Tag Archives: György Matolcsy

The chairman of the Hungarian central bank discovered a U.S. plot to topple the Orbán government

The independent media outlets have a jolly good time every time György Matolcsy, the chairman of Hungary’s Central Bank, opens his mouth. Well, he spoke again today. By now even usually polite politicians have gotten to the point that they openly say that Matolcsy is not quite of sound mind and suggest that the chairman of the National Bank seek medical help.

So what happened to prompt such a response? The bank chairman delivered his report to parliament on the performance of the Hungarian National Bank in the last two years. As expected, he said that the institution under his direction had performed superbly. Under his excellent stewardship the bank’s monetary strategy added at least 1.5 percentage points to Hungary’s already respectable economic growth.

Not too many members of parliament were interested in Matolcsy’s self-praise. Only four or five MPs, just those who had to attend, were sitting in the huge chamber. I must say that those who were absent missed a great performance and a by and large incoherent speech about “a very grave shadow, a very dark shadow, a deep grey shadow” that darkened the otherwise sparklingly sunny Hungarian sky. This shadow was a treacherous ally’s attempt to topple the Orbán government with the help—you won’t believe it—of Hungary’s National Bank. But thanks to Matolcsy’s vigilance, the coup was averted.

I believe that for readers to truly appreciate Matolcsy’s muddled, rambling speech I must translate the relevant passages:

Here we should stop for a minute because there was a shadow on the year 2015, right at the beginning, in the first four months. That shadow had been visible already from August 2014 on. In 2015 one brokerage firm after another went belly up. First it was the deceitful Buda-Cash, then the deceitful Hungária Insurance Company, and finally the even more deceitful Quaestor failed; it failed because the central bank with its new methods of investigation found all the tricks this company had used in the last 10-15 years.

However, this shadow was actually good tidings. It was a good piece of news, something the whole country can be happy about, because we cleansed the Hungarian financial system by removing these robber barons. . . . But this good news was overshadowed by the fact that a large country which is a NATO ally via its embassy in Budapest began activities aimed at toppling the government and the central bank in the fall of 2014. . . . The central bank naturally would have found the deceitful brokerage firms, but it mattered when we found them: in January, February, and March. Why did we find them in January, February, and March?

Because some people wanted to use the Hungarian National Bank to create a bank panic in Hungary in April. And this bank panic actually occurred. It lasted for four hours in four different cities. We could say that this isn’t much. But it was shocking that some people, our allies and friends, wanted to use the Hungarian National Bank to topple the government by methods using the military and intelligence services.

This is a very grave shadow, a very dark shadow, a deep grey shadow. It has no different shades: it is just dark.

The few people in the chamber were stunned. It was immediately clear to everybody that Matolcsy was talking about the United States.

This muddle is full of unanswered questions. In what way did the United States want to influence either the brokerage firms or the central bank? Why was the so-called coup timed for April? How did Matolcsy manage to foil the Americans’ plans?

Source: 444.hu

The opposition politicians who had gathered to engage in the usual parliamentary debate after such a report were stunned. They were simply not prepared for such astonishing nonsense and concentrated instead on refuting the glowing report presented to them by the chairman of the central bank. János Volner of Jobbik pointed out that the bank did nothing until Quaestor actually went under although it had been known ever since April 2010 that Quaestor was misleading its customers. LMP’s Erzsébet Schmuck also questioned the success story reported by Matolcsy and commented on the unorthodox way the central bank operates nowadays. It was only Attila Mesterházy who had recovered enough from the shock to question Matolcsy’s accusations against the United States. He even managed to inquire whether the bank chairman had reported his knowledge of a foreign power’s meddling in Hungary’s internal affairs to the competent authorities. He called on the appropriate politicians to convene the parliamentary committee on national security to ask the Hungarian intelligence services to clarify the situation.

Well, I have a few questions of my own. My very first one would be whether Matolcsy shared the information he received about this alleged American plot with Viktor Orbán. I suspect he did and that, for one reason or another, Orbán decided that the so-called revelation was useful at this time. I wouldn’t be surprised if Orbán, banking on Donald Trump’s extremely low opinion of his predecessor’s “democracy export,” thinks that this kind of news, coming from the chairman of the Hungarian National Bank, will float in Donald Trump’s Washington.

