Tag Archives: Belt and Road

Snippets from Viktor Orbán’s recent speeches–turning eastward and inward

Viktor Orbán’s stamina is remarkable. He left for China on May 11, where he had a busy schedule of meetings, and returned to Budapest on May 17. Yet the next day he gave a very long speech at the annual meeting of Daimler AG, held in Budapest. On Friday, May 19, he gave a 30-minute interview to Kossuth Rádió in the morning, and by the afternoon he was in Zalaegerszeg, an almost three-hour trip by car, where again he spoke. The following day he attended the congress of the Slovenian Democratic Party in Maribor, another one and a half hours by car from Zalaegerszeg.

I have carefully read all of Orbán’s spoken words since his return from China. Did I learn anything new from them? Yes and no. On the one hand, Orbán, like everybody else, has certain topics, ideas, and notions about the world that keep recurring in all his speeches. Those passages are of no interest to anyone who’s familiar with the main thrust of Orbán’s thinking about the world. On the other hand, here and there new ideas appear, which allow us to look at the Hungarian prime minister in a slightly different light.

My general sense is that the Chinese trip and the Chinese leadership’s vision of the “Belt and Road Initiative” made a great impression on Orbán and that he feels privileged to have an agreement with the Chinese to construct a railroad between Budapest and Belgrade as part of that modern version of the Silk Road, connecting the East and the West. As he put it in his interview on Kossuth Rádió, the Chinese invited only those countries that “will have a role to play in the growth of the world economy in the next two or three decades,” which is an excellent piece of news for Hungary.

Orbán is impressed with the Chinese in general. In his eyes, “the Chinese are serene people with a philosophical bent and a goal of achieving harmony.” In contrast, it is “the pursuit of freedom which is at the core of Western political thought.” One would think that giving freedom center stage would be positive, but for Orbán freedom “leads to conflicts.” Westerners are “constantly alarmed about dangers to freedom.” The Chinese, on the other hand, “are concerned with problem solving, trying to find a balanced result, which they call harmony,” and therefore “it is good to negotiate with them.” For example, the Chinese would never say what the leader of the European People’s Party said: “The ball is in your court, if you react the proper way you are a team player, if not there will be consequences.” In Orbán’s opinion, EPP’s reaction “shows how deformed European politics is.” Of course, many other topics were covered in this interview, but these words struck me as intriguing and perhaps even significant.

Orbán’s lengthy speech at the general meeting of Daimler AG also had a few noteworthy parts. One was a strange sentence at the very beginning of his speech. It reads: “When you chose Budapest [to hold the meeting], you made the right decision. It is a fashionable place in addition to being a place of a certain excitement. When one opens foreign newspapers and reads about Hungary, one is not sure whether they are talking about a black sheep or about an outstanding economic success. That creates a kind of intellectual excitement around Hungary. So, we are happy that you came here to see with your own eyes what’s happening in Hungary.” These sentences lead me to believe that the European Parliament’s resolution is a genuine embarrassment for Orbán. The arrangements for this meeting had to have been made months before, when no one could have foreseen the Orbán government’s being reprimanded by the majority of the European Parliament.

It always amuses me when Viktor Orbán, who knows mighty little about economics, shares his high-flown ideas about the future of the world economy. Again, he couldn’t refrain from offering his golden thoughts. The starting point of his assessment of the economic situation in the European Union began with China. “I just came back from China. If one sees the future and looks at Europe from that vantage point, it is especially urgent to reform Europe so it can regain its competitiveness.” That’s a strong beginning, but it is not entirely new in Orbán’s repertoire of stock thoughts.

It’s possible that I missed it before, but this was the first time I heard him “reinterpreting” the causes of the 2008-2009 world financial crisis in economic terms. He said that

It must be accepted in Europe that the 2008-2009 financial crisis was not cyclical but structural. Some European leaders believe that economic crises are part and parcel of a modern market economy. There had been trouble in the European Union before, economic indicators dropped, the economy corrected itself, and the indicators improved. No structural changes were necessary because the system could repair itself. This was true in the last 40 years, but it is no longer so. What we suffer from now is not a cyclical crisis. The simple truth is that other emerging economies are more competitive than we are, and therefore this is a structural crisis of competitiveness. So, our response should be formulated accordingly. I’m convinced that because this paradigm shift is now taking place in the world economy, we should give a European response to it instead of thinking in terms of a cyclical crisis.

