The first quarter year-over-year 0.5% GDP growth apparently shocked Viktor Orbán. He immediately convened an extraordinary cabinet meeting to discuss the situation, which put Hungary among the worst performing countries in the European Union. Later government communication tried to calm nerves by denying Orbán’s panicky response to the bad economic news, but the meeting definitely took place.
It is possible that the news was a surprise to Viktor Orbán, but people familiar with recent economic trends should have been prepared for slower growth than projected. In the last quarter of 2015 industrial growth was 2.4% lower than a year before, and in the first three months of 2016 the numbers were even worse: 4.5% lower than the same time in 2015. According to forecasters, the dismal economic growth just announced is most likely not a fluke. Analysts predict similar figures for the second quarter of the year as well. One of the problems is that 25% of the Hungarian GDP comes from conventional auto manufacturing, which is shrinking due to the emergence of electric cars. This means a 6% reduction in production at Audi and Mercedes Benz, which will perpetuate the present situation. According to government estimates, the Hungarian economy is supposed to grow by 1.7% this year, which is unlikely. High officials of the Hungarian National Bank, however, are even more optimistic. They are dreaming of 3% GDP growth for 2016. Some of the data actually point to a possible recession.
This news couldn’t have come at a worse time. The unorthodox economic policy introduced by György Matolcsy as minister of the economy (2010-2013) seems to be crumbling just when the same Matolcsy, as chairman of the Hungarian National Bank, is in serious political trouble due to his handling of the reserves of Hungary’s central bank. To put it in the starkest terms, Matolcsy in great secret siphoned off about one billion dollars from money accrued as a result of the weakening Hungarian forint and put it into private foundations.
Common wisdom holds that the Hungarian people are so inured to the widespread corruption in the country that they cannot be aroused by any scandal, no matter how large. The latest poll by the Publicus Institute, however, indicates that the Matolcsy case is an exception to the rule. Another tenet of conventional wisdom is that Hungarians are terribly under-informed. Most of them have no understanding of current political events. Well, in the case of Matolcsy’s foundations this notion also turned out to be false. Two-thirds of the people had heard about the scandal, and of those who were familiar with the case 65% considered Matolcsy’s “unorthodox” handling of the central bank’s money outrageous while 58% thought that the bank chairman should resign. Moreover, and this is bad news for Viktor Orbán, 58% of those questioned considered the government responsible for the scandal around Matolcsy’s foundations and only 17% blamed Matolcsy alone.
Given the delicate situation in which Matolcsy and the Hungarian government have found themselves, the last thing they needed was the interview Csaba Lentner gave to 168 Óra, a weekly. Lentner is currently a professor of economics at the Nemzeti Közszolgálati Egyetem (National Civil Service University), a creation of the Orbán government. Lentner had a “colorful” political career, starting off as an economic adviser to the Smallholders’ Party’s parliamentary delegation but in 1997 becoming one of the top officials of the anti-Semitic MIÉP, the creation of István Csurka, a writer and playwright of extremist views. Between 1998 and 2002 he was a MIÉP member of parliament. In 2004 he switched over to Fidesz. As he said in the interview, he is a slow maturing type. Since then he has been serving Fidesz as an expert on economic matters.
What does Lentner have to do with Matolcsy? Plenty. Believe it or not, our diligent bank chairman in his spare time is writing a Ph.D. dissertation. And who is his adviser? None other than Csaba Lentner. But that’s not all. Lentner is also a member of the board of one of the foundations György Matolcsy created. So corrupt and disgusting, but obviously, as it was evident from Lentner’s interview, the two men find the arrangement perfectly normal and acceptable. Válasz, a right-wing publication, considered the interview a gift to the opposition because Lentner’s profuse praise for the chairman was embarrassing for Matolcsy himself.
From the interview we learn that the current economic policy of the country is still in the hands of Matolcsy, who as bank chairman is supposed to be concerned only with monetary policy, i.e. money supply, interest rates. In Lentner’s opinion Mihály Varga’s ministry of national economy, which is supposed to be in charge of the government’s fiscal policy, is too slow and ineffectual. “The real economic decisions are made in the National Bank.” Because of the “weakness” of Varga’s ministry it was the National Bank that made the 3% economic growth in 2014 possible by giving three trillion forints for low-interest loans and keeping interest rates low overall. Since 2013, when Matolcsy took over the chairmanship of the bank, “a monetary regime change has taken place.” Matolcsy has become “the engine of the national economy.” In Lentner’s mind Matolcsy is a true genius. It is the “intellectual munition he carries in his head that moves the [Hungarian] GDP.”
Those who are against Matolcsy are traitors to the cause of Fidesz and the Orbán government. Matolcsy’s continued work at the head of the National Bank is the guarantee of Fidesz winning the 2018 national elections. Lentner is certain that in the next two years Hungary’s economic growth will be spectacular. Obviously, the dismal numbers of late make no difference as far as he is concerned.
For Lentner, the members of the Constitutional Court who found Matolcsy’s foundations unconstitutional are traitors who “stabbed him in the back.” Matolcsy has achieved a series of great successes, or, as he put it, he carried out “six years of a victorious military campaign in which we win battle after battle. Matolcsy is the alpha and the omega of the 2018 elections.” He deserves a public statue to demonstrate the outstanding service he has rendered to his country. One could ask why a man of such outstanding mental qualities needs a Ph.D. The answer: “in order for him to make his name great for many centuries,” for which it is necessary “to organize the means of non-conventional economic policy into a scientific system.” I’m so glad that with Csaba Lentner’s guidance this great man will formulate a revolutionary economic theory that will change the face of the world.
I found an article on Jobbik’s internet news site called Alfahír. I usually view their news items with suspicion, but this story about Matolcsy sounds plausible. Matolcsy was named political undersecretary in József Antall’s government on May 24, 1990, but a few months later he left the prime minister’s office by mutual agreement. The likely reason for his sudden departure was the revelation by a member of parliament on October 30, 1990 that Matolcsy was involved in the shady privatization of 90 restaurants owned by the state. It looks as if József Antall had no problem firing someone whom he found to be involved in unethical business ventures. If the suspicion about Matolcsy’s sudden departure from the prime minister’s office is well founded, Matolcsy’s not always straight business dealings are not of recent vintage.