Tag Archives: corruption

The past seven years: Hungary in numbers, 2010-2016

Máté Veres, research associate of Gazdaságkutató Zrt., published this study in Új Egyenlőség at the beginning of the year. The article was translated by “Observer,” who added the following notes:

This article offers a set of indicators to reveal the state of the Hungarian economy and society. We think, however, that the situation is somewhat worse than Veres’s assessment because there are additional detrimental factors not discussed here, e.g.:

  • The very low investment rate as a percentage of GDP
  • The budget deficit hidden in subsystems down to individual units like hospitals or schools districts
  • The consumption boost by the remitted earnings from abroad, which are to decline in time
  • The poor ratings of the Hungarian places of higher education, the outdated, retrograde education model and policies, the very low number of people with IT or foreign language knowledge, etc.  

Analyses of these points will eventually be presented in another article. I’m grateful for the work and care “Observer” took in translating this important article for us.

♦ ♦ ♦

Analyzing the results of the second Orbán government [and third as from 2014] after seven years of freedom fight and other kinds of struggle and hundreds of millions of euros from the EU spent, it’s time to draw a picture of how the Hungarian economy and society are doing compared to 2010 in the light of the latest figures available.

After [the election victory in] 2010 the government benches have been widely using the already well known “past eight years” phrase. It was used by Fidesz and the Christian Democratic politicians as their favored counter-argument when the opposition tried to challenge government actions. The performance of the governments between 2002 and 2010 in many areas could have been criticized (as we did in our analyses), but in general the “last eight years” argument has always been a simplistic communication tool, often used to bypass substantive discussions. In our evaluation of the Fidesz government performance we now follow a different path and instead of summary political statements we shall stay with the facts and figures to show what the “past seven years” were like.

Seven years are already a sufficient horizon for an evaluation of the government’s achievements. For this purpose, however, in addition to showing the changes in numbers, we need to find explanations for the results, and therefore – where possible – to compare the results with those of our regional competitors as well. So now we’ll consider some areas of key importance to the future of the country.

UNEMPLOYMENT

It was 10.3% in 2010 and only 5% in 2016, according to the KHS (Central Statistics Office-CSO), or 6.8%, according to Eurostat.

Apparently the situation has improved, but it is worth adding that the [2008 world financial] crisis played a major role in the exceptionally weak 2010 numbers, while the much better 2016 numbers include both those working abroad and those fostered workers vegetating on subsistence wages (USD 180/month).

The same factors underlay the Eurostat numbers showing a miraculous growth of employment in Hungary (59.9% in 2010 and 68.9% in 2015). According to official figures we caught up with the EU average, but without those working abroad and the fostered workers we just caught up with the eastern [EU] member states. In any case, there is an improvement, primarily due to the EU-funded, labor-intensive construction projects.

HUMAN DEVELOPMENT

2010 – 36th place, in 2016 – 44th

Human development is an indicator introduced by the UNO, a concept of human well-being wider than the GDP indicator. It is generated by averaging three numerical indicators: life expectancy, education and standard of living (GDP Purchasing Power Parity per capita). In this area we not only managed to fall significantly behind, but all our V4 [Poland, Czech Republic, Slovakia and Hungary] regional competitors overtook us, while Poland was still behind us in 2010.

HOUSEHOLD DEBT

EUR 7,844 mil in 2010, 5,683 mil in 2016

A clear success can be booked in this area. The composition of the debt is just as important as its size, as the crisis taught a large part of the Hungarian middle class. Until 2010 the household debt of the Hungarian population grew at a rate remarkable even by regional standards, and in foreign currency, which was mainly due to the bad interest rate policy of the Hungarian Central Bank (HCB) and to the lack of regulation. The central bank’s interest rate policy between 2001 and 2007 encouraged the population to borrow in foreign currency.

PUBLIC DEBT

In 2010 the PD was HUF 20,420 billion or 78.8% of GDP. Seven years later, in 2016 it was 25,393 billion or 75.5% of GDP.

This figure has fluctuated during the second Orbán government. It had been over 80% GDP too, but at the end of the year ‘with hundreds of tricks’ – the best known being the seizure of the pension finds – they always managed a decrease from the previous year [the government publishes and uses only a single figure – that of Dec. 30th). There is a lot of uncertainty as to whether the government can sustain the downward trend, given the scale of the debt, but if it manages to keep the balance of payments at zero, the government can eventually claim a clear victory on this front.

TAXES ON LABOR

In 2010 the total was 54.1%; in 2016, 49.0% There is a sizable literature on the issue. The differentiated and on average higher taxes on labor and/or profit are not at all problematic, if they are used by the state to provide high-quality, accessible to all, health, education and other services. This is evidenced year after year by the results of the economic systems of Sweden, Norway, Denmark and Finland, known as the “Nordic model”, since the above-mentioned countries have figured at the top of the lists in competitiveness, innovation and the environment for decades. However, in Hungary things are developing in a direction exactly opposite to the Nordic Model. This question is also interesting because the Fidesz government proclaimed itself to be the government of tax cuts.

Social security expenses in the European Union, 2014

It is clear that if we look at the overall situation, the taxes on labor have decreased. Although it’s worth adding that in international comparison while in 2010 we had the second largest burden rate in the OECD, by now we managed to move up only by two places, occupying fourth place from the bottom. This small success is mainly due to the introduction of a flat personal income tax and its rate reduction to 16%.

However, it’s worth mentioning that the replacement of the progressive tax system used until then by a flat tax rate opened a HUF 444 billion hole in the yearly budget and benefited only the richest. In addition, never has labor in Hungary been burdened by such a wide variety of taxes as today. Actually the situation here is the worst in the region. Meanwhile the government promised a massive tax burden reduction in the medium term and a single-digit company tax. There has been a long-standing debate about the need for a significant reduction of the tax burden with regard to the competitiveness of the economy.

In any case, despite the 2010 promise, we surely didn’t get any closer to the “beer mat-sized tax return” [as V. Orbán half-jokingly promised in opposition]. However, with the new flat and extremely low 9% company tax rate, another 2010 slogan – “we shall fight the offshore knights” – now seems to have morphed into “join the offshore knights’ race.” Similar to the effect of the flat-rate personal income tax, now once again the richest (and the big companies) will do really well as not the Hungarians, but the multinationals, such as General Electric (GE), already did under a special agreement with the government.

GDP GROWTH

Between 2004 and 2010 the growth amounted to 9.9% or in absolute terms USD 114.2 billion to 129.4 billion (a 15.2 billion difference). Between 2010 and 2015, in the same length of time, the Orbán government boosted the GDP from USD 129.4 billion to 138.8 billion (a 9.4 billion difference). The right side of politics clearly underperformed. These numbers, however, may be deceptive because much depends on external factors. But if you just look at our competitors in the region, save for the Czechs and Bulgarians almost all Eastern European member states, even Romania, performed better.

PUBLIC TRANSPORT

The [public transport] ticket price in Budapest in 2010 was 320 Ft., in 2016 – 350. The ticket prices in the region were as follows in 2016. Sofia – 158 Ft., Bucharest – 90 Ft., Warsaw – 240 Ft., Prague – 275 Ft. So the situation remains unchanged, we are the most expensive.

FREEWAY CONSTRUCTION COST

During the Gyurcsány government overpricing [in public projects] gained notoriety, but there are still no authoritative studies regarding its extent. Interestingly, according to Zsuzsanna Németh, Minister of Development 2010-2014, the Hungarian freeway construction cost per kilometer had decreased steadily during the Gyurcsány government, and in 2010 was 1.8 billion Ft. on average. Compared to this, according to the same Ministry led by Zsuzsanna Németh, the freeway construction unit cost had increased to 2.3 billion per kilometers in 2013. But there were also sections where the costs reached almost 4 billion forints.

