Tag Archives: István Tarlós

Eradicating György Lukács’s heritage

György (Georg) Lukács (1885-1971), the Hungarian Marxist philosopher, might be controversial, but he was an important figure in twentieth-century western philosophy. Because of his life-long affiliation with the communist movement of the Soviet variety, however, the two far-right parties, Fidesz and Jobbik, have been doing their best to obliterate his name from the country’s collective memory.

These two parties found a willing accomplice in this task in József Pálinkás, president of the Hungarian Academy of Sciences between 2008 and 2014. Pálinkás, who earlier was a member of the first Orbán government and later a Fidesz member of parliament, is one of those who find any remaining vestiges of liberalism or socialism in Hungary abhorrent. He is no friend of the United States either. As soon as Fidesz won the national election and a few months later the municipal election in Budapest, Pálinkás’s first act was to start a campaign to remove FDR’s name from the public square where the Academy’s building stands. That move launched a frenzy of street renaming, with the removal of all those names the Fidesz and Jobbik city leaders found suspect. It was the Pálinkás-led Academy that eventually came to the help of those hapless mayors who couldn’t, for example, decide on their own whether a street could retain the name “Peace” or “Constitution.”

It was just a question of time before Pálinkás and his right-leaning friends in the Academy would find something very wrong with Lukács, who had left his library and manuscripts to the Academy. The understanding was that the collection would remain intact in the apartment in which he and his wife lived for decades. The apartment didn’t belong to Lukács; he rented it from the municipality. So, after his death, it was the Academy that paid the rent on the apartment, which was open to researchers from all over the world who were interested in Lukács’s work. After 2010, however, it was becoming clear that the government wanted to put an end to this arrangement. A group of philosophers who once upon a time were close to Lukács were harassed and accused of misappropriating research funds. Rumors circulated that the Academy wants to break up the collection and close the Lukács memorial center.

Apparently, a decision on the matter was reached during Pálinkás’s tenure, i.e., before 2014, but it was handed down only in March 2016. By that time the Academy had a new president, László Lovász, a Hungarian mathematician best known for his work in combinatorics. Unlike his two predecessors who were committed to the ideology of the right, Lovász tries to be politically neutral, no easy task in Hungary today.

Just as predicted, it was decided that the collection will be broken up, with the books eventually being moved to a library that hasn’t been built yet and the manuscripts being moved to the archives of the Academy. Those who would like to save the collection as it is now received help from the International Lukács Association with headquarters in Germany. Soon enough 3,500 signatures were collected worldwide to support the effort. At the moment the fate of the collection hangs in the balance.

The Lukács library and archives are not the only Lukács-related institutions that have been under fire. Jobbik politicians who have been active in eradicating Lukács’s name from Hungarian history decided to go to court, arguing that the György Lukács Foundation bears Lukács’s name illegally. When the Academy’s Historical Institute was instructed to rule on the question of forbidden street names, Lukács’s name was on the list. Therefore, the suit contended, no foundation can bear his name either. The judge in charge was at a loss, but at least he had the good sense to turn to László Lovász, president of the Academy. Until then Lovász had said nothing about the Lukács case, for which he was criticized. But once, at the request of the court, he had to take a stand, he opted to defend Lukács. He emphasized Lukács’s place in the history of philosophy and stressed the indispensability of nurturing his intellectual heritage. The foundation serves this purpose. If it were deprived of the name of the philosopher, it would lose the very rationale for its existence. The court accepted his opinion and ruled against Jobbik. You can imagine what the anti-Semitic kuruc.info had to say upon hearing the news. Lukács, the author wrote, was “a Jewish Marxist philosopher” and the judge’s ruling was an example of “anti-Hungarianism.”

It will be removed soon

But that’s not the end of the Lukács story. Lukács still has a statue in a park in District XIII, where the socialist party is very strong. Right-wing politicians have been eyeing the statue for some time. The Fidesz-KDNP candidate for district mayor actually campaigned on the issue in 2014. If he becomes mayor, he said, Lukács will go. When that came to naught, local Jobbik leaders asked the socialist mayor to remove the statue, which he naturally refused to do. In fact, these Jobbik politicians were knocking on the wrong door because the land on which the statue stands is under the jurisdiction of the Budapest Municipal Council. Here they naturally had a much better chance. Mayor István Tarlós loves removing names of political undesirables. Marcell Tokody, Jobbik member of the Budapest City Council, proposed removing the statue to make space for a new St. Stephen statue for the 980th anniversary of St. Stephen’s death, obviously a very important anniversary. Of course, the overwhelmingly Fidesz City Council voted for it with enthusiasm: 19 city fathers supported Jobbik’s proposal, and three members–two from the Demokratikus Koalíció and one from MSZP–voted against it. One member abstained.

At this point, the socialist mayor of District XIII asked István Tarlós to allow the statue to be erected on soil that belongs to the District. Tarlós pointed out that it is not his decision but that of the City Council. He added, however, that he would not support such a move “because of [Lukács’s] oeuvre [munkásság],” as if Tarlós had the slightest notion of Lukács’s oeuvre. So, kuruc.info didn’t have to worry that District XIII will provide a place for “a rat’s statue.” Actually, Lukács wasn’t the only “rat.” Kuruc.info also included in this category Árpád Göncz, the beloved first president of the Third Republic (1900-2000). This whole sorry story tells us a lot about the state of Hungary at the moment.