The U.S. Embassy rarely gets engaged in arguments with the Hungarian government, but Matolcsy’s accusation was too much even for the normally calm American diplomats in Budapest. Both Népszava and Index wanted to know the U.S. reaction to Matolcsy’s garbled nonsense. The Embassy spokesman, Richard Damstra, released the following statement: “Hungary and the United States are partners and NATO allies. The United States didn’t attempt to overthrow the Hungarian government either in 2014 or at any other time and we can’t find it credible that any other NATO member state would attempt such a move.” Perhaps this will convince the Hungarian government that American diplomacy, at least for the time being, hasn’t changed all that much and that even the Trump State Department, such as it is, won’t believe that the Obama administration was planning to stage a coup in Hungary.

February 23, 2017

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 fate of a journalist, Gergely Brückner, who told the truth

Népszabadság is not the only Hungarian publication that has been harassed by the authorities, although its shutdown on October 8 was the Orbán government’s bluntest attack on the Hungarian media. Shortly after the destruction of Népszabadság came an assault on a journalist who had investigated one of the Orbán government’s dubious financial transactions. This time the Hungarian National Bank “filed a complaint against an unknown perpetrator,” actually Gergely Brückner, a highly regarded journalist at Figyelő (Observer), a financial weekly whose most important articles are unfortunately not available online. Kolos Kardkovács, head of the central bank’s legal department, filed charges against him for “infringement of trade secrets” in connection with the purchase of MKB Bank. The article Kardkovács objected to appeared in Figyelő’s very first issue in January 2015.

Let’s backtrack a bit to mid-December 2014 when I wrote a post titled “The first state-owned Hungarian bank is already in trouble.” MKB Bank was supposed to be sound since its former owner, Bayerische Landesbank, prior to the sale pumped 270 million euros into it. This was supposed to be enough to cover all possible losses over the following few months. Government officials were sure that the bank would be profitable by 2016 “at the latest” and that “the reorganization of MKB Bank will not burden either the state or the taxpayers.” Yet three months later Viktor Orbán and György Matolcsy, at a joint press conference, said that 300 billion forints are urgently needed to keep MKB Bank afloat. Orbán announced that since “the consolidation of MKB Bank will be done by the Hungarian National Bank, it will not cost the budget or the Hungarian taxpayers anything.” The same lie that was used to justify the establishment of the central bank’s foundations.

Between September and December 2014 Brückner gathered background information for a series of articles on the less than transparent purchase of MKB Bank. During 2015 and 2016  he published at least a dozen articles on the reorganization and eventual sale of MKB Bank to several investors of, again, less than transparent identity.

The decision of the National Bank to file charges against him, however, is based on a single sentence from his initial reporting. The sentence reads: “Our paper has learned that shortly after Lázár became the owner [of MKB Bank] he received a letter from Matolcsy in which the bank president indicated that even in the short term tens of billions of forints will be necessary in order to avoid bankruptcy and that may not be the end of the reckoning [cech]. (Our sources talk about 75 billion forints and later another 200 billion capital increase).” The Hungarian National Bank never denied any of the information provided by Brückner about MKB Bank. They never asked for a correction. Nothing. But suddenly, 22 months later, they discovered that Brückner is guilty of the infringement of business secrets.

Gergely Brückner

Gergely Brückner

Brückner did what a good journalist should. He pointed out that the purchase of MKB Bank was a very bad deal, for which the Hungarian taxpayers have paid dearly ever since September 2014. Whoever sealed the deal either didn’t exercise due diligence or, what in my opinion is more likely, Viktor Orbán was so eager to acquire a foreign-owned bank and transform it into a bank which would eventually be in Hungarian hands that he simply didn’t care about the exorbitant amount of money it would take “to reorganize” it.

The policemen who questioned Brückner demanded that he reveal his sources, which he refused to do. Later he said that in fact he no longer remembers who his source was for this particular piece of information. He had conversations with at least 15 men and women who had information about the case both in Hungary and in Bavaria. He didn’t think this sentence was of any great significance and therefore paid no special attention to it. It was the overall picture that interested him, that the purchase of MKB Bank was a very bad business deal.

This case is yet another example of the warped legal system in Hungary and of the government’s attempt to clamp down on media criticism. Although scores of people have filed complaints in connection with the shady affairs of Antal Rogán and György Matolcsy, neither the police nor the prosecutors move a finger. Their usual answer is that there is no reason to investigate. But if a journalist accurately reports on a disastrous bank purchase, the police are ready to jump and insist that he reveal his sources, which according to current Hungarian law are protected. We don’t yet know whether the investigative judge will decide to go forward with the case.

János Lázár, who can quite often surprise us, once again did so in this case. Last Thursday at his usual press conference he expressed his disapproval of harassing journalists, pressuring them to reveal their sources. I think it’s safe to assume that he was not himself the source; that is, he presumably did not make public the letter he received from Matolcsy. But the information must have come either from his office or from Matolcsy’s, perhaps too close for comfort.