I have no idea what kind of structural corrections Orbán is thinking of or what paradigm shift he has in mind. Traditionally a paradigm shift means a fundamental change in basic concepts, which leads me to believe that Orbán is simply mouthing his “right-hand” György Matolcsy’s unorthodox economic ideas, which most responsible Hungarian and foreign economists reject. The Chinese economy, as is the case with all emerging economies, can produce an incredible rate of growth initially, just as East-Central Europe is at the moment ahead of the West as far as economic growth is concerned, but as time goes by these countries’ growth will inevitably slow. It is a mistake to claim that China’s impressive economic growth is due solely to the different structure of its economy and that if the developed West simply adopted its largely state structure, the EU or the United States would produce a 6-8% yearly economic growth.

I found two more short passages worth noting. The first is from the speech delivered in Zalaegerszeg at the opening of a large complex for testing self-driving cars. This is the only recent major construction project that was financed exclusively by the Hungarian government. Orbán said: “This test ground is living proof that we are not on [economic] crutches; we have our own resources; we have our talents; and we are capable of achieving world-class performance. I would like to remind everyone that under the leadership of [Finance Minister] Mr. Mihály Varga during our first government between 1998 and 2002, when we were not yet a member of the European Union, we achieved an economic growth rate of over 4% due to our sound economic policies. In fact, there was one quarter when it was over 5%.” These words were interpreted by the independent media and commentators who are critical of the government as a reformulation of Orbán’s earlier quip: “There is life outside the European Union.” A bad sign, they said. Perhaps he is thinking of eventually leaving the EU.

The proud crew behind the Zalaegerszeg test ground

And finally, in Maribor at the Slovenian Democratic Party’s conference, Orbán said: “As you have heard from your chairman, there is a lot of talk about European values nowadays. They talk about them as if they were guarded in a safe somewhere in Brussels whose key is in the breast-pockets of a very few privileged people. The truth is, however, that there are indeed safes in which European values are stored. These safes, however, are not in Brussels but in the hearts of European citizens, Slovenians, Hungarians, Poles, Germans, French, Slovaks, because European values are not carved into lifeless stones but are written in living hearts.” These words cannot be interpreted in any other way but as a rejection of the fundamental values of the European Union: “Respect for human dignity and human rights, freedom, democracy, equality and the rule of law. These values unite all the member states—no country that does not recognize these values can belong to the Union.” This is the first paragraph of the description of EU “values and objectives” published by the European Parliament. If these values can be reinterpreted on a national or individual level, we no longer have a union.

Taken together, these last two quotations may be an indication of Viktor Orbán’s thinking about the future. In the short run, it means that the tug-of-war between the European Union and Hungary will continued unabated.

May 22, 2017

The European Union and Chinese plans for the reorganization of the global economy

Over the years I have somewhat neglected Chinese-Hungarian relations, although Viktor Orbán made clear his intense interest in China very early in his tenure. In the fall of 2010 he sent his then minister of national development Tamás Fellegi to China. After five days of negotiations Fellegi returned with little to show for his efforts to expand trade relations between the two countries. On the diplomatic front the situation hasn’t been much better. Although Xi Jinping visited Poland, the Czech Republic, and Serbia last year, he hasn’t yet paid a visit to Hungary.

Finally, after years of lobbying, the Orbán government signed a comprehensive strategic partnership with China two days ago. As Magyar Nemzet discovered, however, the agreement includes the following important sentence: “The two countries jointly promote the construction of the Hungarian-Serbian railroad in Hungary.” According to diplomats consulted by Magyar Nemzet, this means that China expects the Budapest-Belgrade railroad line to be built in exchange for a strategic partnership, something that at this point cannot be taken for granted.

In order to understand what this insertion means, we have to go back to December 2014 when Hungary, Serbia, Macedonia, and China signed an agreement on the modernization of the Budapest-Belgrade-Skopje-Athens railroad, “which will allow the fastest transportation of Chinese goods from Greek harbors to Europe.” Under the agreement, a Chinese consortium, led by the China Railway Group, was awarded a $1.57 billion contract to build the 160 km Hungarian section. The European Union has many concerns about the project. Once again, the project’s profitability is in question. The cost to Hungary would be 550 billion forints, but currently only 4,000 people travel on that line daily. If China uses the tracks to transport its goods, I assume it would compensate Hungary. Whether the compensation would be sufficient to make the line profitable I have no idea. Negotiations with the European Union about the fate of the railroad are still underway. A year ago the whole project was put on hold when infringement procedures were launched against Hungary. It is hard to predict what the EU’s final decision will be. The Chinese government has shown signs of impatience with the difficulties the Hungarian government is encountering with the European Union.

