Orbán giveth and Orbán taketh away

In April 2015 I wrote a post about the Modern Cities Project that Viktor Orbán came up with, most likely because Fidesz had lost a number of by-elections and had thus fallen short of its comfortable supermajority in parliament. It was time to offer all sorts of material incentives to larger Hungarian cities known as “megyei jogú városok,” which simply means that they also take care of the business of the counties in which they are situated, although not all of them are county seats.

Orbán began a roadshow, visiting city after city. At each place he visited he offered fabulous amounts of money for road construction and all sorts of other projects, many of them having something to do with sports. The most ambitious part of the plan was the modernization of the infrastructure of the entire country, which included converting all of the highways connecting these cities to “motorways” or superhighways. At the time the cost of the package was estimated to be 1,000-1,200 billion forints.

According to the latest estimate, the promise tsunami of the prime minister was much greater than originally estimated. Thus far he has visited only 13 cities of the 23, and 1,200-1,500 billion forints has already been pledged.

Valasz.hu has done an excellent job of collecting all the available data about the Modern Cities Project. Its reporters came to the conclusion that only 80 billion forints has actually arrived at the 13 municipalities. Considering that the deadline for the original plan was 2018, it is unlikely that many gift packages will be delivered to these cities anytime soon.

The latest piece of good news was announced on July 22. The government made some important decisions regarding much needed improvements on M1 and M7. Both are very busy roads on which traffic jams are frequent. M1, which is a two-lane “motorway,” will be widened between Budapest and Győr to become a three-lane road. The same thing will happen on M7 between Budapest and Balatonvilágos.

But a week later, on a Friday afternoon, came the surprise: the projects on M1 and M7 are off. Moreover, road construction around Veszprém was scrapped, as was the construction of a four-lane highway between Budapest and Kecskemét. The last was totally unexpected since only a month ago Mercedes announced plans to expand its factory in Kecskemét. The government has also reneged on promises for new or widened roads around Sopron, Szolnok, Békéscsaba, Ózd, Győr, and Esztergom.

Still, a fair number of projects remain on the books. According to a list provided by portfolio.hu, they are mostly construction projects on roads that connect Hungary with neighboring countries. These projects fall within the European Union’s so-called “Integrált Kölekedésfejlesztési Operatív Program” (IKOP), designed to facilitate efficient international travel through a network of roads across Europe. They can therefore be financed by the European Union. Roads promised to certain cities, however, like the ones around Veszprém, Sopron, or Kecskemét, that serve only local needs must be financed by the Hungarian government. And it is becoming increasingly evident, despite the Orbán government’s boastful comments to the contrary, that the state coffers are not exactly overflowing.

Scrapping the project to widen M1 and M7 may also mean that Viktor Orbán is reconsidering his dream of hosting the Olympic Games in 2024. This road construction was among the infrastructural changes deemed necessary for the feasibility study to be submitted to the International Olympic Committee. Next year’s World Aquatics Championship in Budapest, which the government agreed to host after Mexico changed its mind, has turned out to be a very expensive undertaking. The original cost estimate has already doubled, and we are nowhere near the end of all the necessary construction projects. Perhaps the growing price tag of the Aquatics Championship has tempered Orbán’s enthusiasm for the Olympics.

The media, which as far as I remember didn’t spend much time questioning the feasibility of the promises Viktor Orbán made during his road show, which lasted almost a year and a half, has now discovered that “Orbán’s promises about the future of modern cities were no more than a fairy tale.” A blog writer called the program “a gigantic hoax” because to the very last minute the waves of promises continued unabated when the government already knew that no money was available for the projects.

Indeed, Magyar Idők reported at the beginning of June that “the implementation of the Modern Cities Program” would begin soon and that it would be “the largest investment program of the century.” According to the mayor of Kaposvár, 452 billion forints has been put aside in the 2017 budget for the program. These investments will mean such robust economic development in the regions, counties, and cities that “in Hungary everybody will be able to work who wants to.”

fairy tale

What kind of governance is going on in Hungary where two major road construction projects are announced one day and a week later the decision is reversed? What could have happened during this week? The most obvious explanation is that it was discovered that there is simply not enough money for all the projects promised. But did the government really not know that on July 22? Perhaps one day we will have the answer. At the moment there is only bafflement.

August 6, 2016
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August 6, 2016 8:48 pm

The international reserves of the Hungarian National Bank, MNB were down to 24.556 on July 31, 2016 vs 34.615 billion euros on July 31, 2015.

The last time the reserves were so low was February 28, 2009.

The gross debt of the central government was 18.86021 trillion forints on that day. The same number stood at 25.29052 trillion [June 30, 2016] + 2.8423 [ private retirement accounts confiscated in 2011, valued on March 31, 2016].

