Tag Archives: Mihály Varga

Labor shortage, emigration, and the economy

A couple of weeks ago Hungary’s National Association of Employers and Manufacturers (Munkaadók és Gyáriparosok Országos Szövetsége/MGYOSZ) sounded the alarm about the acute labor shortage in the country. If the government, which is currently busy turning the population against “economic migrants,” does nothing, the country’s economy will be in big trouble. Even now, it is almost impossible to find skilled blue-collar workers and qualified white-collar employees.

The Orbán government’s response was indicative of the total confusion that must reign within Fidesz and the administration in general. It seems that politicians like János Lázár, head of the prime minister’s office, are restrained by the ideological straitjacket imposed by the all-powerful prime minister. The official line is that Hungary doesn’t need immigrants, that the devastating demographic figures can be improved by a higher birthrate. But, as is becoming patently obvious, Hungarian men and women are not in the mood to have larger families. And even if they were, it would not make any difference for another two decades. This attitude of “we are going to deal with the problem ourselves” is now coupled with a vicious anti-refugee campaign. It was inevitable that Lázár would have to toe the party line even though he undoubtedly understands that without immigration the situation will only worsen. Mihály Varga, minister of economics, who is less of a party politician, reacted to MGYOSZ’s cry for help with some sympathy. The result was the confused message typical of this government.

The labor shortage, caused by the low birthrate, is aggravated by the massive exodus of Hungarians, which has been going on for years. According to the latest figures, only last year close to 50,000 people left to find a better life elsewhere.

A recent study by the staff of the International Monetary Fund addresses the economic impact of this emigration. Although the IMF study is titled “Emigration and its Economic Impact on Eastern Europe,” the paper covers Central, Eastern, and Southeastern Europe (CESEE ). The numbers are staggering. In the last 25 years approximately 20 million people left this region and moved to better-off areas of the European Union. Many of the emigrants are well educated and young, and their exodus accelerates the adverse demographic trends. East Europeans moving westward “benefited the receiving countries in the European Union and, therefore, the EU as a whole.” The study views this “migration … as an indicator of success of the EU project, which sees freedom of movement as necessary for achieving greater economic integration, and ultimately, higher incomes.” But migration had a negative impact on the “sending countries” where it “slowed per capita convergence, reduced competitiveness and increased the size of government.” Apparently, the situation is worst in the Baltic countries and in Southeastern Europe, i.e. the Balkans.

So, Hungary is not in the worst shape, but in comparison to earlier years the current situation is different in two important ways. First of all, the number of people who get on a plane to seek their fortune elsewhere has been growing rapidly. Here are a few numbers. Just in one year, during 2015, the number of Hungarians living in other EU countries grew by 15%. Since 2010 the number of Hungarians living in Norway has tripled, in Germany it has doubled. Unfortunately, the United Kingdom, where the number of Hungarians is very high, didn’t report its statistics to Eurostat. According to Eurostat, in 2015 563,00 Hungarian citizens lived outside of Hungary as opposed to 108,000 in 2010. Add to that the estimated 200-300,000 Hungarians in the U.K. and those in Austria, a country that still hasn’t reported, and the picture is even grimmer.

Another difference between those who are now looking for jobs abroad and those who left a few years ago is that the earlier emigrants, at least initially, were not planning to live outside of Hungary permanently. They were thinking of a temporary stay, just long enough to save some money to start a business, buy an apartment in Hungary, or pay off their Swiss-franc loan or perhaps long enough to perfect their German or English. All that has changed. People today who are seeking jobs abroad plan to become permanent residents.

Several employment agencies in Hungary cater to those looking for jobs abroad. One of them, Euwork, specializes in healthcare but has job opportunities for unskilled workers as well. The agency told HVG back in April that a member of Euwork’s staff will ask applicants at their interview why they want to leave. Nowadays, the most frequent answer is that the Hungarian situation is “hopeless.” It is hopeless not just because their own career seems to be going nowhere but also because they think the country itself is going to the dogs. They don’t believe there will be any change for the better in the near future. These applicants increasingly complain about the general state of affairs and politics. They don’t necessarily limit their complaints to the government or Fidesz but talk about the political situation in general. These people, even if they don’t speak the language well and know relatively little about the country where they are heading, plan to stay there permanently. Apparently western companies welcome these determined immigrants because they are more eager to fit in and will more readily integrate.

Randstad, an American employment agency with an office in Hungary, conducted a survey recently on Hungarian young men’s willingness to go abroad for a good job. The findings were astounding. Eight out of ten men under the age of 34 would pack up and leave for employment opportunities abroad. Instrum Justitia, an organization studying the state of the consumer industry, reported that most young parents (between the ages of 20 and 25) are in serious financial trouble. Only 25% of these families can pay their bills on time. So it is not surprising that 44% of them have already contemplated emigration, which is much higher than the average of 35%.