March 25, 2017

The Hungarian opposition shows signs of life

Momentum’s victory

The major news of the day is the overwhelming success of Momentum’s signature drive for a referendum on holding the 2024 Olympic Games in Budapest. They needed 138,000 signatures; they collected 266,151. Although the young leaders of the movement don’t seem to be overly grateful, about 60,000 of these signatures were collected by political parties on the left. LMP and Párbeszéd were especially active.

Momentum’s plan at the moment is to become a self-sufficient party. But I wouldn’t be surprised if closer cooperation among Momentum, Párbeszéd, and LMP would materialize, especially now that Párbeszéd has withdrawn from negotiations with MSZP and DK.

Viktor Orbán, who a few months ago considered hosting the 2024 Olympic Games “a matter of national significance,” a couple of days ago instructed the Fidesz-KDNP parliamentary delegation to refrain from any comment in the event that Momentum gets the necessary number of signatures. His position now is that the central government supported the idea only after the Budapest City Council, including opposition members, voted to submit an application to the IOC.

Budapest mayor István Tarlós, although initially against holding the Olympics in Budapest, now stands by Viktor Orbán. He complains about “the betrayal of the opposition,” which a year and a half ago supported the idea heart and soul and now portrays itself as the defender of the people and the country. Unfortunately, there is a great deal of truth in this charge. Csaba Horváth (MSZP), József Tóth (MSZP), and Gergely Karácsony (Párbeszéd) supported the application. Even Erzsébet Gy. Németh (DK), who verbally disapproved of it, had the courage only to abstain. The sole person to vote against it was Antal Csárdi (LMP). Bravery and consistency are not the strong points of the Hungarian socialists and liberals.

Granted, given government pressure and the general Fidesz enthusiasm for the project, it was guaranteed to sail through the Budapest City Council. Still, those opposition city fathers who have been so loud of late in their disapproval of the project would look a great deal better if they had not bent under pressure and had instead voted their conscience. MSZP is especially hesitant to take a stand when its leaders believe, rightly or wrongly, that its voters might not approve of the party’s actions.

Tarlós indicated that once the final verdict on the number of signatures is announced, he “will think very seriously about withdrawing the application.” Given the enormous number of signatures collected, there is no doubt that the referendum request will be valid. And if the referendum were actually held, the “no’s” would carry the day. Tomorrow Publicus Intézet will publish its latest poll, according to which 76% of the total population would use the money for something much more important. The respondents could pick from several categories and obviously, since the numbers add up to more than 100%, could choose to allocate the saved funds to more than one urgent need. 65% of them opted for healthcare, 32% for education, 16% for the elimination of poverty, 11% for the creation of new jobs, and 8% for better infrastructure.

András Fekete-Győr proudly displaying the fruit of Momentum’s labor

The leaders of Momentum will embark on a two-month tour of the countryside where they plan to establish local party cells. András Fekete-Győr announced a few hours ago that the new party will have candidates in all 120 electoral districts. It intends to compete against the other opposition parties, although we know that fracturing the anti-Orbán forces is political suicide. Under the current electoral law, which is designed for a two-party system, a divided opposition can only lose. Nonetheless, for the time being Momentum is planning to follow in the footsteps of LMP, which doesn’t bode well for either Momentum or Hungarian democracy. László Bartus of Amerikai Magyar Népszava has already written an opinion piece in which he expresses his fears that Momentum is glossing over the distinction between Hungary prior to and after 2010.

László Botka’s program is shaping up

The anti-Orbán forces got some good news yesterday when Republikon Intézet published its poll on the popularity of current candidates for the post of prime minister. Viktor Orbán and László Botka are essentially neck to neck. Botka is only two percentage points behind Viktor Orbán (46% to 44%). What is especially significant is that Botka is by far the more popular candidate among undecided voters, 44% against Orbán’s 29%, a result that didn’t surprise me as much as it seems to have surprised the media. I have been convinced for a long time that if someone could inspire this group to vote, the majority would vote for a candidate on the left.

Many voters who sympathize with the “liberal” democratic parties in Hungary have been impatient with László Botka’s relative inaction since he announced that he intended to throw his hat in the ring. For example, although he promised to visit the chairmen of the smaller parties, he hasn’t gotten around to it yet. Yesterday I read that the first party he will visit will be LMP, an odd choice, I would say, since LMP’s willingness to negotiate with Botka is about zero.

On the other hand, Botka at last came out with an article, published in 168 Óra, in which he spells out at least part of his program. He embraces the idea of introducing a guaranteed basic income on an experimental basis in the most underdeveloped and poorest regions of the country. I assume that would be the northeastern corner and the County of Baranya along the Croatian-Hungarian border, both with large Roma populations. He also envisages introducing a supplement to pensions that do not provide enough income for survival. He would like to alleviate the difficulties younger people have in gaining access to affordable housing. He proposes that municipalities build apartment complexes, with apartments to be rented out at reasonable prices. He wants to change the flat tax system introduced by the second Orbán government to a progressive one. Moreover, he wants to introduce a property tax on high-priced real estate and luxury cars. In addition, Botka emphasized that education and health will his government’s priority.