How badly have Hungarian taxpayers been burned by the deal? It had to be a colossal loss. The bank into which 300 billion forints was poured, over and above the 35 billion purchase price, was sold in March 2016 for 37 billion forints. It was sold to a consortium of domestic and foreign equity funds, with Hungarian owners getting a majority stake. One member of this consortium is a Hungarian private equity fund called Metis, which will have a 45% stake in MKB Bank. Metis was launched only recently with a registered capital of 100 million euros. The other prominent member is Blue Robin Investments SCA, whose owners are apparently Indian and Chinese investors. It will also own 45% of the bank. A Hungarian pension fund will hold the remaining 10% of the shares.

By July Brückner learned that “the most important and real owner” behind Metis is László Szíjj, owner of Duna Aszfalt, which people usually refer to nowadays as the new Közgép. Közgép was Lajos Simicska’s firm, which in the past used to receive most of the government contracts. Now that Simicska is one of the chief enemies of Viktor Orbán, his place has been filled by a number of oligarchs, one of whom is Szíjj.

One more thing about Figyelő. Although the weekly is profitable, it is up for sale because of an acrimonious ownership dispute that has been going on for about two years. The journalists who work at the weekly are almost certain that the new owner will be Mária Schmidt, the court historian and director of the House of Terror who became a very wealthy woman after the unexpected early death of her husband. If Schmidt does indeed become the owner, I’m sure Gergely Brückner will quickly become “redundant.”

November 1, 2016

Viktor Orbán shut down Hungary’s leading opposition paper

By now the whole world knows that Hungary’s leading daily newspaper, Népszabadság, is no more. Although the Budapest correspondents of Reuters and the Associated Press pointed out that the newspaper has lost $18.4 million since 2007, don’t allow yourselves to be fooled. Mediaworks, which owns Népszabadság, makes plenty of money on its other publications, including several profitable regional papers and the popular Nemzeti Sport.

Fidesz may say that it considers “the suspension [of Népszabadság] a rational economic decision,” but ceasing publication altogether is not considered to be an economically sound choice for solving the financial woes of a business venture. Reorganization, restructuring, reducing the size of the workforce–these are some of the most often used instruments to salvage a company. Suspending publication, by contrast, can be a costly affair. There are most likely contracts in force to print the paper for the next few months, and what about the 30,000 some subscribers who will not receive their daily paper on Monday? No, closing the doors of Népszabadság has nothing to do with economics. It is a sordid political maneuver executed by the far-right, dictatorial leader of a country that can no longer be called a democracy.

The hypocritical prime minister wants us believe that “it would be a violation of the freedom of the press if [Fidesz] would intervene in the affairs of the owner of the media,” but it is almost certain that this sudden move was orchestrated by Viktor Orbán himself. Just as we learned only recently that he had been the one who handed down the order to investigate Ökotárs, the civic group responsible for the dispersion of the Norway Funds, two years ago. He lied then as he does now. At the time of the raid on Ökotárs, he was asked whether he played any role in that shameful affair. He denied it, adding that if he had done so, it would have been a crime. Now we have the proof. We know that the prime minister of Hungary, by his own admission, committed a crime in 2014. And I suspect that he did so again while working to eliminate a paper that must have nettled him, especially lately. I wonder what his next step will be in his quest to destroy all independent media outlets. He has been at it for some time, but earlier he didn’t use such heavy-handed and so openly dictatorial methods. By now, it seems, he no longer cares about even the semblance of legality and media freedom.

Darkness, Thomas Toft / flickr

Darkness, Thomas Toft / flickr

In the last few months rumors were flying that the government was trying to buy, through some middleman, Mediaworks, currently owned by Vienna Capital Partners, a private equity firm. In June 2016 Népszava, the oldest Hungarian socialist newspaper, learned that Heinrich Pecina, the majority owner, asked for a meeting with Viktor Orbán. Interestingly, the Hungarian prime minister had no compunctions about negotiating with the owner of Népszabadság concerning the possible sale of the paper. Népszava at that point believed that the “buyer” would be the mysterious “adviser” of Viktor Orbán, Árpád Habony, who is most likely Orbán’s “stróman,” as a front man is called in Hungarian. Others suspected Lőrinc Mészáros, who is usually described as the ultimate “stróman,” the alter ego of the prime minister whose newly acquired fabulous wealth is only partly his. The employees of Népszabadság were living under the constant threat that they would end up in the street and be replaced by a new pro-government owner, just as happened to Magyar Hírlap in 2004 when Ringier, an international media group with headquarters in Switzerland, sold the paper to Gábor Széles, a billionaire with far-right political views.