BIG MAC INDEX

[Or how many minutes you have to work for a Big Mac]

Crisis or not, the change here is clearly positive: in 2009 – 59 min., in 2015 only 44 min. That said, we still haven’t overtaken anyone in the region, we are on par with Bucharest. It is also important to point out that the Big Mac index focuses on cities, and while Budapest is clearly catching up, the country is dropping behind compared to the other EU Member States. And this worsening trend continued during the past seven years just as before.

BUDAPEST (CENTRAL HUNGARY) GDP PPP / CAPITA compared to EU average

In 2010 144%, in 2014 143% where 100% means the EU average

Only Budapest is above the EU average, the second best county – Győr-Moson-Sopron stands at only 77%. In the light of the foregoing it is worthwhile showing also how the best performing Hungarian regions – where the situation in this area has worsened since 2010 – compare to our V4 competitors. In 2014 in the same category Prague was stood at 173%, Bratislava 187%, Warsaw 197%. Notably in the case of Budapest, Pest County is also part of the region.

GDP per capita by purchasing power parity, 2015

IMPORTED FOODS SHARE

In 2010 24.5%, in 2015 22%

The more food is produced by local, domestic producers the better, both environmentally and economically. According to a relatively recent Corvinus University study, positive, if modest changes have taken place in this area.

THE REAL VALUE OF PENSIONS
It is so far growing in the second Orbán government period, due in part to last year’s persistently low inflation, the third year in a row, and, on the other hand, partially due to the inflation-indexation of pensions introduced by the Gyurcsány government and which during the Fidesz government was often surpassed through the use of small tricks.

MATERNITY LEAVE

In 2008 the gross benefit was HUF 28,500, in 2016 just as much. In international comparison, this is dramatically low.

PRIMARY SCHOOL TEACHER GROSS ANNUAL WAGES

In 2009 it was USD 9,500, in 2015 – 9,149.

The biggest change in the area of earnings in the past period, as mentioned before, was the flat personal income tax, which benefitted primarily the affluent. At first glance the above seems even a decrease, but due to the significantly weakened forint exchange rate in the period the balance is rather a positive one. This fact doesn’t make for any exuberant joy because according to the OECD data, admittedly in need of updating, the approx. USD 9,500 earnings (just as a few years ago) was sufficient only for the last place among the EU member countries.

PEOPLE LIVING IN EXTREME POVERTY

In 2010 – 3 million, in 2016 – 3.6-3.8 million

In addition to this terribly high number, perhaps it is most important to note that after nearly a quarter of a century, in 2011 the CSO stopped publishing any figures about exactly how many people live below the poverty line. (The Policy Agenda think tank, however, has calculated that by 2015 the number has grown to 41.5%. See our article on all of this.)

Actual Individual Consumption in the European Union, 2014

Furthermore, the CSO had calculated that at least 87,351 Ft. monthly net earnings were required (in 2014) for living at a subsistence level. In comparison the net minimum wage in 2016 was still 73,815 Ft. In the first case it seems there was finally a move forward. Thanks to the tenacious struggle of the trade unions in 2018 the minimum wage will reach the subsistence level of around 90,000 Ft. However, thanks to the far higher 35% tax burden, in net terms the minimum wage is still light years behind that of our competitors in the region regarding the increases carried out between 2008 and 2016. In addition, Hungary has the highest proportion (72.2%) across the EU of households that wouldn’t be able to pay any unexpected expense.

HOSPITAL BEDS NUMBER

In 2009 – 70,971, in 2014 – 66,000

The population has been declining steadily since 2010, but we surely aren’t so many fewer. Actually there are more elderly. Therefore we need more, not fewer beds.

HEALTHCARE

Not only compared to 2010, but in fact never has any government since 1990 spent so little on healthcare, as a percentage of GDP, as in the past several years. And this is not only a basic requirement for a more successful functioning of the economy but also a factor that could have improved significantly the overall mood of the whole country. Recent research has shown that the overall satisfaction level in a country is not best raised by increasing the earnings of the inhabitants but by spending relatively larger amounts on problems of well-being. There is also a demand for it. According to the 2016 European Social Survey the Hungarian society is in a terrible state compared to the other European countries: in Hungary people consume the smallest quantities of fruits and vegetables, Hungarian women are moving the least, compared to the Hungarian men only Lithuanians smoke more, compared to the Hungarian men only more Czechs are overweight, Hungarian women are the most overweight, we have the largest proportion of men in poor or a very poor state of health, compared to the Hungarian women only the Spanish women are in a worse state of health, among the Hungarian men are the most showing signs of depression, and the Hungarian population, both men and women, is most affected by cancer. After that, perhaps it’s not surprising that we visit doctors most frequently among OECD countries.

EDUCATION

Similar to the health care case, counting from 1990 we have never spent so little of the GDP in this sector as during the Orbán government. Yet the word education could safely be replaced by “future,” since it is basically influenced by the country’s medium and long-term competitiveness. We are rank penultimate in Europe [in spending], so such investment here would bring the biggest return among the OECD countries. The results are visible: we are sixth from the bottom in the OECD in the number of researchers employed in the country; there haven’t been so few studying in higher education in the last seventeen years. We spent the least for developing computer skills, and our students have the largest number of school hours for non-essential knowledge (e.g., ethics [compulsory alternative to religion], etc.) as opposed to essential ones (e.g. reading, writing, literature, mathematics, natural sciences, second or other language). In view of the above, the recently published PISA results, which understandably caused an outrage, probably represent only the tip of the iceberg.

One of the few positive steps in the past few years is that those who cannot find work are, finally, offered free training, but the training offered by the National [Vocational] Training Register (Országos képzési jegyzék) is unlikely to boost the highest added value production areas. In addition, the participants’ livelihood is not guaranteed during the course; hence the training can only be used by jobseekers with a better financial cushion or those enjoying a patronage. Improving job qualifications is needed to raise our incredibly low average salary, which already inhibits economic growth.

CORRUPTION PERCEPTIONS INDEX

In 2009 – 46th place, in 2015 – 50th place

Even the people in Saudi Arabia, Botswana, Qatar and four-fifths of our region feel their governments are less corrupt.

ENVIRONMENTAL PROTECTION

No previous government has shown less interest in this area. The Orbán government’s response to the day-by-day worsening problem of global warming was to abolish the Environment Ministry and to do nothing about the few concrete promises it made before the election – including the creation of a green bank. In the meantime, they managed to earn the glory of the “tree-felling government” title, since probably no one has cut down so many trees as they have done in the last seven years in Budapest, and they have plans for more. Moreover, we are perhaps the only country in the world to impose taxes on solar panels while indebting Hungary by a loan equal to at least 10% of GDPif not more – for the sake of a twentieth-century technology for [Russian nuclear reactor blocks] Paks 2, which, in the bargain, will surely never produce a return.

Meanwhile, despite all the flag waving and freedom fighting the external exposure of the Hungarian economy has not been reduced at all. And here it is not primarily the foreign currency denominated debt segment that counts most, nor the export-import volume, which reached 200% of GDP, but the fact that less than half of the exported added value is created in Hungary. In other words, more than 50% of the added value produced in Hungary is by foreign-owned companies, which is unique in the European Union. It is no surprise that of the EU money arriving here for business development – after the government has carved off its significant slice – almost 70% is awarded to multinationals.

