head. Of course, this is just speculation, but it was rather embarrassing when a few months ago Medgyessy claimed in a radio interview that the Orbán government’s corruption is no different from corruption during the socialist-liberal period. I guess this also included his own two years as prime minister.

I’m sure that the pro-government media, including state TV, will keep this issue alive while an investigation will immediately begin into the bribery charge against Medgyessy and perhaps even against Demszky. Meanwhile, of course, nothing will happen on the Matolcsy front.

April 26, 2016
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nwo
Guest

The Matolcsy scandal does have the feeling of an end of regime kind of an event. Basically, a theft of nearly $1 billion of public money, banning opposition journalists, throwing up red herrings (the timing of the Medgyessy scandal revelationsremind by of the BKV scandal timing). I fear though this will be too big and there is no one holding a brown paper bag with money actually in it. for the public to get it and focus on it. It is an outrage. Western journalists get it and are focused on the media (VS.hu) corruption part. I doubt the EU will react. I feel like Bokros. It only gets worse, because nothing ever happens.

Member

Ladies and Gentleman, let’s move on. There is nothing to see. The EU will keep pumping money into the Orban government. In fact next to Orban and Matolcsy, I would love to see some members of the EU get on trial in the forcible future for mismanagement of public funds. Orban and his family, Matolcsy and his family, and all their gang only able to siphon the money out because the EU provides enough funding to plug the holes. If the EU would stop the flow of money, the Orban government would be gone.

Istvan
Guest

If the EU stopped the money flow part of the Euro-bond bussiness would dry up, there is money to be made here for many investors. The best part of all of this is that the taxpayers of Europe are picking up the tab.

webber
Guest

Istvan – what Hungary gets is peanuts. The Euro-bond business would carry on without a blip.

Note that the EU (GDP $1`8.495 tn), on whole, has a higher GDP than the US ($18.1 trillion).

It’s just that the income discrepancies between individual EU countries is greater than between US states. Even with the massive transfer of funds, Hungary’s GDP per capita is less than half of the poorest US state’s, Mississippi’s, while Luxembourg’s and Liechtenstein’s are much higher than Alaska’s (only the District of Columbia has a higher GD per c.).

Istvan
Guest

Webber money is money. If the EU cuts off Hungary for corruption, there are similar problems in other Central European nations. Where does the cut off in cohesion funds stop? Even through Hungary is a small market there is money to be made, for example the Danube fund which is still making money in Hungary and marketing to wealthy Americans including the extended Bush family and former Governor Pataki. I know numerous American Hungarians here in Chicago who continue to invest in Hungary.

When the EU has a character like Juncker leading it who is as greedy as they come and is known for having encouraging a rather lax, flexible banking system in Luxembourg cracking down on Central European corruption is less than high on the real agenda.

Roderick Beck
Guest

It is not peanuts to Hungary. EU funding is one percent of Hungary’s GDP. Hence 1% of its annual growth rate. Given Hungary has only averaged about 2% per annum real GDP growth since the Wall fell, the EU is responsible for almost half of Hungary’s growth.

Max
Guest

Roderick Beck: Would you be so kind not to comment with data on a subject which is obviously unfamiliar to you? HU had received some 24.6 billion euros for the 2007-13 financing period. Just last year the payments of EU structural and cohesion funds to HU surpassed 5% of GDP.

Observer
Guest

Max, your figure must include the agricultural subsidies, since the cohesion money is 20.4 bill Euro in total (which will probably be drawn 100%).

Roderick Beck
Guest

Let me add, Max, to clarify, that is real GDP is the relevant figure and there is no way that these funds can be as high 5% of real GDP. Hungary hasn’t grown that fast in the last 16 years.

Roderick Beck
Guest

No, Max, you should read more carefully and be so kind not to comment on things you don’t have a clue about. By the way, I am an economist. You obviously are not.

As a long term average Hungary receives EU development grants equal to 1% of GDP. If Hungary received funds surpassing 5% of GDP last year, it would imply that Hungary’s organic growth is negative!!! And in 2015 EU funds peaked in the 4th quarter at 3% of GDP so how you get a figure of 5% involves “New Math”.

The EU cannot be financing Eastern Europe countries at levels of 5% of GDP per anum. Impossible.

Observer
Guest

@Roderick b

Further to Max’s comment.
As a result of accelerated drawing down in 2014 and 2015 the cohesion funds infusion accounted for 6 to 8% of GDP next to 3.6 , 2.7% growth.
All this with very low multiplication effect. Pretty awful.

Guest
Roderick Beck
Guest

Those numbers on the face it makes little sense. Hungary had real GDP growth of 3% to 4% in 2015. Since inflation was null at the retail level, the 6% to 8% implies that the Hungarian economy would be shrinking in its absence. Even an pessimist as I find it difficult to believe that.

It is pretty obvious that some of the money is not spent on goods and services. Either it is being held in back accounts prior to disbursements or it is being used to buy assets (Budapest Bank).

The Devil is in the Details and a lot of you just taking raw numbers without understanding them.