The trend will continue and the gaping differences in living standards between East and West will not be narrowed any time soon. Unfortunately, in the last 25 years Hungary’s economy has stagnated. Or, to be more precise, after a few years of economic growth, bad government policies caused a relapse, followed by some improvement, which was soon enough killed by the next administration. The latest such setback occurred after 2010 when the new Fidesz government’s policies tossed the country into recession, wiping out the heroic efforts of the Gyurcsány and Bajnai governments, which had succeeded in putting the country’s economic house in order, surviving a worldwide recession, reducing the deficit, and achieving modest economic growth by 2010.

Propaganda is not enough

Current government propaganda may laud its great achievements, but the numbers don’t lie. Under the present circumstances more and more people will pack up and leave for places with greater opportunities. The country where they settle will benefit from their presence and so will the immigrants themselves, who make double or triple what they could in Hungary.

As for Hungary’s labor shortage, for the time being the Hungarian government isn’t worrying about it. But let’s assume the Orbán government changes its mind and recruits workers from, let’s say, the Balkan countries. Will these people stay in Hungary? I’m afraid the future is bleak in this respect.

 July 21, 2016

Hungary’s sudden interest in the eurozone

Mihály Varga, minister of economics, just dropped a surprise package. In a lengthy interview, he talked about Hungary’s plans to join the Eurozone by the end of the decade.

It’s difficult to reconcile the government’s conflicting messages. Earlier, János Lázár, the #2 man in the Orbán government, said that he would vote against membership in the European Union if the decision had to be made today. A week later he drew a parallel between the Soviet Union and the European Union, stressing Hungary’s fervent desire to remain independent. Moreover, the Hungarian government has just begun a venomous campaign against the European Union’s refugee policies ahead of a referendum which, according to the democratic opposition parties, is the first step in realizing the Orbán government’s resolve to leave the EU. Tamás Bauer, a keen observer of Hungarian politics, goes even further. “Orbán wants more than Boris Johnson and Nigel Farage did. He doesn’t want to take his country out of the Union. He wants to destroy the Union itself.” And now comes this interview with Varga, who talked in specific terms about the Hungarian government’s intent to join the Eurozone in the near future.

The media hailed this interview as indicative of a complete turnabout in the Orbán government’s policies toward the European Union. Actually, a year and a half ago there was a similarly unexpected announcement by Antal Rogán, who proclaimed that sometime between 2018 and 2020 Hungary will be in a position to introduce the euro as the country’s currency. His statement contradicted Viktor Orbán’s position, who in prior years had said that he was in no hurry to join the Eurozone because being “outside of it means great independence” which is, as we know, a primary consideration for the prime minister.

The last time Orbán talked about his government’s position on joining the Eurozone was in February of this year, in a speech delivered to Hungarian ambassadors. He refrained from committing himself one way or the other. At this junction, he said, he believed that more and more member states are interested in creating “a core Europe” which, he quickly added, is not the same thing as a “two-tiered Europe.” The members of the Eurozone will constitute the core. Once a country decides on a currency union, it has to give up a great deal of its national sovereignty. In the next few years Hungarians will have to have think very hard whether “we want to belong to a group of countries with a European entity or we will follow an independent national and economic policy.” There are people who support the creation of a United States of Europe, while others think that “one should not make snap decisions.” In any case, “we have to think hard about the question.” This certainly didn’t sound like an endorsement of Eurozone membership, but Orbán left the question open. It could be debated later, in case there is a change in the political constellation on the Continent.

At this point at least, Orbán believed that Hungary would get along just fine economically and wouldn’t suffer any negative consequences from being outside of the “core.” But then came today’s interview with Mihály Varga, who said that he is “very much hoping that we will have the euro, and happily it is up to us when that will be.” He predicted that by the end of the decade the Hungarian currency will be the euro. He explained that Hungary has fulfilled all the requirements for membership with one exception: it is not a member of ERM-II. For Eurozone membership a country must belong to the Exchange Rate Mechanism to ensure that exchange rate fluctuations between the euro and other EU currencies do not disrupt economic stability within the single market. ERM-II allows a ±15% fluctuation band, which is achieved by interventions coordinated by the European Central Bank and the central bank of the non-euro member state. As Varga pointed out, Hungary is in good shape in this respect. In the last two years the forint has remained well inside the band. The maximum fluctuations in the exchange rate between the euro and the forint have been +2.6% and -5.8%. According to Varga, Hungary didn’t join ERM-II because with such a move the country would have lost its competitive advantage.

eurozone

Hungary is not rushing to join ERM-II. Varga indicated that the Czech Republic, Poland, and Hungary constantly coordinate their moves and will decide when such a step is advantageous to them. It all depends on how stable the euro is in the next few months or year and how competitive the Hungarian economy is.