Such a level of foreign investor influence is extraordinary even by regional standards, although in Eastern Europe we are all rowing in the same boat, i.e. in what the literature calls a dependent market economy. That is, our economies are wholly dependent on Western investments. This is particularly true for the car manufacturing brought to Hungary, because it accounts for more than 20% of Hungarian exports, and this situation hasn’t changed since the year 2000. Meanwhile a leading Fidesz politician says that nothing can be done because “Hungary is a determined country, where it’s impossible to pursue other economic policies.” But it was precisely the Orbán regime which showed that it is. Over the last fifty years countries such as South Korea, Taiwan and Singapore went through economic development with substantial state assistance, which took them to where we are heading today. Big companies like Samsung, LG and Hyundai were heavily subsidized by the state, which in return set certain export expectations, so these companies were forced to continue spending on innovation. While it is a widespread view that the international rules made impossible this type of government intervention, we can see that the Orbán regime can support their oligarchs without any sanctions. The problem is that instead of innovation the regime expects only political loyalty. Despite its references to them as a model, none of the East Asian models’ components has been employed.

In light of the above it is not surprising that there have never been so many who wanted to emigrate from the country. Meanwhile the middle class is eroding and the differences in wealth between the richest and the poorest are increasing.

There is money available though, since up to now the government has spent HUF 300 billion on state companies and a further HUF 100 billion on its own (i.e. our) soccer pet. Overall, we spend four times more on this prime minister’s mania than on road maintenance, while the number of spectators is steadily declining. There are other outlays that went wrong too – the György Matolcsy-led National Bank has had HUF 250 billion pumped into dubious foundations or spent for the purchase of art objects. In addition, another HUF 850 million was sunk into the Felcsút narrow gauge railway, never to produce any return, and HUF 6.7 billion credit was extended to Andy Vajna for the purchase of TV2. Speaking of Andy Vajna, it is worth highlighting the greatest of all items, in regard to which the government didn’t do anything, namely the offshore [knights racket]. Moreover, Hungary is actually moving in this direction. Even in the face of the couple of years old study finding that the almost unfathomable amount of USD 247 billion of untaxed income has left the country in past decades. In the course of this offshore racket we have suffered the second largest losses in Europe.

WHAT FOLLOWS FROM ALL THIS?

Looking at the numbers the government could demonstrate quite serious achievements compared to 2010, primarily in the area of balancing the ​​budget and public debt. The GDP growth rate could have been included but for the fact that this growth was due mainly to the accelerated EU investments and not to a better performance of the domestic economy. In fact our productivity has been stagnant since 2008.

On the other hand, the social inequalities have increased dramatically during these seven years. It is unlikely that these short-term favorable macro-economic data can be sustained in the long term, mainly because the Hungarian society’s human capital indicators have significantly deteriorated as a result of the dramatic underfunding of the public subsystems (healthcare, education, social policy, public transport). That is, the economic growth is due to a great extent to the EU investment funds and the short-term budgetary balance to huge austerity measures. Both are unsustainable.

February 19, 2017

Miklós Haraszti: I watched a populist leader rise in my country–That’s why I’m genuinely worried for America

Miklós Haraszti, author and director of research on human rights at the Center for European Neighborhood Studies of Central European University, is a familiar name to readers of  Hungarian Spectrum, both as an author and as a commentator. This opinion piece originally appeared in The Washington Post (December 28, 2016). I’m grateful for the opportunity to share it.

♦ ♦ ♦

Hungary, my country, has in the past half-decade morphed from an exemplary post-Cold War democracy into a populist autocracy. Here are a few eerie parallels that have made it easy for Hungarians to put Donald Trump on their political map: Prime Minister Viktor Orban has depicted migrants as rapists, job-stealers, terrorists and “poison” for the nation, and built a vast fence along Hungary’s southern border. The popularity of his nativist agitation has allowed him to easily debunk as unpatriotic or partisan any resistance to his self-styled “illiberal democracy,” which he said he modeled after “successful states” such as Russia and Turkey.

No wonder Orban feted Trump’s victory as ending the era of “liberal non-democracy,” “the dictatorship of political correctness” and “democracy export.” The two consummated their political kinship in a recent phone conversation; Orban is invited to Washington, where, they agreed, both had been treated as “black sheep.”

When friends encouraged me to share my views on the U.S. election, they may have looked for heartening insights from a member of the European generation that managed a successful transition from Communist autocracy to liberal constitutionalism. Alas, right now I find it hard to squeeze hope from our past experiences, because halting elected post-truthers in countries split by partisan fighting is much more difficult than achieving freedom where it is desired by virtually everyone.

But based on our current humiliating condition, I may observe what governing style to expect from the incoming populist in chief and what fallacies should be avoided in countering his ravages.

A first vital lesson from my Hungarian experience: Do not be distracted by a delusion of impending normalization. Do not ascribe a rectifying force to statutes, logic, necessities or fiascoes. Remember the frequently reset and always failed illusions attached to an eventual normalization of Vladimir Putin, Recep Tayyip Erdogan and Orban.

Call me a typical Hungarian pessimist, but I think hope can be damaging when dealing with populists. For instance, hoping that unprincipled populism is unable to govern. Hoping that Trumpism is self-deceiving, or self-revealing, or self-defeating. Hoping to find out if the president-elect will have a line or a core, or if he is driven by beliefs or by interests. Or there’s the Kremlinology-type hope that Trump’s party, swept to out-and-out power by his charms, could turn against him. Or hope extracted, oddly, from the very fact that he often disavows his previous commitments.

Viktor Orbán (Thierry Charlier/Agence France-Presse via Getty Images)

Populists govern by swapping issues, as opposed to resolving them. Purposeful randomness, constant ambush, relentless slaloming and red herrings dropped all around are the new normal. Their favorite means of communication is provoking conflict. They do not mind being hated. Their two basic postures of “defending” and “triumphing” are impossible to perform without picking enemies.

I was terrified to learn that pundits in the United States have started to elaborate on possible benefits of Trump’s stances toward Russia and China. Few developments are more frightening than the populist edition of George Orwell’s dystopia. The world is now dominated by three gigantic powers, Oceania, Eurasia and Eastasia, a.k.a. the United States, Russia and China, and all three are governed by promises of making their realms “great again.”

Please do not forget that populists can turn into peaceniks or imperialists at any moment, depending on what they think could yield good spin that boosts their support. Remember how Putin and Erdogan had switched, within months this year, from warring to fraternity. Or how Orban in opposition had blasted any compromises with Russia, only to become Putin’s best friend upon his election.

I have plenty of gloomy don’t-dos, but few proven trump cards. There is perhaps one mighty exception, the issue of corruption, which the polite American media like to describe as “conflicts of interest.”

It is the public’s moral indignation over nepotism that has proved to be the nemesis of illiberal regimes. Personal and family greed, cronyism, thievery combined with hypocrisy are in the genes of illiberal autocracy; and in many countries betrayed expectations of a selfless strongman have led to a civic awakening.

It probably helps to be as watchful as possible on corruption, to assist investigative journalism at any price, and to defend the institutions that enforce transparency and justice. And it also helps to have leaders in the opposition who are not only impeccably clean in pecuniary matters, but also impress as such.

The world is looking at the United States now in a way that we never thought would be possible: fretting that the “deals” of its new president will make the world’s first democracy more similar to that of the others. I wish we onlookers could help the Americans in making the most out of their hard-to-change Constitution. We still are thankful for what they gave to the world, and we will be a bit envious if they can stop the fast-spreading plague of national populism.

January 2, 2017

András Kósa: The speech of the chief, Őszöd ten years later, Part III

Gyurcsány’s attempt to interpret the speech in Őszöd as the beginning of a new era

András Kósa, a well-known Hungarian journalist, recently published The Speech of the Chief: Őszöd after Ten Years, a collection of interviews with Ferenc Gyurcsány, former and current politicians, and political commentators. Interest in Gyurcsány’s speech and its impact on subsequent political developments doesn’t seem to wane.

A reader and friend of Hungarian Spectrum, Steven N., who is also a friend of Kósa, translated the interview with Gyurcsány for publication here. Since the interview was lengthy, I posted it in installments. The first and second have already appeared. This is the final installment.