The Orbán government’s enthusiasm for this project is baffling. As far as I can see, the deal is good only for China. According to the agreement, Hungary must take out a large Chinese loan at an interest rate of 2.5% for 20 years, bringing the interest charges alone to close to 100 billion forints on the 550 billion forint cost of building a railroad line Hungary doesn’t need. Most of the work would be done by Chinese firms for a project that serves only Chinese economic interests.

Viktor Orbán among friends

Whether Hungary will again manage to convince the commissioners of the College, as it did in the case of the Paks nuclear power plant, is hard to tell. Over the last few months contradictory bits of information have reached the Hungarian media regarding the possible outcome of the case. In September Magyar Nemzet claimed that the European Commission, thanks to the good offices of Berlin, would give a green light to the project if Orbán toned down his anti-refugee rhetoric. As we know, nothing of the sort happened. In fact, the anti-Brussels, anti-migrant rant has intensified since, and Orbán’s support in the European People’s Party has been dwindling. Yet Magyar Nemzet announced just today that it got hold of a report on the communication between the European Commission and the Hungarian government, which claims that the dialogue between them is coming to a favorable end. The report also states that by the end of January the Commission was no longer having serious reservations about the project. Of course, anything is possible when it comes to the “bureaucrats in Brussels,” but I’m a bit dubious on this score given the latest developments at the Beijing Summit on China’s ambitious “Belt and Road,” a gigantic infrastructure project that would connect Asia, Europe, and Africa. There are potential roadblocks to this project. India didn’t even attend the summit, and “the EU dealt a blow to Chinese president Xi Jinping’s bid to lead a global infrastructure revolution after its members refused to endorse part of the multibillion-dollar plan because it did not include commitments to social and environmental sustainability and transparency.”

I’m sure that European leaders are serious about both the environment and transparency, but I suspect that these were not the only reasons for their refusal to partner with the Chinese leaders. Economic considerations most likely weigh heavily against the project. As The Guardian put it, “some sceptics see the plan as largely a ruse to boost China’s own economy by shifting excess industrial capacity to less developed nations and draw poorer countries tighter into Beijing’s economic grip.” Or, to quote an Indian newspaper, there is a fear that the project is no more than “a colonial enterprise.”

So, let’s return to Hungary’s attitude to the “Belt and Road” project. We know that Viktor Orbán has courted China for years to achieve a strategic agreement with China. Therefore, I was surprised to read in The Guardian’s report that “the EU’s 28 member states decided not to support a statement about trade prepared by Beijing to mark the end of the summit.” According to a high-level EU diplomat, “apparently to Chinese surprise, the EU was united on this.” AFP’s account, however, tells a different story. It reports that “several European countries—France, Germany, Estonia, Greece, Portugal, and Britain—indicated they would not sign one of the summit documents on trade.” If AFP is correct, the EU countries were not united in their opposition to Chinese plans as they were formulated in the closing document. Because of the discrepancies between the two sources, I’m unable to determine which countries, in addition to Hungary, signed the document.

The Carnegie Europe Research Center published a study titled “China’s Belt and Road: Destination Europe.” It is a sophisticated assessment of the economic and political impact of the Belt and Road project which is not easy to summarize in a couple of sentences, but I’ll try anyway. If the initiative were seen by Europeans “through the misguided lens of pure transportation and communications infrastructure, it would be appropriate for the EU to embrace it with few or no reservations.” But, the study continues, “the initiative attempts to change the rules organizing the global economy, primarily by granting China a set of tools with which it can reorder global value chains.” Such an outcome might have an adverse effect on the whole western economy. Belt and Road is often called the New Silk Road, “a name which in many respects is misleading, but it does have the advantage of reminding China watchers that the Belt and Road is above all a challenge to Europe—a challenge to which Europeans have yet to respond.”

The European Union, it seems, hadn’t given much thought until now to this particular Chinese attempt to reorganize the world economy. Viktor Orbán in this respect is ahead of his colleagues. The only trouble is that he is most likely again on the wrong side of the issue.

May 15, 2017