Hungary’s sudden interest in the eurozone

Mihály Varga, minister of economics, just dropped a surprise package. In a lengthy interview, he talked about Hungary’s plans to join the Eurozone by the end of the decade.

It’s difficult to reconcile the government’s conflicting messages. Earlier, János Lázár, the #2 man in the Orbán government, said that he would vote against membership in the European Union if the decision had to be made today. A week later he drew a parallel between the Soviet Union and the European Union, stressing Hungary’s fervent desire to remain independent. Moreover, the Hungarian government has just begun a venomous campaign against the European Union’s refugee policies ahead of a referendum which, according to the democratic opposition parties, is the first step in realizing the Orbán government’s resolve to leave the EU. Tamás Bauer, a keen observer of Hungarian politics, goes even further. “Orbán wants more than Boris Johnson and Nigel Farage did. He doesn’t want to take his country out of the Union. He wants to destroy the Union itself.” And now comes this interview with Varga, who talked in specific terms about the Hungarian government’s intent to join the Eurozone in the near future.

The media hailed this interview as indicative of a complete turnabout in the Orbán government’s policies toward the European Union. Actually, a year and a half ago there was a similarly unexpected announcement by Antal Rogán, who proclaimed that sometime between 2018 and 2020 Hungary will be in a position to introduce the euro as the country’s currency. His statement contradicted Viktor Orbán’s position, who in prior years had said that he was in no hurry to join the Eurozone because being “outside of it means great independence” which is, as we know, a primary consideration for the prime minister.

The last time Orbán talked about his government’s position on joining the Eurozone was in February of this year, in a speech delivered to Hungarian ambassadors. He refrained from committing himself one way or the other. At this junction, he said, he believed that more and more member states are interested in creating “a core Europe” which, he quickly added, is not the same thing as a “two-tiered Europe.” The members of the Eurozone will constitute the core. Once a country decides on a currency union, it has to give up a great deal of its national sovereignty. In the next few years Hungarians will have to have think very hard whether “we want to belong to a group of countries with a European entity or we will follow an independent national and economic policy.” There are people who support the creation of a United States of Europe, while others think that “one should not make snap decisions.” In any case, “we have to think hard about the question.” This certainly didn’t sound like an endorsement of Eurozone membership, but Orbán left the question open. It could be debated later, in case there is a change in the political constellation on the Continent.

At this point at least, Orbán believed that Hungary would get along just fine economically and wouldn’t suffer any negative consequences from being outside of the “core.” But then came today’s interview with Mihály Varga, who said that he is “very much hoping that we will have the euro, and happily it is up to us when that will be.” He predicted that by the end of the decade the Hungarian currency will be the euro. He explained that Hungary has fulfilled all the requirements for membership with one exception: it is not a member of ERM-II. For Eurozone membership a country must belong to the Exchange Rate Mechanism to ensure that exchange rate fluctuations between the euro and other EU currencies do not disrupt economic stability within the single market. ERM-II allows a ±15% fluctuation band, which is achieved by interventions coordinated by the European Central Bank and the central bank of the non-euro member state. As Varga pointed out, Hungary is in good shape in this respect. In the last two years the forint has remained well inside the band. The maximum fluctuations in the exchange rate between the euro and the forint have been +2.6% and -5.8%. According to Varga, Hungary didn’t join ERM-II because with such a move the country would have lost its competitive advantage.

eurozone

Hungary is not rushing to join ERM-II. Varga indicated that the Czech Republic, Poland, and Hungary constantly coordinate their moves and will decide when such a step is advantageous to them. It all depends on how stable the euro is in the next few months or year and how competitive the Hungarian economy is.

The two largest democratic opposition parties, MSZP and DK, reacted skeptically to the Varga interview. MSZP called it “a cheap performance” while DK somewhat sarcastically remarked that Varga “must have suddenly seen the light.” DK’s spokesman added that if Orbán shares Varga’s views, he should immediately call off the hate campaign against the European Union and the referendum on quotas, which would initiate Hungary’s exit from the Union.

I don’t think Varga’s statement means that the Orbán government has made a serious commitment to work toward joining the Eurozone. We have heard such pronouncements before from other members of the current government. But Péter Szijjártó’s offer today to take over the presidency of the European Union from the United Kingdom in the second half of 2017 indicates to me a more conciliatory attitude toward Brussels. In case Great Britain is unable to fulfill its obligation, the Hungarian foreign minister said, Hungary would be happy to assume its duties. He added that Hungary’s presidency between January 31 and July 30, 2011 was by all accounts considered to be a success. Hungarian diplomats proved themselves up to the task. Of course, Szijjártó didn’t add that those diplomats no longer work for the Ministry of Foreign Affairs. He and Tibor Navrancsics purged them.

These friendly overtures by two ministers of the Orbán government cannot be a coincidence. Something must have happened in the last few weeks or even days that prompted Viktor Orbán to try to curry favor with Brussels. But I agree with the spokesman of DK that it is impossible to make overtures to the European Union and at the same time conduct a vicious anti-EU campaign. I really wonder what is in Viktor Orbán’s mind. Perhaps the whole thing is nothing more than the usual “peacock dance” to which we have become accustomed by now. But the question still remains: why, and why now?