♦ ♦ ♦

András Kósa: You know Vladimir Putin personally, as you’ve met with him on several occasions. What is the secret of the surprisingly strong relationship between the Russian President and Viktor Orbán?

Ferenc Gyurcsány: To answer this, it has to be noted that in the mid-to-late 2000s, the European Union and the Obama administration viewed Putin as a leader who was democratizing cautiously. During his first visit to Berlin, the entire Bundestag gave him a standing ovation. Then, in the Russian parliamentary elections in the fall of 2011, he had to pilfer 17 percentage points to be able to win. In the spring 2012 Presidential election, he again needed to cheat to attain a “victory,” though less so this time. I think these things have changed Putin. He realized that the policies he had pursued up until then did not automatically expand his power, so he launched a campaign of harsh repression at home (including the killing of journalists and political rivals, remaking the Russian criminal code, and restricting the freedom of assembly), and again began to assert the conquering pursuits of Great Russia. I have not changed: I’m not critical of Putin because I’m in the opposition. My relationship towards him did not change until the summer of 2012. We even met in Moscow with our families then. But I don’t like this Putin now. Orbán, by comparison, has taken the opposite route: when the world trusted Putin more, he was very critical of our cooperation. Then when the world increasingly kept its distance from Putin because of what I said earlier, he became one of his main allies. I think the only thing that’s happened here was that Viktor Orbán was looking for partners for his foreign policy, and he found one in Putin. If I want to go against Brussels (which was Orbán’s big foreign policy shift after 2010), then – being the Prime Minister of a small-medium-sized country – I need partners to do this, and Putin is perfect for it at the moment. The current Polish leadership is also an excellent partner.

Is it “only” this?

The possibility that money and corruption are behind the good relations between Viktor Orbán and Vladimir Putin cannot be ruled out. Maybe it also greases their relationship. But it’s not the main reason.

As Prime Minister, you had insight into intelligence-related matters: would it be possible that the large intelligence agencies, for example Russian or American, could not find out pretty much anything about any kind of personal or perhaps business matter, or the financial situation, of the current Hungarian Prime Minister?

If they wanted to, they could find out pretty much anything. Of this, I have no doubt. If you’re asking whether these agencies are able to find out something that they could blackmail a Hungarian Prime Minister with, then I would say, yes, they could do that. Whether they’d use it or not, I wouldn’t be able to say. I didn’t come across these things during my own time in office. I did have very nasty disputes on energy issues with the American ambassador and with representatives of the government in Washington. They tried to talk me into this, that, and the other, but they didn’t venture beyond putting verbal pressure on me. Experts say that today around 600-800 people in Hungary are definitely working for the KGB in some capacity. This is not a small number. And their capacity is such that if they want to listen in on our phone calls, they can do it. If they want to know where we’re going and when, who we’re having dinner with and what we’re talking about, they can find out. I think that this coterie exerts a substantial influence on the world of Jobbik and Fidesz.

During your time in office, how big was this 600-800 number?

Roughly about half of that.

A two-speed Europe is forming right before our eyes, and for now we Hungarians seem to have a strong role on the periphery. In such a situation, in which we know that aid from the EU will be drastically reduced after 2020, how much can democratic ties loosen in Hungary, as well as in the region as a whole?

They won’t expel us from the European Union, but the processes can only really go in such a way that one group of countries will deepen its cooperation and head towards a federal Europe. While we remain on the periphery, as you said. Not only will they fund less and less of our finances, but also increasingly less attention will be paid to the social and general state of affairs here. Maybe I’m naive (since before 2010 I also didn’t expect that such a radical transformation would occur if Fidesz ever came into power), but I can’t really imagine what more the government could do in such a transformed EU. You can’t turn off the internet. There’s hardly any openness as it is. Under European circumstances, the police can still not just come into my apartment, and the authorities can’t take away my assets and businesses. I think that Fidesz has pretty much gone to the wall. It’s possible, of course that they’ve already figured this out, because what’s happening right before our eyes is a march towards a semi-authoritarian regime. János Kádár’s cloak stretches extremely far in this regard.

What do you mean?

We Hungarians signed on to what we thought was a highly successful, but nevertheless dishonest, historic compromise. Hungary was the only place in Eastern Europe where (in our so-called “soft dictatorship”) there wasn’t open repression that affected the masses. The “happiest barracks” was built on an immoral pact in which the authorities said: there are three things that you can’t touch. There’s a one-party system, 1956 was a counter-revolution, and the Soviet troops in Hungary protect the peace. Otherwise, you are more or less free to live your life, you can travel somewhat, the shoe stores have shoes, the meat shops have meat, and you can even tell political jokes too. This somewhat conflated the oppressor with the oppressed, which is why the majority of the country now reacts so permissively to political tyranny. Viktor Orbán correctly senses that it’s not the lack of democracy that will crush his regime. This issue has remained a cause only for the upper segment of the political class. Poor governance of the country leads to poor performance: healthcare, the educational situation, and a lack of prospects, shockingly low wages, and increasing vulnerability in the workplace – these are much more dangerous to Orbán than the fact that public television has become the television station of the ruling party. They’ll change the channel to something else.

Why is it that in Hungary charges of corruption don’t harm the government?

One reason is that Byzantine culture has maintained itself right up until the present time: if the powers-that-be dip into the common goods but some of it still occasionally comes my way, then I won’t be so strict with the rules all the time on my own level – this itself is in the tradition of Byzantine culture, which can still be found here. Moreover, the entire political class is considered corrupt – so what’s the difference? But there’s a much more tangible reason as well: the public prosecutor here has a monopoly on prosecuting cases. Péter Polt essentially refuses to launch any kind of investigation, so every initiative comes to naught. The system today is itself built upon corruption; it doesn’t have just a speck of corruption, but is its very essence. Everyone in Fidesz knows about it, everyone knows who is corrupt and in what way, but they condone each other’s actions. Finally, it’s because the opposition has not been very successful with these matters. In any case, Péter Juhász, the representative of the Együtt Party, has done more in this area in the past few years than the rest of us put together.

Will you be Prime Minister of Hungary again?

I won’t rule it out.

Would you want it?

I don’t have such a strong desire for it right now. I did have it in 2004, no question. I am grateful to fate for letting me be Hungary’s Prime Minister, but it now also has a strong desire for this democratic and civic alternative which I represent to gain a large base of support. It has a stronger desire for this now than it does to make me Prime Minister once more. I can feel good about imagining my life in a way that I remain a Member of Parliament and not have any higher power than this. But it’s devilishly hard to predict what fate will bring in 2022 or 2026. I’ll be 66 years old in 2026: this is still an active age as a politician. I am fortunate because my ambitions and opportunities are just now coming together.

You were once considered one of the most promising politicians in Hungary after the regime change of 1989, and then your name became associated with one of its biggest scandals. What was this experience like for you?

If I could be objective, I’d say: it’s my personal misfortune. But there’s no anger inside me towards anyone. For those who go into this career, it doesn’t hurt to be aware that such things can happen to you. Looking back, I don’t lament about how much of what happened to me was fair or not. Or how much was my fault, or how much was due to chance or a malicious conspiracy by others.

What was your responsibility?

To start with, I took over the government at the head of a party that I was not compatible with, neither culturally or in terms of mentality. This was encoded into what happened later.

When did you realize this? That you weren’t compatible with your own party.