The journalists working for the paper might have had their forebodings, but I’m sure they never dreamed of such an abrupt and barbarous end to their paper. The question is what made Orbán set aside all niceties and finesse and show his true ruthless self. It seems that the straw that broke the camel’s back was a recent series of investigative articles that appeared in the paper about Hungarian National Bank Chairman György Matolcsy and Antal Rogán, the propaganda minister.

The paper reported that Matolcsy’s lover, while working for the bank, received an inordinately high salary. And once she left the bank, Matolcsy placed her in lucrative positions at some of the bank’s foundations, which serve as conduits to transform the “profits” of Hungary’s central bank from public to private funds.

As it turned out, that was not the end of the Matolcsy story. Since Matolcsy is in the middle of divorcing his wife, he needed an apartment. Soon enough he found just the right one. A lovely, very expensive apartment in the Castle District of Buda. The only problem is that the apartment belongs to the president of the Hungarian branch of Unicredit, Mihály Patai, who is currently the chairman of the Banking Association. Considering that György Matolcsy is heading the very institution that has a supervisory function over the Hungarian banking system, this whole arrangement is highly unethical and suggests a conflict of interest. Népszabadság had begun to investigate possible favors extended by the central bank to Unicredit.

That was bad enough, but then came another story, this time about Antal Rogán, whose extravagant lifestyle and questionable financial dealings have been the talk of the town for a long time. Népszabadság learned that Rogán, his wife, and one of their sons traveled in princely fashion to a wedding. They used a helicopter. Well, I guess nothing is wrong about traveling by helicopter to a wedding if you have enough money, but the story was not so simple. First, Rogán denied the whole thing–until he was confronted with a photo showing him heading toward the helicopter. At this point he switched his story and talked about a kind friend who generously gave him a ride back from the wedding. A day later it turned out that he had used the helicopter both to go to and to return from the wedding. Lies, lies, lies.

Well, these two or three embarrassing stories about people who are perhaps the closest associates of Viktor Orbán were too much for the mafia boss. He gave the order: shut them down! After all, he had no idea what else those two or three journalists who had worked on the stories know. And what paper that wants to live another day will hire them to continue their work? Shutting down Népszabadság doesn’t merely have a chilling effect; it puts Hungarian investigative journalism into a deep freeze.

Viktor Orbán is a vengeful, vindictive, malevolent man who doesn’t forget and who is ready to pursue his victims until they are utterly destroyed. There is no mercy once he decides that somebody is an enemy. At the top of his enemy list are Gábor Iványi, the kind minister of the Hungarian Methodists; Ibolya Dávid, whom he blames for his lost election in 2006; and Ferenc Gyurcsány, who had the temerity to win a television debate against him. And then there are the other lesser-known victims who at one time or the other stood in his way: they often languish in jail for months or years on trumped-up charges. One could go on and on.

Finally, let me quote a bitter Facebook note by Mária Vásárhely, a media expert: “Thank you, European Union. It matters not how painful it is, but it must be said that without you Hungary wouldn’t have ended up where it is now. If you didn’t finance the building and functioning of Orbán’s dictatorship, the whole edifice would have crumbled already. It doesn’t matter how painful it is to point out, but the destruction of Népszabadság, one of the last bastions of press freedom, was purchased with the immense amount of money you have poured into the country and which is now being used by the criminal oligarchs of a criminal state.”

Unfortunately, there is a great deal of truth in this bitter note.

October 8, 2016

When a love affair is no private matter: The case of György Matolcsy

Until very recently the Hungarian media had left politicians’ private lives alone. In the last few months, however, there has been a decided change in attitude. I think it was 888.hu, a government-inspired internet site that was supposed to be hip and capture the imagination of the younger generation of right-wingers, that broke with this hands-off policy. The editor-in-chief, the notorious Gábor G. Fodor of Nézőpont Intézet, decided to publish nude photos of the wife of MSZP party chairman József Tóbiás. A few weeks later Ripost.hu, also a government-sponsored tabloid site, came out with a juicy story about János Volner, a Jobbik MP, who was found behind some bushes with a woman friend in Pécel, a suburb of Budapest. What the two were doing in the bushes was widely discussed at the time, especially in the pro-government media. So, thanks to the newly created pro-government tabloids, the taboo has been broken.

The story of György Matolcsy’s divorce and his liaison with a 31-year-old woman, Zita Vajda, has been garnering a lot of attention. The media isn’t interested in their romantic attachment. Rather, they view the story as further proof of the incredible corruption that surrounds the Hungarian National Bank (MNB) under the leadership of György Matolcsy.