I am curiously awaiting the reaction of the media and the general public. I’m sure that most of these goals will meet the expectations of the majority, although I don’t know how people will feel about the idea of a guaranteed basic income. I assume that MSZP will fully support these goals, but they will also have to be approved by those parties that are ready to stand behind Botka. The way things are going, very soon it will be only DK that Botka will have to negotiate with.

We already know the reaction of the government media to Republikon Intézet’s poll on Botka’s popularity. Here are some headlines: “Few people support László Botka on the left,” “Botka is not supported even on the left,” “László Botka is not popular.” The source of this information? Fidesz’s own pollster, Századvég.

February 17, 2017

The perils of being an opposition politician in Hungary

I don’t know whether I will be able to make a coherent story out of the mess the Orbán government most likely has purposefully created regarding the report of the European Commission’s European Anti-Fraud Office (OLAF) on irregularities—fraud and possible corruption—in connection with the construction of Budapest’s fourth metro line (M4). The report covered the period between 2006 and 2015.

Although the Hungarian government received the OLAF report—or its English-language summary, the Hungarian public heard about it only from the English-language news site Politico. It didn’t take long before the Fidesz government and the Fidesz-led City of Budapest, on the one hand, and the politicians of the socialist-liberal government of the pre-2010 period, on the other, were at each other’s throats. The government claimed that practically all the financial wrongdoings were committed before 2010 while the opposition politicians accused the Orbán government of making political hay out of the case while refusing to make the report public. The administration claimed that it has no authority to release OLAF’s findings.

Most likely because of the holiday season at the end of the year, for about a month not much happened. Then, on January 16, János Lázár officially announced that he will file a complaint against Gábor Demszky (SZDSZ), mayor of Budapest between 1990 and 2010, Csaba Horváth (MSZP), deputy mayor between 2006 and 2009, and János Atkári, a highly respected economist who for many years served as Gábor Demszky’s financial adviser. That announcement started an avalanche of often conflicting articles in the Hungarian media.

A day after Lázár’s announcement, his deputy Nándor Csepreghy gave a detailed press conference dealing with the Metro4 corruption case. The government found MTI’s report of that press conference so important that it was immediately translated into English. We learned from Csepreghy that the Fidesz government had had its own suspicions of fraud surrounding the project even before. The OLAF report only confirmed these suspicions.

Csepreghy disclosed a few relevant facts that might help our understanding of the case. For example, he revealed that the investigators of OLAF conducted interviews with 50 individuals, “including the competent executives and managers” of the Budapest Transit Authority (BKV) and the City of Budapest. In addition, Csepreghy named a few companies that had been involved in the construction of the metro line as possible culprits. He also gave the initials of certain individuals heading large public and private companies. Finally, he said that “there are dozens of actors mentioned in the report who were politicians, were associated with the realm of politics, or operated as semi-public actors.” Finally, he told the press that the “government’s legal advisers are currently looking into the possibility of disclosing the OLAF report to the public in its entirety, to which the Government is fully committed.”

Nándor Csepreghy at the press conference / Photo: Tamás Kovács (MTI)

Although the government filed a complaint against Demszky, Horváth, and Atkári, they weren’t among the individuals Csepreghy referred to by their initials. A Magyar Idők editorial found Demszky’s absence from the list especially regrettable. The former mayor will get off scot-free because “according to rumors, his name doesn’t appear to be in the report.” Only the CEOs of large companies will be prosecuted. But what will happen if they reveal “the name of the chief coordinator”? In brief, the journalist responsible for this editorial accuses Gábor Demszky of being the head of a conspiracy to commit fraud.

Meanwhile Hungarian members of the European Parliament decided to look into the question of whether the Hungarian government told the truth when it claimed that it needed the approval of OLAF to release the report and that it was waiting for OLAF’s response to its request. All three opposition MEPs–Csaba Molnár (DK), Benedek Jávor (Párbeszéd), and István Ujhelyi (MSZP)–asked the head of OLAF, Giovanni Kessler, about OLAF’s position. All three claimed that, according to the information they received, it was up to the Hungarian government whether to release the document or not. Since there is a controversy over the meaning of the information received, I will rely on Ujhelyi’s statement, which includes the original English-language letter he received from OLAF. Here is the crucial passage:

In response to your question, since the OLAF final report has now reached its intended recipients, the Office is not in a position to decide on the possible release of the report. Such a decision belongs in the first place to the national authorities to which the report was addressed. It is for these authorities to assess the impact of a possible release of the report and to ensure compliance with the relevant legal obligations on judicial secrecy, data protection and procedural rights, including the right of access to file.