When things started to go bad for us after 2006. And when I saw that Fidesz owed its success, among other things, to being able to fight its battles as a large singular unit, which we were not capable of. When Orbán gave his ultimatum after the Őszöd speech was leaked, that if they do not remove me as Prime Minister within 72 hours then he would put so much pressure on MSZP that we couldn’t hope to be able to bear it, I naturally called together the leaders of the Socialist Party. And I had to admit that there were some in the leadership who wanted to comply with Orbán’s demand purely out of fear. In that regard, of course, they were honest enough to indicate as much – and so the decision was made for me to ask for a vote of confidence against myself in Parliament. But after this, I felt that the party had completely changed: not standing up for introducing the doctor’s visit fee, not arguing for it or explaining it, but fleeing from it. This showed me that the party could not handle the struggles that I urged them to fight for in the Őszöd speech. I had convinced them right then and there. I got their votes, but I couldn’t get their hearts. If you don’t believe in the story, in the hellish debates, in the struggle – then what is it in politics that you do believe in?

We do love conspiracy theories, so since you’ve already brought up the 72-hour ultimatum of October 2006: many contend that with this step Orbán truly brought you back into the game from a losing position. If he had been slower and more patient then and there, he could even have succeeded with the ruling coalition ridding itself of Ferenc Gyurcsány. But after such an ultimatum, MSZP could not have done anything else but reinforce your position three days later in a Parliamentary vote of confidence.

I prefer to believe in the truth contained in a non-public poetic treatise by Orbán that we learned about from the Wikileaks cables, stating, “If you can kill your adversary, and don’t put it off.” I don’t think that today’s Prime Minster, who was the leader of the opposition at the time, delivered this ultimatum in order to keep me in office. He did it because he had assessed the courage of the Socialists pretty well, and he saw a chance that they would back away from me.

There is also an interpretation that you two need each other mutually in a political sense, as a clearly tangible image of each other’s enemy.

I know that to this day there exists this Orbán-Gyurcsány parallel, which really does hold up in two respects. With respect to our origin, we both came from a provincial town and from poverty, and were both first generation intellectuals. But more importantly, we have taken completely opposite routes since coming to Budapest: Orbán became jealous of the downtown elite – he felt that they had taken something from him. Even to this day, he views the metropolitan intellectual elite with contempt. But I admired them. The way I saw it, it was like, “Damn, you can live this way too! Then why would I do it any other way?” We’re also alike in that both of us are strong characters who live for politics. This is true. But there are no similarities between our respective visions. Nor between the systems that we want to build. I think that Viktor Orbán started as a very promising European-minded democrat, and I even saw very many things in him to admire. But from then on he has become an increasingly authoritarian figure who left behind everything about him that was respectable. I came from the youth organization of the state party, so there’s no doubt that he could label me a “communist” (while even before the regime change we had said that we wanted a multi-party system, just more cautiously and slowly, unlike Fidesz at the time), but on this basis I became a wholehearted democrat.

It is said that the reason why Viktor Orbán and Robert Fico understand each other so well (though they have different ideologies within their party’s family structure) is because both are opportunistic, populist politicians who always view a particular situation in terms of the techniques of power, and analyze how to exploit it to their benefit. After Fico was elected as Prime Minister for the second time (freeing himself from the nationalist Slovak National Party), he was able to “turn towards Europe” after 2012 and develop good relations with Brussels. Do you think Viktor Orbán would also be capable of the same in a particular situation?

I wouldn’t rule it out. The turnabout he did in Hungarian-Russian relations in connection with expanding the capacity of the Paks nuclear power plant, in a very short time and managed so successfully (the right-wing voting base, having previously been extremely suspicious towards the Russians, adopted a basically pro-Russian stance two months later, according to polling) speaks for itself. I do absolve Orbán on a very small point, and can self-critically say: it is of course important to be principally and morally committed in politics (which I think I still represent to this day), but it should not be taken too far. I took it too far. It’s perfectly normal for a politician to think about what his voters give him a mandate to do and not to do, no matter how correct he may be. When Orbán said to the Christian Democrats, “However right you are in regards to banning abortion, no matter how much it may be your fundamental position as a principled Christian, if we do this we’ll lose the elections,” I think he was completely right to say it. It wasn’t that I thought: “These Hungarians have become accustomed to free health care while they hand out gratuity money to doctors. I have to convince them to do things differently.” But before that point I should have thought about whether I could convince them, and if not, what good would it do if I lost and then they change it back? Because then I didn’t do anything. I was proud that I fought to justify myself even against the will of the majority. Viktor Orbán pushes terribly hard for the other half of this matter: he is capable of nearly any compromise on principle for the stabilization and extension of his power. Of course, he doesn’t rely on the discretion of the people, so he dismantles institutions that provide a check on democracy: even if they wanted to they wouldn’t be able to stop his intentions.

However, as a wealthy businessman, you sometimes say things like you know what it’s like to live on minimum wage, which it’s better to live poorly but honestly…

Why wouldn’t I able to know? A doctor doesn’t have to have a backache to be able to feel his patient’s pain. A teacher doesn’t have to be an idiot to be able to feel the suffering that his weakest student goes through studying for the next day’s lesson. A politician doesn’t have to live in misery to understand that public goods should be distributed on the basis of social justice. And I haven’t even spoken about coming from an apartment with a kitchenette, where our toilet was in the outer corridor, or a Christmas when we didn’t even have a donut to eat. And I don’t even have to add that a large part of my family still lives a life that is not even lower-middle class, but one beneath that. People I regularly get together with. I consider this comment a cheap intellectual slur if I ever happen to see it.

Do you have any personal relationships with right-wing politicians or opinion makers?

None.

Do you think this is normal?

Of course not. But this is because of a deliberate division of the country into two on Orbán’s behalf. We go along hearing phrases (from Orbán) like “the homeland cannot be in opposition,” while these are the most severe words you can say. This statement means that you do not consider another’s political existence as natural. You consider the other political side as an error that must be eliminated, and with their elimination you have less and less moral compunction. This is the endpoint of this process. And in turn, Viktor Orbán’s responsibility for making this concept more and more acceptable to the country cannot be overstated.

How do you think this final/fatal mutual distrust can be overcome? And would this generation be at all capable of doing it?

Certainly not with Orbán. The preamble to the current Hungarian constitution condemns the entire Hungarian left. Which is absurd. But I also do not think that a majority of Fidesz supporters and some of its leaders would not want a world that is much more relaxed than the one we have now.

Where do you think the country is now, ten years after Őszöd?

In its moral state ten years before Őszöd – I mean that it is in worse shape than before 2006. But Őszöd is not the primary cause of the moral deterioration. It’s a different issue whether it helped open up the way to letting what the authorities are now doing to the country hide in the cloak of legality. There is now a terrible atmosphere in the country, without any large, shared positive experiences or successes.

December 24, 2016

Hungary quits the Open Government Partnership in a huff

Yesterday the Associated Press reported the Hungarian government’s decision to quit the Open Government Partnership (OGP), “a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance.”

OGP was formally launched on September 20, 2011, when the eight founding governments (Brazil, Norway, the Philippines, South Africa, the United Kingdom, and the United States) endorsed OGP’s Declaration and announced their countries’ action plans. Since 2011, 62 other countries joined, including Hungary, which signed its letter of intent on July 10, 2012. In this letter of intent the Orbán government declared that “it attached the utmost importance to cooperation with civil organizations.” It was the Ministry of Public Administration and Justice under Tibor Navracsics that represented the Hungarian government in this particular undertaking, which claimed at the time that “it supports the effective implementation of the OGP commitments.” It also promised “in person consultations with the civil organizations and experts regularly on a monthly basis.”

These were the promises, but according to the recollections of the participants, after the initial good working relations “the process started to slow down as the document reached the political level.” The final commitments were vague and greatly weakened. By 2014 it was clear that the Hungarian government’s “sole purpose with its membership was the opportunity to communicate its devotion to open government” to the international community.