The two largest democratic opposition parties, MSZP and DK, reacted skeptically to the Varga interview. MSZP called it “a cheap performance” while DK somewhat sarcastically remarked that Varga “must have suddenly seen the light.” DK’s spokesman added that if Orbán shares Varga’s views, he should immediately call off the hate campaign against the European Union and the referendum on quotas, which would initiate Hungary’s exit from the Union.

I don’t think Varga’s statement means that the Orbán government has made a serious commitment to work toward joining the Eurozone. We have heard such pronouncements before from other members of the current government. But Péter Szijjártó’s offer today to take over the presidency of the European Union from the United Kingdom in the second half of 2017 indicates to me a more conciliatory attitude toward Brussels. In case Great Britain is unable to fulfill its obligation, the Hungarian foreign minister said, Hungary would be happy to assume its duties. He added that Hungary’s presidency between January 31 and July 30, 2011 was by all accounts considered to be a success. Hungarian diplomats proved themselves up to the task. Of course, Szijjártó didn’t add that those diplomats no longer work for the Ministry of Foreign Affairs. He and Tibor Navrancsics purged them.

These friendly overtures by two ministers of the Orbán government cannot be a coincidence. Something must have happened in the last few weeks or even days that prompted Viktor Orbán to try to curry favor with Brussels. But I agree with the spokesman of DK that it is impossible to make overtures to the European Union and at the same time conduct a vicious anti-EU campaign. I really wonder what is in Viktor Orbán’s mind. Perhaps the whole thing is nothing more than the usual “peacock dance” to which we have become accustomed by now. But the question still remains: why, and why now?

July 19, 2016

Severe labor shortage combined with anti-immigration propaganda

Two days ago, seemingly out of the blue, Mihály Varga, minister of the economy, got in touch with MTI, Hungary’s official telegraphic agency, to make the grand announcement that “the government is taking steps to remedy the growing labor shortage that is becoming an impediment to economic growth.” As it turned out, the minister’s move was prompted by a proposal submitted by the National Association of Employers and Manufacturers (Munkaadók és Gyáriparosok Országos Szövetsége/MGYOSZ) to address the acute shortage of qualified workers in many fields.

Varga stated that the government agrees with many of the recommendations, which include the importation of guest workers from so-called third countries, i.e. outside the European Union. In order to facilitate this recommendation, the government promised to reduce the tax burden on companies that bring in foreign employees. This is the first time the Orbán government has officially admitted that the lack of qualified workers is a serious problem in Hungary.

The problem, of course, is not new. Already a couple of years ago Stefan Körmendi, managing director of Europakraft GmbH, bitterly complained that the Hungarian government had deceived him and his company when it sang the praises of the “well-qualified Hungarian labor force.” His company needed skilled welders, pipe fitters, and disk roller specialists. There were plenty of applicants, but when they had to demonstrate their skills, most of them were unable to perform even the most basic tasks. Sixty percent of the 600 applicants tested couldn’t even weld, and all of these people had a piece of paper testifying that they had successfully been trained as welders. The whole sad story can be read in my post from 2014.

Since then the situation has only gotten worse. At the end of June Népszabadság reported that some foreign companies are so desperate that they are importing employees from their other factories to work in their Hungarian division for shorter or longer stints. The article highlighted the case of a factory that makes tops for luxury convertibles. The company’s Hungarian division, situated in Szügy, a small village in Nógrád County, was in such trouble that it had to bring in four women and four men from its Mexican division in Toluca for three months. Even with the added expense of transportation from Mexico and perhaps bonus pay, this solution was apparently still worth it. Guest workers also came from the company’s Russian and Serbian divisions. These foreign employees were necessary because the quality of the work done by the locals was not what management expected. The number of rejects was far too high. Moreover, this factory ran three shifts, and it was difficult to fill all the shifts with Hungarians. They weren’t interested in working outside the usual daytime hours.

Bors, a Hungarian tabloid, dispatched a reporter to Szügy, where he learned more details of the lives of Mexican guest workers while in Hungary. They were placed in a stately mansion that serves as a hotel; they were taken to Budapest and other cities in the country on sightseeing trips; the company even made sure that they could watch Copa America football matches on television. Apparently, they didn’t like the food, but otherwise I’m sure this Hungarian trip was quite an adventure for them. After the Mexicans left, a new batch of people came from Tatarstan, Russia. Clearly, the situation is desperate, and I’m sure that the management of this company is just as frustrated as Körmendi was back in 2014.

MGYOSZ’s suggestions “for the handling of the critical labor shortage in Hungary” started with the main reasons for this shortage: low birthrate; emigration, especially of more highly qualified workers and university graduates; the fact that almost half of those seeking employment are unskilled; and a workforce whose quality is on the decline. Something must be done quickly because otherwise the economic growth of the last couple of years will come to a screeching halt.