It is hard to fathom why the Orbán government again resorted to lying instead of appealing to the possible legal problems that could stem from the release of the report. Since then, Attila Péterfalvi, president of the National Authority for Data Protection and Freedom of Information, personally asked István Tarlós, who by now has a copy of the document, not to make the OLAF report public. It looks as if Péterfalvi, before making this request, consulted with János Lázár of the Prime Minister’s Office and Péter Polt, the chief prosecutor, who are both against the release. Although there might be compelling legal reasons not to allow the publication of the OLAF report, given the reputation of Péter Polt’s prosecutor’s office one cannot help being skeptical about the real reasons for the secrecy.

Over the weekend Gábor Demszky gave an interview to Vasárnapi Hírek in which he detailed his position on the case. Demszky said that, according to the rules of the Council of Europe and the European Parliament, OLAF must give anyone mentioned in their investigative reports the opportunity to respond. Since no one contacted Demszky, Horváth or Atkári, it is probably safe to assume that they are not the subjects of the investigation. Even so, the Orbán government filed complaints against them. Demszky also said that because OLAF conducted its investigation between 2012 and 2016, “most of their information came from the offices of the Fidesz government.” OLAF, Demszky added, most likely accepted the information in good faith because its investigators don’t expect these offices to be swayed by political pressure.

I might add that one has to be very careful when assessing the veracity of witness testimony. We know from other politically motivated trials that witnesses often give false testimony. The most infamous was that of Zsolt Balogh, head of BKV. In order to save himself months of pre-trial custody, he invented the story that Miklós Hagyó (MSZP), one of the deputy mayors, demanded 40 million forints, to be delivered in a Nokia box.

The opposition parties are truly worried about the prospect of years of investigation by politically motivated Hungarian prosecutors. Even though in the past most defendants were eventually exonerated, they remained in limbo for years and their careers were ruined. We must also keep in mind that although OLAF has filed scores of such reports on cases involving fraudulent procurement practices, only four guilty verdicts have been handed down in the last almost seven years. Some cases, like that involving Orbán’s son-in-law, were unceremoniously dropped. The prosecutors’ sudden interest in this case indicates to me that they think they can use it to do damage to the opposition, one way or another. Evidence of culpability has never been the litmus test for deciding which cases to pursue.

January 30, 2017

An EU prosecutor’s office would be a heavy blow to Viktor Orbán

I don’t think that anyone familiar with the Hungarian situation can doubt the economic ramifications of the institutionalized corruption of the Orbán regime. It retards growth and competitiveness and distorts the market economy.

A significant source for this institutionalized stealing is the EU’s convergence funds. Across the EU approximately 50 billion euros in funds distributed to member states is lost to fraud. The problem is especially acute in the former Soviet satellite countries: Bulgaria, Romania, and Hungary. The European Commission’s European Anti-Fraud Office (OLAF) gathers evidence of financial misconduct and prepares hundreds of judicial recommendations, but the prosecution rate is only about 30%.

If you think that this rate is pitifully low, you should take a look at the Hungarian situation. In 2015 OLAF investigated 17 suspicious cases, of which 14 were deemed serious enough for the organization to suggest that financial penalties be paid by the Hungarian government. As far as I could ascertain, in no case did the Hungarian prosecutors move a finger.

Yet hardly a day goes by without news of corruption. Ákos Hadházy, co-chair of LMP who has done the most to unearth corruption, asked Péter Polt, the chief prosecutor, to reveal the number of cases prosecuted since 2011. The answer was staggering. In only four cases did prosecutors bring charges. In monetary terms, in comparison to the billions most likely stolen, the sums involved were peanuts. According to their findings, the financial loss to the European Union was only 286 million forints, or 917,030 euros. Even though every day Hungary receives about two billion forints in EU convergence funds. Several notorious cases, like the street lighting business of Prime Minister Viktor Orbán’s son-in-law, were simply dropped.

For the EU, setting up a new organization–the European Public Prosecutor’s Office or EPPO–to investigate the fraudulent misuse of EU funds and inter-state or so-called carousel fraud is becoming an urgent task. In December I devoted a post to the subject, in which I reported first the reluctance and later the refusal of the Hungarian government to accept such a supranational body. We heard the old refrain: “the sovereignty of Hungarian prosecution might be undermined.” Moreover, goes the argument, since the Hungarian chief prosecutor is appointed by parliament, there might also be a constitutional problem. The latter excuse is truly laughable: almost never does the need for an amendment to the constitution cause any problem for the Orbán government.

Knowing the government’s heavy reliance on the good offices of the chief prosecutor in fraud cases, it was inevitable that Hungary would fight tooth and nail against EPPO. In the last couple of days the issue emerged again after an informal meeting of the justice ministers in Malta. Seventeen countries indicated they would participate in so-called “enhanced cooperation,” which is a procedure whereby a minimum of nine EU countries are allowed to establish advanced integration or cooperation within EU structures without the other EU countries being involved. Five countries, among them Hungary and Poland, opted out.