Regular readers of Hungarian Spectrum are only too familiar with Matolcsy’s generosity toward his friends and family—and his family is large since there are a lot of Matolcsys. He is especially generous toward his lover, for whom he is divorcing his wife of thirty years. In fact, Matolcsy is taking care of Zita’s mother as well. It is easy to be generous with someone else’s money, especially when that money comes straight from Hungary’s central bank. Matolcsy has a track record of using bank funds for questionable purposes. The bank bought some very expensive real estate, and it transferred an incredible amount of public money from the bank to private foundations it set up, which I described as a perfect money laundering device.

Népszabadság stumbled upon the case of Matolcsy’s liaison with Zita Vajda by accident. What the paper was investigating was her fabulously high salary. She was making more money than a department head, and her job was merely to prepare and organize Matolcsy’s foreign travel and negotiations. When Matolcsy became chairman of the central bank in 2013, he fired a number of staff members, including well-qualified economists, and replaced them with his favorite associates from the ministry of the national economy. Zita Vajda was among them. Vajda’s very high salary (1,730,000 ft.) was undoubtedly the subject of gossip, and I assume that one of the employees convinced Népszabadság to investigate. It took a little while because the bank tried to stall, but eventually the paper got the information with the following sentence tacked on at the end: “György Matolcsy’s personal life and his divorce is a private matter.” Was this a mistake or was the information about his divorce, which was not publicly known, intentionally leaked? I don’t know, but it supplied another incentive to pursue the matter. And the deeper Népszabadság dug, the more dirt it uncovered.

In addition to her job at the bank, in 2014 Zita Vajda was made a board member of the bank’s Pallas Athene Domus Innovationis (PADI) foundation. A year later she became a member of the board of a corporation created by the same PADI. Népszabadság calculates that the salary of a board member of one of these foundations is 555,000 ft./month. Soon enough it became known that Zita Vajda’s mother, Mrs. Péter Vajda, an employee of a public accounting firm, takes care of the accounts of all six foundations. The company, thanks to Zita Vajda’s relationship to Matolcsy, received approximately 27 million forints from the foundations in 2015 alone. The company’s total revenue that year was only 62 million forints. Thus, almost half of the public accounting firm’s revenue came from the bank’s foundations.

Just to keep the record straight, Zita Vajda no longer works for the bank. I guess it was deemed advisable to remove her from the limelight because of the divorce and impending marriage. Ripost recently reported that the Matolcsys separated months ago and that divorce papers had already been filed. After Vajda’s departure from the bank, Matolcsy made sure that she would not suffer any financial loss. Thus, in addition to her two board member jobs, she became deputy director of the Pallas Athene Geopolitikai Alapítvány (PAGEO) and also a “researcher” in the PAGEO Research Institute. Her income from these two new jobs amounts to 1.2 million ft. /month, which doesn’t quite match the money she made at the bank. But if you add up her income from the four different sources, her salary may be as high as 2.3 million forints a month.

Of these four jobs the most intriguing is her “research position” at PAGEO to the tune of 600,000 ft. /month. As far as we know, she spent two months in India where she studied yoga. In fact, in her spare time as “international secretary” to Matolcsy, she gave yoga lessons to interested bank employees. Her knowledge of India certainly doesn’t merit 600,000 ft. per month. The top expert on India, a university professor, makes only 380,000 ft. Népszabadság discovered one short article online that she wrote about Dharavit, one of the largest slums in Mumbai. But she is no India expert. The job was created for her because of her relationship to Matolcsy. After all, the happy new couple will need plenty of money to maintain a life style becoming the Hungarian central bank chairman and his wife.

The lady seems talented--in yoga

The lady may be talented–in yoga

Matolcsy, we know, is attracted to certain Eastern beliefs/superstitions. For instance, it seems that Matolcsy believes in the ill effects of certain numbers. The number 8 has ominous consequences, and therefore he changed the official address of the bank from Szabadság tér 8-9 to Szabadság tér 9. People claim that certain rooms inside the building had to be renumbered to avoid the number 8.

Another hypothesis that’s floating about in Budapest is that Hungary’s central bank is run by a man who accepts the Tibetan Buddhist belief that there are four days in the year when positive or negative actions can be multiplied ten million times. The best description I could find of this belief came from the Kopan Monastery in Nepal. Since these days are calculated on the basis of the lunar calendar, the dates vary from year to year.

Upon hearing stories about Matolcsy and the Buddhist ten-million multiplier days, the journalists at Népszabadság began checking the calendar of important bank announcements and came to the conclusion that there might be something to the story. The article correlated these special days with important bank announcements. It is hard to know, without going over all the important decisions that have been made in the last three years, whether there is any truth to this hypothesis. I did check the dates to ascertain what day of the week we are talking about, and I found two announcements that had been made on Saturday, an odd day to pick.