Therefore the national debt has risen by 49.1% while we got back to the same level of reserves.

This happened in a extraordinarily low interest rate environment with 30.5 billion euros of NET European grant since January 1, 2009.

August 6, 2016 9:11 pm

In my note above, I relied on minister Lazar’s December 2015 propaganda number of 7+ billion gross inflow from the EU funds.

But the 2015 data are just out. So let me share with you the whole series:

gross and net EU contributions to Hungary, in millions of euros:

2000: 155.7- 0 = 155.7
2001: 195.2- 0 = 195.2
2002: 139.8- 0 = 139.8
2003: 189.7- 0 = 189.7,

2004: 713.4- 537.1 = 176.3, operating balance: 193.4
2005: 1357.0- 833.2 = 523.8, operating balance: 590.1
2006: 1842.2- 782.5 = 1059.7, operating balance: 1115.0
2007: 2427.6- 870.2 = 1557.4, operating balance: 1605.9
2008: 2002.6- 947.1 = 1055.5, operating balance: 1111.7

2009: 3568.6- 908.9 = 2659.7, operating balance: 2719.4
2010: 3650.0- 955.0 = 2695.0, operating balance: 2748.4
2011: 5330.9- 937.4 = 4393.5, operating balance: 4418.3
2012: 4177.1- 928.4 = 3248.7, operating balance: 3280.4
2013: 5909.8-1011.1 = 4898.7, operating balance: 4954.5
2014: 6620.2- 995.8 = 5624.4, operating balance: 5681.6
2015: 5629.1-1073.6 = 4555.5, operating balance: 4636.5

So the net EU contribution was 28.0755 billion euros in the last 7 years.

August 6, 2016 9:34 pm

Operating budgetary balance was 4.38% of the Hungarian GNI in 2015.

This was the second highest percentage in the EU.

2015 [2014]

Bulgaria: 5.33% [4.45%]

Hungary: 4.38% [5.64%]
Slovakia 4.07% [1.37%]

Czechia: 3.77% [2.08%]
Romania: 3.27%[3.09%]
Lithuania: 3.12% [4.38%]

Greece: 2.80% [2.89%]
Poland: 2.31% [3.47%]


UK: – 0.46% [-0.23%]
France: -0.25% [-0.33%]


Germany: -0.46% [-0.52%]
Sweden: -0.48% [-0.52%]
Netherlands: -0.71% [-0.54%]

August 6, 2016 9:35 pm

Netherlands: -0.54% [-0.71%]

August 6, 2016 10:26 pm

Net operating balance of Hungary from EU budget as % of GNI.

2004: 0.24%
2005: 0.69%
2006: 1.29%
2007: 1.70%

2008: 1.11%
2009: 3.05%

2010: 2.95%
2011: 4.62%

2012: 3.47%
2013: 5.08%
2014: 5.64%

2015: 4.38%

August 7, 2016 2:09 am

Bloody hell, in a nut shell. Tnx.
I still have to stomach the reserves figure. How could this happen? Wherehas the money gone?
And election year is still ahead.

August 7, 2016 7:46 am

Re: ‘Where has the money gone?’

Looks that it goes to Magyar illiberalism with Putin et al getting alot of political gravy. He won’t mind lapping it up and certainly he doesn’t spend a ruble. He’d love nothing better than to see Europe be in the charitable mood of ‘giving’. Europe perhaps could wise up a little bit. Living in penury could happen in a flash wth the way the ‘V & V’ bank operates: Vee Own You.

August 7, 2016 2:14 am

Eva asks “What kind of governance is going on in Hungary? ”
The gypsy horse trader kind, with that level of knowledge, transparency and integrity.

August 7, 2016 5:05 am
I’ve often taken some of these motorways, sometimes they were crowded, sometimes they were, well not empty, but comfortable. Of course around Budapest there are some times when you don’t really want to be on the M1/M7 – our young ones always try to go back early on Sunday, but of course they like the lunch that my wife prepares and then there is packing … So usually they end up in the rush hour with an hour or so extra time – and in the evening it would be even worse … And when there’s an accident let’s say on the stretch between Székesfehérvár and Budapest – I’ve seen more than30 km of stop and go on three lanes in the other direction coming back from one of our rare visits to Bp. On the other hand it seems almost impossible to widen these roads – especially under traffic! It would be very, very expensive! I still remember with horror the times when the M0 ring around Budapest was widened from four to six lanes. Of course an “easier solution” would be to complete the M0 west and north of Budapest, turn it into a real ring – that… Read more »
August 7, 2016 5:25 am

“Its reporters came to the conclusion that only 80 million forints has actually arrived at the 13 municipalities.”
Instead million should be billion.

Still obvious how laughable those beguiles are.

August 7, 2016 3:20 pm

Only one person to fix Hungary–Roderigo Duterte