Hungary is the second country whose government is not ready to abide by guidelines set by the Steering Committee of OGP and endorsed by them. The first country to leave OGP was Putin’s Russia, which had joined the organization in April 2012. A year later, on May 17, 2013, the Russian government informed the group of its decision to leave. Russia’s participation in this group was dubious from the very beginning, but there were other countries whose commitments to the ideals of OGP were also questionable. OGP acknowledged in February 2014 that Lithuania, Malta, and Turkey had failed to meet their commitments as members of the Open Government Partnership. Warnings were issued to these three states. In addition, the Steering Committee redefined standards for suspending members. “Two warnings in a row would trigger a discussion about continued membership of OGP countries” that create hostile environments for civil society.

By October 2014 new rules were in place that made suspension of membership practically automatic if any country limits the freedom of information; limits the activities of civic groups; favors civic groups attached in some way to the government; limits the freedom of expression and freedom of assembly; limits freedom of the press, independence of the media, or engages in the intimidation of media owners. 444.hu’s eagle-eyed reporters noted the OGP’s tightened rules for suspension, adding that they are tailor-made for Viktor Orbán’s Hungary.

The first victim of the new suspension rules was Azerbaijan. In March 2016 the Criteria and Standards Subcommittee recommended the move because “such constraints are evident in the laws on grants, non-governmental organizations, incarceration of NGO activists and journalists” that would precipitate “OGP’s response policy.” At that time, it was noted, “similar NGO complaints that the Hungarian government is restricting civil society remain under consideration.” In addition, Turkey was suspended in September 2016 because it had failed to deliver a National Action Plan since 2014.

Prior to this time the Orbán government had begun a war against Hungarian nongovernmental groups, financed mostly by the Norway Grants but also by the Soros Foundation. The government accused these NGOs of representing foreign interests and proceeded to raid their offices. At that point four leaders of NGOs decided to follow their colleagues in Azerbaijan and launch a formal complaint against the Orbán government. Fanny Hidvégi of the Hungarian Civil Liberties Union, Sándor Léderer of K-Monitor Watchdog for Public Funds, Miklós Ligeti of Transparency International Hungary, and Júlia Keserű of the Sunlight Foundation wrote a letter to the members of the OGP Steering Committee. The letter is available on the internet.

After considering the complaints submitted by Hungarian NGO leaders, OGP proposed several remedies that the Orbán government should adopt. It suggested the establishment of a Permanent Dialogues Mechanism (PDM) within sixty days that would ensure the participation of the relevant government agencies and interested civil society organizations. What must have especially irritated the Orbán government was that “all members of the public will be kept informed about all core aspects of the national OGP process—and especially know well in advance … about the key moments to provide inputs and discuss priorities.” OGP demanded five so-called Smart Recommendations that the Orbán government would never accept: monitoring of public disclosure practices of local government and state-owned enterprises; reviewing party and campaign financing regulations; revising the freedom of information regulations; revising regulations on classified information; and launching e-procurement. For easy access to this document, I am attaching it in full at the end of this post.

After reading these “recommendations” I’m not at all surprised that the Orbán government accepted the odium of withdrawal. A semi-autocratic, illiberal government of the kind that exists in Hungary today would never agree to such demands.

So, let’s see how the official government media explained the decision. Magyar Idők justified the Hungarian decision by citing OGP’s “one-sided criticism” of the Orbán government based on the unfair accusations of “civilians financed by George Soros.” These NGOs serve foreign interests and have been spreading false stories about the Hungarian government. Transparency International and TASZ, the Hungarian equivalent of the Civil Liberties Union, had complained to the organization about the Orbán government already in October 2012, shortly after Hungary joined OGP. In January 2013 K-Monitor allied with TASZ and TI in a new attack. And here was the latest one. It was high time to quit this unfair organization.

In the opinion of Szilárd Németh, deputy chairman of Fidesz, Hungary’s abandonment of the organization “actually sheds a very positive light on us because we do not want to participate in an organization where members carry on a conversation among themselves after which they single out somebody whom they are trying to keep at bay with one-sided reports, distortions of facts, with documents prepared by phony civil organizations mostly financed by George Soros.” It was a good decision, “a lovely gift for the time when they can get together again and they can nod against Hungary.” Németh is referring to the Open Government Global Summit, which is being held at this very moment in Paris.

The opposition’s interpretation of the move was predictable. They pointed out that the Orbán government no longer cares what the world thinks of it because surely, following in Russia’s footsteps, they are practically admitting that they are corrupt to the core. Zsolt Gréczy, DK’s spokesman, said that Hungary’s eventual suspension from the organization was inevitable. But the country’s withdrawal from the organization a day before the beginning of the Global Summit was unnecessary in that Hungary was not facing suspension at this time. The demands the organization made on the Orbán government, however, were more than the “proud Magyar” could stomach.

♦ ♦ ♦

December 8, 2016

Viktor Orbán and Ghaith Pharaon: The end of a business relationship?

Although I’m aware that regular commenters on Hungarian Spectrum seem to be interested only in the aftermath of Donald Trump’s victory, I have to return to Hungarian affairs. After all, the blog’s stated purpose is to acquaint people with the politics, economy, culture, and history of Hungary.

I think that by now readers of Hungarian Spectrum are fully aware that the Orbán government is exceedingly pleased with the result and is looking forward to a close friendship between the two countries. I’m certain that Hungarian foreign ministry officials already envisage Viktor Orbán paying an early visit to the Trump White House. Maybe even a state dinner. Wouldn’t that be splendid?

But let’s get back to Hungarian reality, which is not without its troubles for Viktor Orbán and his closest entourage. The Hungarian prime minister might act high and mighty in parliament when asked about one of his closest associates, Antal Rogán, whose luxurious life style reeks of ill-gotten gains. But Rogán’s activities are symptomatic of wider problems. For instance, the “business activities” of the president of Hungary’s central bank, György Matolcsy, funneled through phony “foundations,” and his “generosity” toward his friends and family, from public funds, haven’t helped the reputation of the Orbán government. By now the majority of the population considers it rotten to the core.

Hardly a day goes by without one of the few remaining independent internet news sites unearthing a new scandal. Just today 444.hu published an excellent piece of investigative journalism showing that the Pénzügyi Szervezetek Állami Felügyelete (PSZÁF), the Hungarian equivalent of the U.S. Securities and Exchange Commission, and the Hungarian National Bank, which incorporated it in September 2013, must have had knowledge of Quaestor’s Ponzi scheme for at least 15 years before the brokerage firm collapsed in March 2015. I provided details of the scandal earlier.

Another story that doesn’t want to die concerns Ghaith Pharaon, a wealthy Saudi businessman who has been a fugitive from justice for the last 15 years at least. I covered the story about three weeks ago, but since then an awful lot of new information has come to light, which I will try to summarize briefly.

First of all, the confusion in government circles about the status of Pharaon is indescribable. Yesterday Index devoted a lengthy article to recounting the range of explanations coming from various government offices about why a fugitive from justice had received a Hungarian visa. The same confusion exists when officials try to explain Pharaon’s exact relationship to Viktor Orbán and his family. These explanations more often than not contradict one another. Some most likely have nothing to do with reality. János Lázár is especially prone to inventing stories for his weekly press conferences. I will not bore readers with these attempts to mislead the public.

On the other hand, I think it is important to note that Pharaon’s business activities were not confined to buying expensive real estate in Hungary from a firm connected to Viktor Orbán’s son-in-law, István Tiborcz. MOL, the Hungarian oil company, also had business dealings with Ghaith Pharaon through Pakistan Oil Fields Ltd. The deal was sealed only in April 2016. And a couple of days ago RTL Klub learned that the ministry of foreign affairs and trade, which owns Magyar Nemzeti Kereskedőház/MNK (Hungarian National Trading House), which is designed to encourage and smooth the way for ventures of Hungarian businessmen in different parts of the world, broke its contract with one of Pharaon’s Hungarian companies, Pharaon Gamma Kft. MNK naturally denied that the move had anything to do with the cloud over Pharaon.