Buddha stature from Sarnath / 4th century

Buddha statue from Sarnath / 4th century

Soon after the article on the strange happenings in the central bank was published, the bank’s spokesman denied the allegations and called it absurd, pointing out that since March 2013 the Hungarian National Bank has published 818 news bulletins and 455 publications. Therefore there has been hardly a day when the bank didn’t make some kind of a statement. Yes, the hypothesis may sound strange, but by now one can imagine almost anything about the affairs of the bank under the leadership of Matolcsy, who some years ago claimed that all Hungarian children, just like the Japanese, are born with a red spot on their fannies which, of course, was nonsense.

In the wake of the revelations of Népszabadság, the pro-government papers have been silent. Matolcsy and his girlfriend have disappeared from sight, and Zita shut down her yoga blog in a great hurry. The supervisory board headed by a Fidesz politician claims that it has no jurisdiction over Zita Vajda’s salary. We can be pretty sure that everything will go on as if it nothing happened in MNB, which the author of an editorial renamed Magyar Nemzeti Budoár (Hungarian National Boudoir). Another editorial, which appeared in Magyar Nemzet titled “Sötét verem” (Dark pit), emphasized that although the paper is not fond of tabloid stories and the romance between Zita Vajda and György Matolcsy is a private matter, there are times when a love affair loses its private quality. This happens when public money is involved. According to the author, “Matolcsy for a very long time has owed the public an explanation of his sundry questionable affairs.” And if he misses the opportunity to do so, “he shouldn’t be surprised if many people think that love is not only a dark pit but might also hide corruption.”

Perhaps the best line came from Zoltán Bodnár, former deputy chairman of the central bank, who has a good sense of humor. At the time of the upheaval over the establishment of private foundations by the Hungarian National Bank, Matolcsy steadfastly maintained that with the transfer of the money to private foundations “it had lost its public character.” So, when a few days ago a reporter asked Bodnár what he thought about the national bank under Matolcsy, Bodnár quipped: “it has lost its character as a central bank.”

September 15, 2016

Another government shake-up: Greater confusion guaranteed

János Lázár has been the focus of a great deal of media attention of late. His often provocative behavior and his less than diplomatic comments about fellow politicians and important oligarchs made a lot of political observers wonder when Viktor Orbán will deem it necessary to shove his currently number one man into the background. The discussion over Lázár’s political future gained intensity last fall with the appointment of Antal Rogán as chief of the Prime Ministry’s Cabinet Office, nicknamed Viktor Orbán’s propaganda ministry, which was created especially for Rogán. Some people believed that the creation of this new office weakened János Lázár’s position. There were also reports that Lázár was not too keen on the idea of placing another center of power inside the Prime Minister’s Office.

Speculations over Lázár’s future flared up again when a week ago he announced the retirement of Mrs. László Németh, undersecretary in charge of financial services and postal affairs. Her appointment as minister of national development in 2010 caused quite a stir. She was an absolute unknown without much educational background. But she was Lajos Simicska’s close friend and business partner. Through her Simicska pretty well controlled the whole ministry of national development. In 2014 Orbán, who was obviously already thinking of loosening Simicska’s influence over financial matters, replaced her with Miklós Seszták. Surprisingly, this was not the end of Mrs. Németh’s career. Orbán found a place for her in the Prime Minister’s Office. Mrs. Németh hasn’t yet reached the official retirement age of 65, and therefore I assume that her “retirement” wasn’t exactly voluntary. But Fidesz will find a job for her somewhere else.

Mrs. Németh’s “retirement” is probably not related so much to the Orbán-Simicska fallout as to the so-called Spéder case, about which I wrote earlier. The case is very complicated, but the most likely explanation for Viktor Orbán’s ire and his decision to unseat one of his formerly favorite oligarchs was Spéder’s less than subservient behavior toward his benefactor. Certain financial transactions were made that, in Orbán’s opinion, hurt his government’s interests. It was Mrs. Németh who was supposed to keep an eye on Spéder, which she failed to do. At least this is the most likely charge against her.

But what does all this have to with János Lázár? Quite a bit. First of all, a week ago Lázár announced that Zoltán Spéder is his friend, whom he is not going to abandon. According to rumor, the police have taken, among other things, taped telephone conversations between Simicska and Spéder, which were most likely recorded by Spéder. Whether this rumor is true or not, most likely in Orbán’s head there is a connection between Simicska, Spéder, Mrs. Németh, and perhaps even János Lázár.