Justice Minister László Trócsányi self-righteously announced after the meeting that the Hungarian government’s main concern with setting up an EU public prosecutor’s office is its fear of weakening such institutions as Eurojust and OLAF, neither of which has prosecutorial powers. The former is merely a coordinating body that is supposed to improve the handling of serious cross-border crimes by “stimulating” investigative and prosecutorial coordination among agencies of the member states. OLAF can only make recommendations. Trócsányi had the temerity to claim that “these institutions have achieved remarkable results.” In the statement given to MTI, the Hungarian news agency, Trócsányi left open one possibility: “In case they want to establish a European prosecutor’s office, it should be created on the foundation of Eurojust.” As far as Hungary is concerned, “regulating the competence of such a body should require a unanimous vote.” This is in contrast to other countries “who believe that its establishment is possible by a qualified majority.”

Péter Niedermüller, DK member of the European Parliament, somewhat optimistically predicted that “the establishment of EPPO can be delayed but cannot be prevented.” We do know that the EU is reassessing its convergence program, perhaps as a result of all the fraud. Commissioner Věra Jourová, who is in charge of the project, has already indicated that there might be a modification of the rules governing the assignment of EU convergence funds. In plain language, if a member state receives more funds than it contributes to the common purse, it will get less money in the future. The European Parliament can institute “ex ante conditionalities” that would allow for such modifications. That would be a heavy blow to Poland and Hungary, the largest beneficiaries of the convergence funds.

You may have been wondering why I haven’t written about OLAF’s report on its investigation into fraud in the Budapest Metro 4 project, which was reported by Politico at the end of December 2016. It has been heralded as one of the biggest fraud cases ever in the European Union. OLAF recommended the repayment of €228 million to the EC Department of Regional and Urban Policy and €55 million to the European Investment Bank.

Although in the last month the Hungarian media has been full of accusations and counter-accusations, no responsible reporting of the case is possible for the very simple reason that the Hungarian government refuses to make the OLAF document public. As long as we have no idea what is in the document and we have to rely on the interpretations of János Lázár and Nándor Csepreghy, the number one and two men of the Prime Minister’s Office, and Budapest Mayor István Tarlós, who has definite ideas on the subject but admits that he hasn’t seen the report itself, we cannot possibly pass judgment on the case.

The investigation covers the period between 2008 and 2014–that is, two years of the Gyurcsány-Bajnai government and four years of the Orbán administration. The only thing we can say is that it is unlikely that all the fraud took place before 2010 and nothing happened under the new government, which is what the Orbán government claims.

Under the present setup these OLAF reports can be an instrument for political games. The establishment of a supranational European Public Prosecutor’s Office would help prevent the kind of situation that currently exists in Hungary with the latest OLAF report.

January 29, 2017

Two men who put up a fight: Lajos Simicska and Bachar Najari

Among the active members of Hungarian Spectrum there has been a long-standing debate about the most useful attitude toward the Orbán regime’s very existence and future. There are those who get upset when they encounter pessimism regarding the removal of the present Hungarian government. They think that defeatism is counterproductive and take every opportunity to raise their voices against naysayers. Among these people we find some who think that these pessimists are actually Fidesz propagandists whose job is to spread the dogma of Fidesz invincibility. But, to be fair, one doesn’t need to be a Fidesz troll to feel less than optimistic given the state of affairs in the country.

I for one agree that the proverbial Hungarian pessimism can become a self-fulfilling prophecy, which should be avoided at all costs. But, at the same time, we must admit that overcoming the obstacles that Orbán and his minions have placed in front of those desiring change is a formidable task.

Today I would like to hearten those who are worried about Hungary’s future by writing about two men who decided to stand up to the government. The first is Lajos Simicska, Orbán’s friend from high school, who reaped all the benefits of the mafia state until his falling out with the prime minister about a year and a half ago. The other is Bachar Najari, a Syrian-Hungarian-Swiss businessman, the new owner of the famed Zsolnay Porcelain Factory in Pécs. Although for different reasons, both were targeted for financial annihilation by a corrupt regime. It looks as if the powers that be are finding it difficult to destroy them.

Some people believe that Lajos Simicska’s contribution to the creation, development, and final accomplishment of Fidesz was even greater than Viktor Orbán’s. After all, it was Simicska who brought home the bacon. Of course, in the process he himself became immensely rich. But then came the falling out. Orbán, being a vindictive man, decided to ruin his old friend financially.

Simicska’s most important business venture is Közgép, a construction company that specializes in building highways and railways. As such, it is heavily dependent on government orders. Thus, Simicska looked like an easy target. Indeed, right after the blow-up between the two men, the government suspended midstream the highway that was to be built by Közgép. The second move was that the Public Procurement Authority (Közbeszerzési Hatóság), which handles government tenders, “discovered” that Simicska’s firm had cheated on one of its tenders. It was decided that as punishment Közgép would not be able to compete for any government jobs for three years. Simicska went to court and won, both in the lower court and also on appeal.

Trying to ruin Simicska through Közgép was not enough. Orbán instructed István Tarlós, mayor of Budapest, to break a long-term contract with Simicska’s firm, Mahir Cityposter. In 2006 the firm acquired the right to provide the city with 761 large cylindrical kiosks. The contract was to be good for 25 years. Ten years later the city suddenly “discovered” that the contract was not fair. When Simicska didn’t remove the kiosks by a specified date, the city ordered them to be forcibly removed despite a court order to stop the vandalism. Simicska promptly hired György Magyar, a very able lawyer, who said from the beginning that the case was absolutely clear-cut. And indeed, he was right. A few days ago the court agreed with the argument Simicska’s lawyer presented and forbade the removal of the kiosks while the case is pending before the court of appeal. The city will also have to pay 6.8 million forints in court costs. If the city loses, it will have to pay Simicska 600 million forints in damages.