Observer
Guest

The looting and pillaging continues on a historical scale. The regime starts to sink in its own mess, more silly and absurd.
But the homo hungsaricus are numb, bewitched by some nemzeti flavored BS, letting a bunch of scoundrels rob them blind and set the country back by a decade.
Champions in suicide and at shooting themselves in the foot.
Hajra! fizetni..

Guest

When it comes to financial affairs in banking there it sure looks as if there’s no ‘irrational exuberance’ in its execution. In fact it’s rather rational when ‘risk’ is non-existent in generating ‘income’. Nice gig if you can get it. And oh they got it. And the EU as ‘la dee da’ central bankers are looking another way.

webber
Guest

“However, I would like to remind Árpád Habony and Antal Rogán…”
Don’t tell me they are HS readers!??

Member

I am not sure if their English is good enough to understand the nuances, but likely they received huge sums from the Hungarian taxpayers via the National Bank to have interpreters and media analysts on board. Same in Hungarian. (The later is a joke that made it rounds, as official tourism directories were posted in the Castle District with information in Hungarian, and under it , literally one sentence “Same in English”. I am not sure how much did that cost. LOL)

Guest

Eva: ”….Medgyessy claimed in a radio interview that the Orbán government’s corruption is no different from corruption during the socialist-liberal period.”

It can’t be true. If previous regimes had been sucking the wealth of the state at the same rate as the Orban regime is doing now, Hungary would have been dead and buried long time ago.

By the way who can present an estimate of the total value of assets and ready cash that is stolen yearly by members of the regime and their widespread families and friends? I suppose that the number would lend credibility to my above opinion.

Pinka
Guest

Orban isn’t surrendering to the liberal media. Even the idea is loughable.

Matolcsy will remain no matter what . Remember when even the idea that he could be a Central Bank head was heretical, now he’s been there for years.

Peter Polt’s wife would be implicated if Matolcsy would be let go and you can’t be serious that Peter Polt’s position would be endangered.

The system is working perfectly it is extremely resilient.

The top people are legally untouchable. The leftists don’t have a clue, neither the willpower to hold the top Fideszniks (those 500-1000 people) accountable (plus there are some leftists involved too, just in case).

The smart Fidesz lawyers thought hard about the system but they figured out a pretty good system.

If the opposition had any cojones they would’ve “attacked” the Central Bank yesterday (something like the fideszniks did with the TV HQs backmn in 2006, only a bit more symbolically). What is this timidity? After all about 1bn euros were stolen.

The real problem is that even the leftist politicians don’t feel anger. They are burnt out and don’t believe in themselves. But without righteous anger and rage and self-confidence the Fidesz edifice will stay.

Guest

”The top people are legally untouchable.”
This is their fatal illusion. They will be in prison as soon as Orban is out of power. Polt will be the first.

Reality Check
Guest

You do not pay attention to the news. The opposition did attack the activities of MNB. Not just yesterday but for quite a while.

As matter of fact at least one member of the opposition filed a lawsuit.

Another opposition bashing troll.

spectator
Guest

Wake up dear, — and all you others — if you think that anything constructive will come out of this scandal, you may just as well forget it, as it comes.

Just what and why you don’t seem to get the situation, for crying out, etc…?

The whole bunch of crooks is ‘above the law’, means: practically untouchables! Who stops you to realise that doesn’t fuck*ng matters who filed what, the whole charade keeps going on, alive and prosper, while we delude ourselves that “the law” may interfere!

Not in our life, as long as this mob is in power, you’d better realise it!

Either we will manage to throw them to the waste-heap, where they belong, or go and bury ourselves on the same spot, because we don’t deserve any better either!
There is no middle way!
It’s way too late for negotiations!

Clean out the garbage — or accept slavery in your own homeland.

No other way, folks, time to realise!

Guest

@spectator
April 27, 2016 1:12 pm

–“Just what and why you don’t seem to get the situation, for crying out, etc…?”–

Simple: wishful thinking.

Guest

Pinka is our “no1 troll” – appearing under many different names, but always making the same grammar/spelling errors!
Congratulations!

Pinka
Guest

Medgyessy is an idiot. Well, we knew that. His secret was bound to be published sooner or later, but he thought foolishly that appeasement could work. With Fidesz, appeasement could work, muhahahahahahah.

Appeasement, giving in to blackmail never works. When will these idiots learn?
Never. The leftists don’t know how to fight. When you steal and accept bribes at least don’t be naive and clueless. But the lefties can’t change.

The Matolcsy affair will soon blow over and the Medgyessy etc. stories will continue to come out.

It turns out nothing changes, the old commies and liberals remain the same, corrupt. At least Fidesz is defending the Hungarian interests, they steal too but they are real Hungarians and people in the country appreciate that. They don’t want the old guard to return again, they had communists for 50 years and that was more than enough.

webber
Guest

Hello Fidesz-troll!
If people in the country appreciate Fidesz, explain how and why Fidesz has lost by-election after by-election in the countryside since 2014.
You are full of it, and you know it. Fidesz is heading towards a beating of epic proportions, not because average people like the left but because they have come to hate Fidesz so much.