The Artemy used by Lőrinc Mészáros

The Artemy used by Lőrinc Mészáros

Meanwhile, back in August Magyar Narancs learned about a 35m luxury yacht docked in the Zadar harbor in Croatia, most likely rented by Lőrinc Mészáros. Of course, it was a juicy story that the former pipefitter, Orbán’s front man, not only has a luxury villa on the Adriatic coast but also enjoys the good life on a yacht with a four-member crew on deck. But the story became truly interesting in November when the same reporters discovered that on August 4 Mészáros’s yacht was anchored in the harbor of Split. And behold, Ghaith Pharaon’s famous Le Pharaon luxury yacht, on which he spends most of his days, just happened to be docked right next to it. This was a most unlikely coincidence because, as the reporters found out, Le Pharaon had not visited Split in the three years prior.

Ghaith Pharaonás famous Le Pharaon

Ghaith Pharaon’s famous Le Pharaon

But this is not the end of the story. At the beginning of August Viktor Orbán disappeared for at least a week. The assumption was that he was on vacation. Zsolt Gréczy, the spokesman for DK, inquired from the prime minister’s office about the whereabouts of Viktor Orbán. He was told by Bertalan Havasi, director of the prime minister’s press office, that he was unable to provide any information regarding the prime minister’s holiday plans. Now that Magyar Narancs discovered the strange “coincidence” of the two yachts next to each other, DK suspects that it wasn’t so much a rendezvous between the pipefitter and the “professor,” as Orbán called Pharaon, but a high-level business meeting between the Hungarian prime minister and the wanted man. Today, although the prime minister’s office still hasn’t revealed where Viktor Orbán was on August 4, it claimed that “Viktor Orbán hasn’t even gotten near Split this year.” I doubt that this denial will satisfy the increasingly suspicious public.

And now let’s move on to a slightly different aspect of the Orbán-Pharaon relationship. Orbán in parliament admitted that he had met “Professor Pharaon” at a dinner party given by the Budapest representative of Jordan where Pharaon was the guest of honor. And now comes Mátyás Eörsi, former chair of the foreign affairs committee of the Hungarian parliament and undersecretary in the ministry of foreign affairs between 1994 and 1998. After hearing the story of Orbán’s meeting with the “professor,” he became suspicious. First of all, it is extremely rare for a prime minister to accept a dinner invitation from a representative of a foreign country. It is even less likely that he would accept such an invitation from the honorary consul of a country that doesn’t even have an embassy in Budapest. Economic relations between the two countries are practically nonexistent. Jordanian exports to Hungary amount to 0.04%, while Hungarian goods going to Jordan are only 0.15% of total trade. Surely, Eörsi argues, the prime minister’s acceptance of this dinner invitation had nothing to do with affairs of state.

Eörsi became even more suspicious when he tried to find out details of direct Jordanian investment in Hungary and discovered that, in the case of Jordan, this is “confidential information.” Normally such investment figures are readily available to the public. On the basis of his research Eörsi suspects, first, that the dinner was organized for the sole purpose of giving Orbán an opportunity to meet Pharaon in person without arousing suspicion and, second, that the subject of their meeting was of a private nature. As for the confidentiality of Jordanian investments the answer is simple enough. Pharaon’s front man is a Jordanian lawyer who is behind the nine Hungarian real estate purchases that have been sealed so far. Surely, the Jordanian partner doesn’t want to reveal details of Pharaon’s purchases, which were most likely acquired on the cheap in exchange for some benefits to the Hungarian partners. I find Eörsi’s hypotheses convincing.

November 15, 2016

The Orbán government stands fast at home and abroad

At home

Viktor Orbán was expected to have a difficult time in parliament today. It was one of those times that the prime minister has to answer questions. He cannot pass the unpleasant task on to one of his ministers or even to undersecretaries. All three opposition spokesmen wanted the prime minister to say something about Index’s revelations concerning Antal Rogán’s suspicious business activities which, on the surface at least, seem to involve kickbacks and money laundering.

Opportunities to confront the prime minister directly are rare, and therefore each opposition party should designate its best person to pose the question. I’m afraid MSZP’s choice of László Varga wasn’t wise. His “witticism”—if you can call it that—about Antal Rogán’s inability to see reality from his helicopter and the size of his apartment fell flat. For Orbán, who can shine in such a situation, Varga’s poorly formulated question was easy to answer and counter. Orbán never uttered Rogán’s name but instead reminded the socialists of the days when the MSZP-sponsored hunger marches were organized by “an opulent euro millionaire,” a reference to a high-level MSZP politician who was discovered to have 200 million forints worth of euros in an Austrian bank.

Bernadett Szél, co-chair of LMP, was a great deal more specific. First, she recalled all the lies Rogán told about the residency bonds and about his relationship to Balázs Kertész. Szél specifically wanted to know how long Antal Rogán can remain a minister. She reminded Orbán that he as prime minister is responsible for the composition of his government and therefore it is he who must take responsibility for the behavior of his ministers.

This question couldn’t be sidestepped. Orbán had to give a more or less straight answer. His reply: “I don’t have anything to do with political bluster and political tabloid sensations. I am interested only in performance within the government. Whatever has been happening to Antal Rogán so far only strengthens his position. Don’t think that these accusations shatter us or that they force us to think of them at all. I consider the accusations no more than infantile sham which I simply don’t take seriously. If one word of this affair were true you would have filed charges already.”

Viktor Orbán today in the Parliament

Viktor Orbán in parliament today

Finally, György Szilágyi of Jobbik rose and listed all the lies Rogán uttered in the last few days. He inquired why Orbán as prime minister tolerates this. Orbán pretty much repeated what he said to Szél: “These are political sham attacks that I don’t take seriously. Every attack I have heard so far only increases my trust in the minister.” Orbán also cleverly used this opportunity to bolster his defense of Rogán by pointing out that the attacks are no so much against his minister as against himself and his government. His final words to Szilágy were: “a politician calling another politician a liar is not very original.”

So, for the time being Rogán’s position is secure. He has been an indispensable associate who, by the look of things, brought billions of euros into the coffers not only of the country but most likely also of Fidesz, in addition to enriching himself. Orbán at the moment thinks so little of the strength of the opposition that he believes that he can withstand all the charges. Most likely he is right.

Abroad

Hungarian papers barely mentioned an extraordinary dinner meeting of foreign ministers held on Sunday, which was inspired by German foreign minister Frank-Walter Steinmeier. In light of the unexpected victory of Donald Trump, a man with no background in foreign affairs, Steinmeier thought it was important for the EU foreign ministers have a common policy when dealing with an unpredictable Washington. Federica Mogherini, the quasi foreign minister of the European Union, agreed and the meeting was scheduled.

It was rumored at the time the meeting was announced that Foreign Minister Péter Szijjártó would not attend but would instead send one of his undersecretaries. It was an indication that Hungary, unlike most of the EU member countries, didn’t believe the emergency meeting was necessary. Since Viktor Orbán, alone among European politicians, rooted for Trump, he hopes that the new president will look upon his regime favorably. That the foreign minister opted not to attend the emergency meeting should give Hungary another gold star in Trump’s book.

Three foreign ministers did not attend the Sunday meeting. Predictably, the UK’s Boris Johnson was absent. After all, Britain is on its way out of the Union and needs to be on especially good terms with the next president of the United States. France’s Jean-Marc Ayrault sent an envoy due to a scheduling conflict. And, as euobserver.com said, “Hungary’s pro-Trump Prime Minister Viktor Orbán also kept his top foreign envoy at home.”