Perhaps Simicska’s savviest move to date has been to form a consortium with the Italian company Itinera, which has been described in the Hungarian media as “a big gun.” Itinera has been “active in large-scale infrastructure projects and civil construction for more than 75 years in Italy and around the world.” Közgép together with Itinera presented a bid for a 27 km-long section of the M4 highway between Berettyóújfalu and the Romanian border. Their bid was 58 billion forints or approximately 188 million euros. Two other consortiums were also eyeing the job: (1) a consortium of three Hungarian companies whose bid was 84 billion forints or approximately 268 million euros and (2) a French-Slovak-Czech consortium that bid 87 billion forints or 272 million euros.

The difference in price is staggering. It seems that Simicska with this offer wanted to show the fair (admittedly, probably on the low end of fair) price of road construction and to highlight the graft that is normally built into these bids. In the case of the Hungarian consortium it was as much as 26 billion forints or 80 million euros. In this particular case almost 3 million euros per km would end up in someone else’s pocket. Of course, it is still possible to find fault with the Közgép-Itinera tender if Viktor Orbán so desires, saying that price is not everything, but apparently the Közgép-Itinera bid is also best in every other category, including environmental considerations. The consensus is that it will be very difficult to award the project to anyone else.

 

Now we can turn to the case of Bachar Najari, the Syrian-Swiss businessman with a Hungarian wife who also speaks fluent Hungarian. How Najari ended up owning the Zsolnay porcelain factory is a long story, which I pretty well told in a post titled “How to ruin a businessman with government help.” The upshot of the story is that one of Viktor Orbán’s oligarchs, Attila Paár, decided that he would like to own the factory because many of the vintage buildings in Budapest that will be restored or even rebuilt will need the famed terracotta tiles Zsolnay was famous for in the last decades of the nineteenth century. Najari had managed to put the formerly city-owned factory on solid financial footing, and it looked as if from here on it would be a profitable enterprise, especially with the impending sale of roof tiles. There was a fairly large loan which had been taken out by the city earlier from the Hungarian Development Bank for which Najari offered a certain amount of money to settle the account. The bank declined the offer and instead sold the debt for half of what Najari had offered to Attila Paár. Meanwhile, the city of Pécs decided to help Paár along by setting up a bogus company to which it recruited more than half of the workforce of Zsolnay. These workers are actually on paid vacation and no one knows who pays them. The situation was compared by one of the workers of the factory to a gangster film from the 1930s.

gangsters

Najari decided to fight. First he managed to get back his stock, which had been placed under sequestration. He used his own money and made good on the debt he inherited when he bought the factory from Pécs and also paid 90 million in local taxes, although it was a disputed item. Therefore there was no more reason for the city, which owns 19% of the stock, to take over the factory. Then the Kaposvár court refused to register Pécs’s new porcelain manufacturer, called Ledina Kerámia. Finally, the court in Zalaegerszeg turned down the request for a liquidation of the Zsolnay factory. A few days ago the city of Pécs “sold” the nonexistent Ledina Kerámia to an unnamed off-shore company. The city claims that the sale, for 3 million forints, “will ensure the jobs of those workers who were enticed to leave Zsolnay because it was to fold soon.”

Meanwhile work is being done at Zsolnay. Najari refused to be intimidated, and it seems that he managed to foil the attempt to rob him blind.

Although it is not easy, these two cases show that a person can win as long as he has the means and the determination to stop the Orbán regime’s unscrupulous, illegal activities.

September 19, 2016

Business ethics is not the strong suit of Russians and Hungarians

Almost a year after the City of Budapest decided that the Russian company Metrovagonmash would refurbish the old trains of the Metro 3 line, the first reconditioned train arrived from Russia via Poland.

Originally, the city had wanted to purchase new cars, especially since the old Soviet-made trains on Metro 2 had already been replaced by new modern Alstom trains and the brand new Metro 4 line also uses Alstom cars. In the final minutes of the negotiations, however, the government announced that they would guarantee the 60 billion forint loan the city needed only if the money was used to recondition its cars, not for the purchase of new cars. Once that was decided, the choice was between Metrovagonmash and Skinest Rail, an Estonian company. Skinest’s offer was lower by 9 billion forints, it offered a 30-year guarantee instead of 25, and its motor design would have ensured savings in energy use. But Skinest was excluded from the bidding process because it had eight “formal” mistakes in its bid. These so-called “formal” mistakes always come in handy when Hungarian authorities want to bar someone from the bidding process.

Already at that point Erzsébet Gy. Németh, the only DK member of the city council who alone voted against the Metrovagonmash contract, suspected a connection between the Russian loan to build the Paks II Nuclear Power Plant and the Russian firm’s winning tender. Antal Csárdi, the only LMP member of the body, said at the time that “all signs point to the likelihood that Viktor Orbán during this trip to Moscow in February 2015 promised Putin that the Russian company would get the job.” He told Magyar Nemzet that Alstom sold new metro trains to Paris for less money than Budapest was paying the Russians for refurbished ones.