Guest

You mean the definition of a real Hungarian is “stealing from other Hungarians” ?
You even might be right there.

PS:
I propose that any of our idiotic trolls which uses the word “leftist” again should automatically deleted!

Of course to a Fascist/Nazi to the right of which there is only the wall, everybody else must be a “leftist” …

Member

Yes. They cannot come up with anything intelligent to say. Their vocabulary is limited and been taught by their dear leader, Orban that opposition= leftist. What do you expect? They cannot stay away from the propaganda.

Observer
Guest

“Medgyessy is an idiot…. ”

Oh guys, to say something like this when we have Matolcsy ! Some pls find a better picture/caricature among the central bankers of the whole OECD.

“Fidesz is defending the Hungarian interests, …”

I wonder what are these trolls smoking. I won’t be surprise if they see fire breathing dragons and orban on a winged horse slaying them …

Roderick Beck
Guest

The level of corruption is clearly higher than during the Socialist’s reign. The proof is is that no one goes to jail today and in the absence of such there is no deterrent.

Observer
Guest

@Roderick

Yours may be the understatement of the year on HS.
1. Before 2010 the corrupt deals were in tens of millions, the orban Mafia “works” in the billions range.
2. Corruption was often prosecuted, offenders were jailed. Now it is the norm -see the Transparency International report.
To my knowledge 95% of all gov projects are corrupt, kickbacks are estimated at 25% avr (To report), up to 45% (ELTE research). But in many cases almost the whole lot is “stolen”, e.g. Agrarian Chamber website for Ft 550 million, market price 1.5 million.

I know, the orban corruption is stagerring and difficult to fathom, but please watch the figures at least.

spectator
Guest
@Pinka Do you really mean that crime becomes “milder” if a “Hungarian” committing it? Whoa! So, how it is in case of Medgyessy, he is a criminal because he isn’t Hungarian? Are you really that much of a retarded Fidesz zealot, or you honestly believe that if Matolcsy joggling with the common property of all Hungarians is totally acceptable, but if a former politician takes on a venture is criminal by definition? Assuming, you living on the same planet and a contemporary to us, you may have heard of expression like “thieving” and “fraud”, haven’t you? In respect of the cases we’re talking about — and assuming the worst — Matolcsy took the money of the Hungarian tax player public and played with it, by throwing around to friends and family while spending on “projects” what only he and maybe his master find important at the time, compared with less than ten (10) percent of the sum Matolcsy spent, paid with a foreign company for a “formal” service, done by a person already out of office, supposed to be even worse? You certainly must get paid handsomely in order to declare yourself such immoral and unscrupulous low life — in… Read more »
Wiktorr
Guest
I guess that’s what people think. Voters of Fidesz explain themselves this way. People first take sides and then find a rationale to support the choice. It is not the other way round. Many people in small places will support Fidesz or Jobbik (just because they hate them “communists” and “liberals”) and must find an argument when faced with Fidesz’ corruption. Gabor Török the well-known political pundit several times explained that people think ALL politicians are corrupt so any successful politics must be played on a different domain. Fidesz can always pretty successfully counter corruption charges saying “but the communists also steal so why would they be any better”? See Medgyessy’s story. We also several times established that people cannot comprehend these numbers and the complex legal constructions behind the schemes. They can understand a 700 HUF internet tax or a 200 HUF co-payment but cannot really comprehend the embezzlement of 250bn forints. Yes, it’s a scandal about money, but people aren’t enraged as much as they could be because they don’t have the emotional means to relate to these numbers. And also because the opposition doesn’t act livid either so average people figure (if they know about the scandal… Read more »
Guest
London Calling! You just don’t understand! Of course the money is ours – even if it comes from the cyclical business of the central bank. Currency fluctuations, whilst taking mandatory deposits from the retail banks – plus serendipitous currency gains from other operations – if they are up – is MY profit to spend on real estate, foundations, Titians and violins. You just don’t understand do you? Even if profit on my foreign reserves weakens the nation’s currency – the ‘profit’ is STILL mine. And anyway exports are cheaper. It’s only if currency reserves weaken and other operations go negative that the MNB is YOURS. Any losses become a burden on the tax payer. NOW do you understand? This is my unorthodox financial theory and the Financial Times doesn’t get it either. I’m sending Andrew Byrne and Kester Eddy some beautiful brochures drawn up by vs.hu so they can attend my unorthodox economic foundation – Systemic Theory of Economic Academy Learning course (STEAL) – which offers private views of my Titian and fiddle as a bonus. (Fiddle! Get it?!!!) If Ader and Kövér scupper my plans we just change the law retrospectively – Orban will arrange it because he actually… Read more »
spectator
Guest

Right o!
Just what do you think, why the HUF exchange rate stuck to the frog’s bottom?
That’s the way to milk the system big time!
And this is quite a “big” time, indeed!

You may remember when- and how it started: when Kósa and Szijjártó made the first hit on the Hungarian currency?

Well, it working ever since.

Never mind those poor sods who indebted themselves in foreign currency, it’s their problem.
At the main time those who “in the know” in the inside filling their various accounts with the “results”.

That’s the way to do it, folks!

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