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.
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?