So, the first train arrived and with it the great surprise. There is a good likelihood that the train, consisting of six cars, is not the one sent to Russia to be reconditioned but a product that Metrovagonmash began manufacturing in 2009. Since the train’s arrival, experts who have examined it are coming to the conclusion that the Russians didn’t touch any of the old trains, described by many as wrecks. Instead, they got rid of some of their older, unsold trains sitting in their warehouses.

The first reburbished/new metro cars / MTI / Photo: Zoltán Máthé

The first refurbished/new metro cars / MTI / Photo: Zoltán Máthé

But why would the Russians resort to such deception? According to those who are convinced of the deceit, the Russians couldn’t possibly compete with manufacturers like Alstom with their less modern, technologically less advanced trains and therefore would most likely have lost in an open bid. But if that is the case, the Hungarian government is also implicated. After all, it was the Orbán government’s decision about the loan guarantee that forced BKV to sign a deal for reconditioned trains and thus enabled Metrovagonmash to get rid of 37 trains with 222 cars. It is likely that BKV, the city’s transit authority, was also complicit in the deception because immediately after signing the contract, the Hungarian side came up with new requirements, possibly to match the model the Russians were planning to send to Hungary.

Mayor István Tarlós doesn’t find anything wrong with this fraud concocted between the Russian and Hungarian governments, Metrovagonmash and BKV. His first reaction was that the opposition’s favorite pastime is hairsplitting. “Let’s suppose for the sake of argument that these cars are new. Then when did the city get a better deal? When for its money it gets refurbished ones or completely new ones?” He has no problem with the Russian and Hungarian governments’ trickery as long as, in his opinion, the city ended up on the winning side.

But did the city do well on the deal? Figures provided by media outlets differ greatly. Origo states that the city paid 69 billion forints for reconditioning the old cars while brand new trains would have cost 90 billion forints. However, according to Origo’s calculation, the cost of refurbishing the cars in Russia actually cost 84 billion forints because the city had to borrow 9 billion forints in foreign currency and the interest for the 15-year loan is 15 billion forints. Portfolio, disregarding any added costs, comes up with €1.33 million per Alstom car as opposed to €0.98 million for the Russian ones. But even if these cars are new, Portfolio adds, their technology is obsolete.

What are the technological deficiencies? What most people will miss will be air-conditioning. The Russians installed some kind of ventilation, but it is hard to tell whether this solution will do the trick. Also, the train uses an outmoded spring instead of modern air suspension and has an antiquated ATO (automatic train operation) which, according to Index, is as if we filled a modern office with Commodore 64s. And Budapest is stuck with these trains for 30 years.

Shortly after the appearance of the Népszabadság article BKV released a lengthy statement in which it “rejects the criticism of the high-quality reconditioning” of the metro cars. It touts the “most modern components,” the “extension of the guarantee without any additional cost,” and “the early delivery of the prototype.” The statement complains about the negative attitude of some people and expresses BKV’s joy at receiving the first six-car unit. And it goes on and on. Only one thing is missing: an outright denial that these cars are new. Attila Gulyás, the head of one of the unions of BKV workers, is taking BKV’s side. He claimed in a radio interview that BKV’s representatives visited Metrovagonmash during the reconditioning phase, and therefore “there are eyewitnesses to the reconstruction.” Otherwise, Gulyás finds these cars much more attractive than the Alstom ones. I guess he likes the Russian-style design, to which he is more accustomed.

Erzsébet Gy. Németh (DK) has already decided to file a complaint based on the suspicion of corruption, fraud, and deceit. LMP is contemplating the same unless BKV within a week can come up with creditable proof that the cars that arrived from Russia are refurbished and not new. As long as the chassis is new, a vehicle is considered to be new, and it is not difficult to determine whether the chassis is forty years old or brand new. LMP’s Antal Csárdi claimed that the Russians accompanying the cars encountered some difficulties with the custom officials, who had their doubts about the identity of the cars. If true, this is an unprecedented case in the business world.

June 3, 2016

A Hungarian guide to ruining an economy, one bus at a time

Today I will regale you with the story of the planned bus purchase by the Budapest Közlekedési Vállalat (BKV), owned by the City of Budapest. One hundred and fifty extra buses must be in service by November, when the long postponed but urgently needed reconstruction of the M3 metro line will begin. Those who are unfamiliar with the way business is done in Hungary will undoubtedly think that the purchase of buses doesn’t merit a whole post. But, as we all know, nothing is so simple in Hungary, especially with Viktor Orbán as prime minister.