July 19, 2016
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Observer
Guest

It’s bloody difficult to lie if one doesn’t know the truth.
I bet that this is just a maneuver with some ulterior motive, as Orban’s usually are.
With so many turns and twists, ad hoc decisions and interventions heaps of lies and mounting corruption joining the Euro zone would be very difficult.
Any control over the Hungarian finances by the EU would be welcome.

Member
Hungary’s Heinous Humpty If it is true that the majority of the population is still pro-EU, then it is a better way to get a bigger turnout for Orban’s anti-quota referendum to make some reassuring steps that look pro-EU, such as making noises about plans to adopt the Euro. Then, after the referendum succeeds, the peacock two-step goes back in the opposite direction, drops the euro-talk, and touts the referendum result as a mandate for further balking and blackmailing of the EU. I would say that for anyone who has been watching Orban’s peacockery for a while, that is all obvious and predictable. This kind of shallow duplicity does not take intelligence to practice, hence it does not take much to detect. The Hungarian populace cannot even be described as having been taken in by it, since most have long since taken to simply taking whatever Orban says is the case to be the case, even if it is the opposite on mondays, wednesdays and fridays. We see this in the parallels with the followers of Trump, who can lie left and right, yet his word is always taken at face value. It’s all as sure as that any crime… Read more »
Member

But let’s not forget the rest of the story…
comment image

Guest

Very good on ‘meanings’. And to paraphrase an old Indian observation……Fidesz speaks with forked tongue. It appears current Magyar political communications are like the Rosetta Stone. You have to have many ‘dictionaries’ when interpreting Orbanic etymologies.

petofi
Guest

Hungaricoes!?

…Making ‘moves’as if the world waited with baited breath for the brilliant Hungarico Peacock to make his next, genius-like steps–

petofi
Guest

The delusions of Viktor spreading over the Hungarian Basin like butter over rye toast-

Guest

Yes! And we can see the ‘vaj’ bringing the baj..;-)…

Observer
Guest

This Euro cheap trick won’t bring new investors to Orbanistan and won’t change the view of the foreign governments about Orban, Petöfi is basically right.
This BS can be useful only locally, dished to those who would readily take any such stuff anyway. Internationally it just reinforces the notions of unpredictability, lack of transparency and due process.

petofi
Guest

Pablum for morons: Viktor is just trying to soothe worried feathers
of the Turul crowd that the vote in the referendum isn’t really a first step of Hung-exit…

Guest

What about this:

The Hungarian government’s intent to destroy the EU by joining the Eurozone in the near future.
As we say in German :

Two annoying mosquitos with one hit!

But it’s probably much simpler – you shouldn’t forget Fidesz’ motto re the EU:

We’re only in it for the money!

PS:

In every “newspaper” we get in our post box (like those weekly advertising circulars) there is a big one page ad containing only those (in)famous wordsfor the stupid Hingarians directed at Brussels …
Do people still believe that?

tappanch
Guest

Dear Istvan,

I just read that the friendly Islamist government of Turkey has been keeping the American soldiers, pilots and atomic bombs hostage inside the Incirlik airbase since July 15.

What do your sources say?

tappanch
Guest

New wikileaks from Erdogan’s party:

https://wikileaks.org/akp-emails/

Guest

I don’t know but it just looks like Turkey and the US will be ‘friendly enemies’. If you can even call it that. Things are eroding quickly.

Guest
London Calling! This is a ploy just to hear “what it sounds like” – and to convince, falsely and momentarily, everyone that they are not in it just for the dosh. And to help stave off sanctions for their dreadful and inhumane actions over the refugees – not to mention all the probes into the Choo Choo train, Orban’s son-in-law-led-lighting and various ongoing corruption probes where Hungary has been found out – and for any future corruption discoveries. And of course there is no way M8tolcsy could ever come under the ECB euro discipline. Come off it – the impossible might be achievable but miracles? Never. However fairy tales à la M8tolcsy are always possible – which is what this ‘euro-scare’ is – Hungary just deceiving themselves and their population. Of course the EU and the Euro need M8tolcsy and Orban because the world is envious and copies Hungary’s success everywhere. We are all buying into the wonderful power of Hungary’s economy which is the engine driving Europe and creating all those jobs – 1,000,000 in eight years! And all the happiness that the population are experiencing with their wonderful President Viktorlae Orbanescu in his fairytale castle – as Hungarians… Read more »
petofi
Guest

(Good stuff, Charlie.)

petofi
Guest

The question that Hungarians–both foreign and domestic–will have to face eventually is this: if one was out to ruin the country, would he have done anything different than what Orban has done in the last six years?

Observer
Guest

Good question.
I know a couple of moves that could have pushed Hungary down the drain faster, but in that case the Orban mafia couldn’t have stolen so much.
So the current policies are not the fastest way to ruin the country, but an optimum, a compromise between starving the cow and milking it.
The cheers from the cow are a hilarious, if absurd bonus.

petofi
Guest

An apt characterization.

Richard Ray
Guest

It is indeed an interesting conflict of culture. Hungary prides itself on being the “sharp tip of the spear”; intense on victory almost to a fault, never one to stay in the background. Yet the only contest is the Euro-game, which is not the style of game to their liking–too much cooperation is required, too many players, no clear-cut victor/loser. Alas, if only there could be some heroic charge of cavalry, or clever storming of a castle.
Perhaps Hungarians should shift the allegory to economic battle where they can still achieve heroic victory. I believe they have the talent and the tools necessary. Whether they have the necessary leadership is yet to be seen.