In record time Mrs. Németh was replaced by Andrea Bártfai-Mager and was given the title of government commissioner, a position that carries ministerial rank. Bártfai-Mager is a member of the National Bank’s Monetary Council, so György Matolcsy, chairman of the bank, may well have recommended her for the job. Most significantly, Bártfai-Mager will not be under the supervision of the head of the Prime Minister’s office, János Lázár, but will report directly to Prime Minister Viktor Orbán.

Mrs. László Németh and her replacement, Andrea Bártfai-Mager / Source: 444.hu

Mrs. László Németh and her replacement, Andrea Bártfai-Mager / Source: 444.hu

With these changes Lázár will lose power over important sectors of the government edifice: the affairs of the Hungarian Development Bank and 18 state-owned companies associated with it; the Hungarian Postal Service, which unlike its American equivalent is an important financial institution; and the integration of the credit unions, which used to be handled by Spéder. Lázár will end up looking after such things as public administration, rural development, EU subsidies, national policy, and heritage conservation.

Although strictly speaking it is an entirely different matter, I should mention in passing that it also looks as if the troublesome issue of the House of Fate, a kind of Holocaust Museum Orbán style, which was most likely Lázár’s idea in the first place, will be taken out of his hands. The task of doing something with the brand new, impressive building, which has been standing empty for well over two years, will be assumed by Zoltán Balog’s already overburdened ministry of human resources.

There is widespread consensus in Hungary that Orbán is heading a government that functions very badly. He himself seems to realize its shortcomings. But his usual fix is to change the government’s structure. He makes ad hoc decisions on structural changes, decisions that by now have resulted in a bloated government and total chaos. Dozens and dozens of government commissioners and over one hundred undersecretaries with all sorts of special jobs have only increased bureaucracy. The talk is always about efficiency and reducing the number of civil servants, but the number of political appointees keeps going up.

Now, it seems, Viktor Orbán has come up with yet another reorganization of the government. The announcement, which was totally unexpected, came from János Lázár this afternoon at his regular Thursday government “info.” He said very little about the details, not because he tried to be secretive but because I suspect he himself doesn’t know much about the impending changes.

So, what’s in the offing? I think Index put it best: “Orbán turns everything upside-down: he is creating two little governments.” Yes, this is the gist of it as far as I can ascertain. As it stands now, once a week the ministers and their undersecretaries get together for what we in English would call a cabinet meeting, presided over by Viktor Orbán. In Hungarian it is called “kormányülés” (government meeting). It is here that final policy decisions are made.

Now, in addition to this group, Orbán will create two “cabinets.” One will be called “gazdasági kabinet” and the other “stratégiai kabinet.” These cabinets will have wide decision-making powers. The idea is that these cabinets, whose membership will vary depending on the subject matter discussed, will allow government officials to focus on important questions in greater depth.

Such an arrangement might make sense if these “cabinets” had only an advisory role, but I don’t see how the decisions of the weekly meeting of ministers and those of the lower-level cabinets can be brought together into a cohesive whole. I’m convinced that the chaos and confusion that now exists in the Orbán administration is nothing compared to what will happen when two mini-governments compete with the real “cabinet.” I don’t know whether such an arrangement exists anywhere else in the western world or whether Viktor Orbán’s latest brainchild will have the dubious distinction of being a unique addition to his illiberal state.

July 7, 2016

György Matolcsy, a headache for Viktor Orbán

In the last few weeks György Matolcsy, chairman of Hungary’s central bank, appeared before parliament twice, and his performances there have been the butt of jokes.

The Hungarian National Bank is supposed to be an independent entity in the sense that its chairman cannot be instructed either by the government or by parliament as far as its monetary policy is concerned. Parliament can, however, exercise a supervisory function over the bank’s activities. Given the recent scandals surrounding the Hungarian National Bank, Matolcsy was required to answer questions from the floor.

On both May 17 and June 13 Matolcsy was asked about the details of the bank’s foundations and the billions these foundations either lent or gave away to Matolcsy’s friends and family members. On both occasions, MSZP’s Gergely Bárándy posed the questions, questions that Matolcsy either couldn’t answer or refused to answer. He simply brushed them aside and repeated three times: “Sham! Sham! Sham!” He declared that anyone who attacks him and the National Bank is doing great harm to the Hungarian currency. In return, Bárándy called him a liar. A few days later the Hungarian National Bank’s press department announced that Chairman Matolcsy is suing Bárándy for slander.