By now all Hungarian municipalities, including the capital, have been stripped of most of their assets. They have lost their schools and hospitals, and they receive less and less money from the central budget. They are unable to apply for a loan without government approval. Even the Hungarian government, however, realized that the M3 line was in such a state that a tragedy could easily occur at any time, and therefore, as a necessary adjunct to the line’s reconstruction, it agreed to guarantee the loan necessary to purchase buses to carry the displaced metro traffic. And yet, from day one, the hands of Mayor István Tarlós and the members of the city council were tied. The government stipulated that only 75 buses could be in “ready-to-run” condition. The other 75 would be delivered in a half-finished state, and the purchaser would have to finish their assembly. IKEA buses, I guess. The government’s insistence on two different providers, one of whom would by default be a specific Hungarian company, I’m sure raised the Budapest city council’s hackles.

Nonetheless, following government orders, in 2015 the city asked for tenders for two different kinds of buses. For the “ready-to-run” kind, they received four bids. The winning bid came from the Polish company Solaris Bus and Coach S.A. The company, which was established 20 years ago, produces about 1,000-1,200 buses a year. In the other category, there was only one company that turned in a bid, the Hungarian MABI-BUS Kft. which is known primarily for its development of an electric bus called Modulo. The Polish “ready-to-run” Solaris cost €277,000 while the one that still required assembly cost €278,800.

According to the company’s website, so far only 63 complete buses have been manufactured, which have been purchased by Hungarian cities. Most of the company’s work has focused on making bodies for buses, which were sold to the United States. According to MABI-BUS’s very modest website, buses with their bodies can be found in several American cities, including Los Angeles, Washington, and Boston.

Photo: solarisbus.com

Photo: solarisbus.com

MABI-BUS has a history of being favored and unfairly rewarded by the government. Until recently, the head of the company was involved exclusively in the field of information technology. In 2010, however, he decided to build trolley buses. In 2011 the company received a grant to develop an electric bus. The government decided that it would prefer electric buses to streetcars in the key tourist district of Budapest. BKV also wanted to buy 20 electric buses and accepted a bid from Siemens-Rampini, the company that supplied Vienna. The city, however, couldn’t finalize its contract with Siemens-Rampini because government approval came too late. Most likely intentionally. In a second round of bidding MABI-BUS got the job, although it was the Chinese BYD, the best known electric bus manufacturer, that won the tender.

A few days ago it was time for the maiden run of the Modulo electric buses, but “the premier wasn’t exactly a success.” After three hours Modulo ran out of juice. Moreover, the bodies of the buses are too wide for the Castle District, where they are to be used. They are unable to turn around at the end of their run. A little earlier, while on a trial run, a bus lost one of its wheels, injuring a passerby. These electric buses cost €560,000 each.

The 150 buses the city of Budapest now needs are ordinary gasoline-powered buses. Given the gap between the Solaris and MABI-BUS bids (taking into account the cost of making MABI-BUS’s vehicles whole and usable) and the latter’s lack of experience in manufacturing gasoline-powered buses, the city council decided to simply ignore the dictate from the government and buy all 150 buses from Solaris, especially since delivery was guaranteed by the time the work begins on M3. As you can well imagine, the Orbán government was anything but happy with the city council’s “disobedience.” After all, the government had made it crystal clear which company it prefers. So, a week ago, the government reduced the size of the guaranteed loan. Suddenly there wasn’t enough money to buy 150 buses.

And what was the response from Budapest? As of three days ago, Tarlós claimed that in this case the city will buy only 110 buses and the rest will come from other routes. Tarlós in his blunt manner, in an interview on HírTV, said that he understands the decision to opt for the Hungarian-made buses because of national interest, but “at the moment there is no such thing as the manufacturing of buses in Hungary.”

Of course, this cannot be the end of the story because Viktor Orbán has to have the last word on every issue. On Wednesday, during a recess of the cabinet meeting, Zoltán Kovács, government spokesman, told MTI that the cabinet had decided “on a three-year strategy of bus manufacturing which would ensure the competitiveness of Hungary in the extremely intense international competition.” He added that already during the negotiations concerning the purchase of the Budapest buses the government asked the city to keep in mind national economic interests. Perhaps the best reaction to the announcement was portfolio.hu’s sarcastic headline: “The long-awaited national bus manufacturing is coming.”

Another most likely economically disastrous decision was made just because Viktor Orbán would like to help a Hungarian oligarch. The manufacture of buses is indeed a very competitive business. It is true that during the Kádár regime Ikarus did well, but then the Hungarian company had a ready market in the Soviet bloc and in some of the less developed countries. Once that market was opened to international competition, Ikarus’s sales collapsed. To develop a competitive international bus manufacturing business from scratch doesn’t seem promising. The six largest producers of buses in unit terms — Zhengzhou Yutong Bus (China), Daimler (Germany), Xiamen King Long Motor (China), Volkswagen (Germany), Marcopolo (Brazil), and Toyota (Japan) — accounted for two-fifths of all sales worldwide in 2013. There are more than a hundred larger and smaller manufacturers of buses. I highly doubt that serious feasibility studies have been undertaken, but MABI-BUS has already received grants worth billions of forints for the design and manufacture of its buses.

Of course, foisting the largely untried products of this company on Budapest is an absolutely foolish economic decision, but it seems that such considerations are immaterial to the Orbán government. I guess promoting MABI-BUS by all means possible, even those bordering on the illegal, is part and parcel of this regime’s unorthodox methods of running, and ruining, the country’s economy.

May 13, 2016