Assessments of the Sunday dinner meeting vary. According to critics, it was far too early for the foreign ministers to get together since we know practically nothing about Trump’s foreign policy objectives. Mogherini, on the other hand, declared the meeting a success, saying that the foreign ministers agreed “to engage with the incoming administration even from this very first week of transition,” meaning right away.

Meanwhile, Szijjártó decided to speak up and explain Hungary’s position. He found “the hysteria caused by the US presidential elections that swept through the European political elite pathetic and at the same time amusing.” Hungary will not take part in this hysteria because it considers Trump’s election good news. The Hungarian government finds the president-elect’s idea to stop “democracy export” beneficial to the world.

It should be noted that Viktor Orbán’s Visegrád 4 friends decided not to follow in the footsteps of their pugnacious Hungarian friend. I wonder whether there was any consultation among the four countries ahead of the Sunday dinner meeting. I suspect there was, but that Poland, Slovakia, and the Czech Republic don’t want any more open confrontations with the rest of the European countries. They gave the EU a hard enough time on the refugee issue and don’t feel like sticking their necks out for Donald Trump, who may be courting Russia at the expense of Eastern Europe.

November 14, 2016

The Orbán government’s corruption unveiled by investigative journalists

Index published an extraordinary piece of investigative journalism on November 11, written by András Dezső, Szabolcs Panyi, and Nikita Hava. The first two reporters are well known for their hard-hitting stories about Jobbik and Fidesz. The third person, who appears on Facebook as Hava Nikita Vladimirovics, calls himself “egy ruszki Magyarországon.” He is well versed in Russian-Hungarian affairs.

The team has been looking into Antal Rogán’s shady business ventures for about a year. As we know, investigative journalism is an expensive affair and Hungarian media outlets are far too poor to undertake such ambitious projects on their own. But thanks to the financial assistance of Transparency International Magyarország and Független Médiaközpont (Independent Media Center), plus of course a lot of hard work, these three young journalists did a bang-up job. I should add that for the Georgian aspects of this complicated corruption case Tazo Kupreishvili, editor-in-chief of News.On.ge, assisted the Hungarian team.

The article is a detailed account of the close working relationship between Balázs Kertész, a lawyer who has been making a concerted effort to stay out of public view, and Antal Rogán, currently the number 3 man in the Orbán government. His job title, minister in charge of the prime minister’s cabinet office, is intentionally meaningless. His real task is to spend government money on Fidesz propaganda. He was responsible for funding the anti-immigrant campaign, including staging the referendum. Rogán has long been suspected of being corrupt. But between 2006 and 2014, when he was mayor of Budapest’s posh District V, he gained the reputation of being one of the most corrupt officials in the Orbán administration.

If the relationship between Lőrinc Mészáros and Viktor Orbán is often described as that of a mafia boss and his front man and if the Simicska-Orbán alliance was more like a business partnership, with Simicska acting as a financial adviser, the Kertész-Rogán alliance is a combination of the two. According to the authors, Balázs Kertész is the person who came up with all the schemes that made Rogán (and I assume Kertész as well) a very rich man.

Balázs Kertész at Antal Rogán's inauguration of minister

Balázs Kertész at Antal Rogán’s inauguration as minister

Although stories about Rogán’s more than shady real estate deals have been circulating for only a few years, he began his unsavory career much earlier. His and Kertész’s names first came up in 2003 when the K&H Equities scandal surfaced. A stockbroker named Attila Kulcsár was running a Ponzi scheme. Fidesz, then in opposition, tried to dump the whole scandal on the socialists, but it turned out that several people close to Fidesz were also involved. Among them, Antal Rogán (age 29) and Balázs Kertész (age 27), whose names were found in Kulcsár’s VIP list. Although the members of the parliamentary committee that investigated the case had questions about the two men, thanks to Péter Polt, the chief prosecutor, their names were dropped from the list of suspects.

This early brush with the law was nothing in comparison to what happened in District V. Balázs Kertész was the first to become a member of the district council. Soon enough he was followed by two of his friends from Fidelitas days, Antal Rogán and András Puskás. (Fidelitas is Fidesz’s youth organization, a place where aspiring young politicians learn the tools of the trade.) In no time the trio was running the show, despite the fact that the mayor was a socialist. In 2006 Rogán decided to run for district mayor against the socialist Pál Steiner and won easily. By that time Kertész was deeply involved in the district’s finances. Apparently he was the one who came up with the idea of selling expensive pieces of real estate at below market prices. He designed the transactions in such a way that neither he nor Rogán would suffer any legal consequences from cheating the district. The buyers, of course, had to pay a “surcharge”/kickback, apparently thousands of euros. How much of this money went to Kertész we don’t know.

Kertész also seems to be behind Rogán’s lucrative residency bond business. After Kertész left politics in 2010, he returned to the prestigious law firm where he began his legal career. A couple of years later, most likely in 2013, he joined a much less distinguished law firm. It was this firm that got the job of handling the administrative work for the applicants for residency bonds. Their fee was €5,000, and we are talking about 2,000-3,000 applicants so far. Of course, we don’t know whether, in addition, the Kertész-Rogán duo received kickbacks from the intermediaries abroad who got €50,000 per transaction. I suspect yes.

The most spectacular achievement of the Index team was the discovery of two videos. One proved that Balázs Kertész, Antal Rogán, and Árpád Habony met, despite Rogán’s denial. The other showed three highly-placed Georgian businessmen discussing a power plant to be financed by the Hungarian Eximbank. The parties to this discussion were the representative of the Bank of Georgia in Hungary, a Georgian-Israeli businessman, and the former prime minister of Georgia (2009-2012), Nika Gilauri, who earlier had served as minister of energy and minister of finance.

Unfortunately the meeting took place on a very noisy street, so not everything is audible. It is, however, clear that 5% of the Eximbank loan for the power plant has to be paid to Balázs Kertész. It is also obvious from the partial transcript that the money should be paid in advance in order “for them to start working.” I assume the work entails convincing Eximbank to grant the loan. The man who most likely has that job is András Puskás, deputy CEO of business operations at Eximbank, who used to be Rogán’s right-hand man and deputy in District V. So far no decision has been reached on the Georgians’ request for $68 million. And after these revelations, I doubt that they will see a penny of the promised loan. Whether Kertész has already banked over $3 million on this deal is unknown.

From Index’s article as well as some other commentaries we get a sense of how Kertész and Rogán have reacted to the probe. First, Kertész must have known for some time that journalists were after him. As the investigative team noted, “the closer we got to him, the more evidence of his existence disappeared.”

Second, there is a very good possibility that Kertész and Rogán laid a trap to discredit whatever Péter Juhász, Együtt’s sleuth, and the journalists might uncover. They enlisted a couple of “reliable” Fidesz sources to claim, independently of one another, that Balázs Kertész had been arrested by TEK and that many hundreds of forints were also impounded. The story was, of course, a hoax. If newspapers reported a false story, it would cast doubt on any subsequent stories about Kertész they might publish. At least one Hungarian newspaper fell into the trap.

Third, it is hard to believe how stupidly Antal Rogán tries to cover up his misdeeds. He thinks that if he denies that something ever happened it will simply go away. He denied his helicopter trip (documented by Népszabadság) and in this instance denied his meetings with Habony and Kertész (where again, hard evidence proves the contrary).

Fourth, perhaps his stupidest move once the Index story broke was to remove the recent picture showing Kertész at his inauguration as minister. For such an occasion a politician can normally invite his family members and a very small number of his closest friends. By removing the picture he practically admitted his guilt.

The most important question still remains. How much does Viktor Orbán know about all this? He has stuck with Rogán through thick and thin in the last couple of years, so my suspicion is that he is privy to everything.

November 13, 2016