György Matolcsy at his appearance in the parliament on May 17 / MTI / Photo: Tibor Illyés

György Matolcsy at his appearance in parliament on May 17 / MTI / Photo: Tibor Illyés

This first performance was followed by a second, when again the opposition pressed Matolcsy regarding the money that was passed to the small bank of Tamás Szemerey, who happens to be Matolcsy’s first cousin. MSZP members of parliament also wanted to know what Szemerey’s wife was doing on the board of one the central bank’s foundations.

Matolcsy’s answer was curious to say the least. He has many cousins who have not received any money from the Hungarian National Bank. For example, László Trócsányi, the current minister of justice, is also a cousin through the Darányi and Héjjas families. Moreover, Márton Kasnyik, a journalist at 444.hu who is very critical of him, is also a cousin. Trócsányi, “although he greatly admires the bank chairman,” rushed to correct the record. He is in no way related to Matolcsy, he said, although Matolcsy had earlier claimed that the information about the family ties came from Trócsányi himself. As for Kasnyik, Matolcsy’s claim is far-fetched. Their last common ancestor lived sometime in the eighteenth century.

Bárándy didn’t stop at family ties. He also asked the bank chairman about numerology. He wanted to know whether it is true that Matolcsy has something against the number 8, and whether it is true that he banished the offending number both inside and outside of the bank. No more Room 8 inside. And the official address of the bank was changed from Szabadság tér 8-9 to Szabadság tér 9. Also, Bárándy wanted to know whether it is true that only people who were born on August 20, 1984 can work in the secretariat of the bank. Matolcsy’s reaction was one of great indignation. But instead of denying the rumors, he simply insisted that his antagonists are concocting conspiracy theories against him.

It was at this point that people began to question the mental competence of the bank chairman, including Gergely Bárándy himself who expressed his doubts about Matolcsy’s mental state on ATV’s Egyenes beszéd (Straight Talk).

Before I return to Matolcsy’s more serious problems, let me insert a bit of family history here. The Matolcsy genealogy was thoroughly researched by a relative, and the almost 100-page family tree is quite impressive. Students of history know the Matolcsy name mainly because of Mátyás Matolcsy (1905-1953), apparently a brilliant economist who ended up as a far-right politician in the 1930s and 1940s. He became a member of the Arrow Cross party and in 1946 received a ten-year jail sentence. He died in jail. Mátyás is only a distant relative of György.

It is a mystery why Matolcsy felt compelled to bring up the Darányi and Héjjas families. Kálmán Darányi, prime minister of Hungary between 1936 and 1938, is associated with the radical right in Hungarian politics, especially during the second half of his premiership when he appointed Germanophile politicians to his cabinet and had a hand in the preparation of the First Anti-Jewish Law. As for the Héjjas family, Iván Héjjas is synonymous with the White Terror. While Pál Prónay was in charge of the summary executions in Transdanubia, Héjjas was at the helm in the territories between the Danube and the Tisza rivers. Search me why a sane man would brag about such a lineage in connection with an alleged relative who turned out not to be a relative at all.

Turning back to the pressure being brought to bear on Matolcsy. After two years of wrangling in court, the Hungarian National Bank was ordered to release a study Századvég did for the bank for the modest sum of 1.8 billion forints. It turned out that the study the bank received had nothing whatsoever to do with the topic Századvég was supposed to analyze. It was, it seems, just another instance of money being laundered through Századvég with the assistance, in this case, of the National Bank.

Yesterday Matolcsy received a letter from Mario Draghi, chairman of the European Central Bank, who explained again that “Article 123 TFEU prohibits the ECB and national central banks from purchasing public debt instruments directly on the primary market.” In brief, the Hungarian central bank cannot invest in government bonds even if they are purchased on the primary market by its foundations.

And one final note. There are people of some importance in the Fidesz ranks who have reservations about Matolcsy’s activities. One is Gergely Gulyás, one of Orbán’s deputies, who is usually an eloquent defender of everything the Orbán government does. So when he says that “there have been some questionable financial decisions by the foundations,” it must mean that not all the Fidesz bigwigs support Matolcsy, that they are worried about the troubles his activities have brought to the party. Further proof that Gulyás must have reservations about the increasingly shady affairs of the government and other Fidesz-controlled institutions like the prosecutor’s office or the National Bank is that in a recent interview he admitted that several times he had toyed with the idea of leaving politics altogether. Indeed, this articulate, smart, always impeccably dressed “young gentleman,” coming from the upper middle class of the Buda bourgeoisie (budai úri fiú), simply doesn’t fit in with the likes of the brutish Szilárd Németh, his fellow deputy chairman of Fidesz. He comes across as someone who, in a different setting, would be a traditional conservative, and a conservative could never feel entirely at home in Fidesz.

June 16, 2016