To solve this crisis, first and foremost the government should assist in attracting foreign workers. For example, one million Ukrainians are working in Poland at the moment. In Hungary’s case, that would mean the importation of about 250,000 foreign employees. But Hungary is not an attractive place for guest workers because of low wages, high taxes, the lack of housing, and the low level of social services. MGYOSZ asked the government to lessen the tax burden on employees so they could raise wages. And naturally, to put more effort into the proper training of workers. The long-term goals include a better educational system that emphasizes the 4Ks: kreativitás, kommunikáció, kooperáció, and kritikai gondolkodás. As we know, Viktor Orbán’s ideas on education stand in sharp contrast to these guiding principles.

Turkish guest workers arriving at the Düsseldorf Airport on November 27, 1961 / Source: en.qantara.de

Turkish guest workers arriving at the Düsseldorf Airport on November 27, 1961  Source: en.qantara.de

Mihály Varga, I’m afraid, was a bit too hasty when he reacted positively to MGYOSZ’s suggestions. The Orbán government has consistently and fiercely opposed any kind of immigration and keeps repeating that more babies will solve all the problems. Mind you, the demographic statistics show no great positive changes on that score. Viktor Orbán must have been furious, and I wonder what “Misi” got from the boss.

Fidesz published a statement saying that the Hungarian government provides work opportunities for Hungarians, not for immigrants. Only the political left and Brussels want to flood Europe and the labor market with immigrants. The Prime Minister’s office also spoke out again against immigration. According to its spokesman, statistics prove that immigration actually exacerbates the problems of the labor market. MSZP’s spokesman, Nándor Gúr, also objected to the scheme because the presence of foreign workers would lower wages in general. The government mouthpiece, Magyar Idők, tried to provide cover for Varga by claiming that MGYOSZ actually talked about guest workers from “the neighboring countries” and not from “third countries.”

Some commentators, like Kinga Facsinay of Magyar Nemzet, pointed out that after a year and a half of intense anti-immigration propaganda, Varga’s enthusiastic embrace of the importation of a large number of guest workers is a strange turn of events. Actually, this is just another example of the confusion within the government that has been endemic ever Fidesz won the election in 2010.

But, yes, the propaganda was, and remains, both intense and expensive. On the anti-migrant campaign the government spent billions: 960 million forints for a “national consultation” and 1.2 billion for the two billboard campaigns. The “Message to Brussels” campaign wasn’t cheap either; it cost 1 billion forints. And the October 2 referendum on quotas will cost 4.5 billion. Instead of wasting all this money on propaganda, the government could have used it to improve the education of future Hungarian workers.

More than 25 years have gone by since the arrival of democracy in Hungary, and yet over 40% of those who are actively seeking employment today have no qualifications for any job. This is a devastating indictment of the Hungarian educational system. It also underscores the failure of successive governments to create an economic environment that would have kept emigration within bounds. Since both have been neglected, I see no short-term internal fix for the Hungarian labor shortage. And this will in turn discourage foreign companies from investing in the country.

If the Hungarian government changed course and welcomed guest workers, this might help a bit. But under the present circumstances few people, especially highly skilled workers, would be enticed to emigrate to Hungary in the hope of a better life.

July 8, 2016

The state of the Hungarian economy à la János Lázár et al.

Great was my surprise when I read a Reuters article the other day with the intriguing headline: “Poland’s markets losing luster as Hungary’s star shines.” The reporter noted that “it took more than three years for the ‘Orbanomics’ rally in Hungary’s markets to kick in,” but as a result of the unorthodox policies Hungary became a “star performer.” It’s too bad that the rosy picture painted in the article has little to do with reality, as the latest GDP figures indicate. Perhaps the Reuters journalist read too much government propaganda about the sterling performance of the Hungarian economy, as has been touted time and again by Viktor Orbán and slavishly repeated by his ministers, specifically by János Lázár, head of the prime minister’s office, and Mihály Varga, minister of economy.

János Lázár just celebrated his fiftieth “government info,” his regular Thursday afternoon marathon press conference. The government introduced these allegedly informative sessions to give the appearance of openness and transparency. Lázár has been trying to humor members of the media with his informal style, but often he ends up trading charm for arrogance. And what is even worse: Lázár is caught lying right and left. By now, journalists attending these press conferences refer to them as the “fairy tale programs.”

Lázár exudes self-confidence. He purports to be thoroughly familiar with the smallest details of every issue. If necessary, he will concoct evidence to prove to his listeners that he is absolutely on top of the situation. Such fabrications usually occur when journalists question the accuracy of one of his claims. He is ready to snap back that the information is based on hard facts when his intelligence came either from flawed media reports or from his imagination. One example was his reference to a non-existent police report dealing with the alleged molestation of teenage girls in Körmend by the newly arrived refugees. A couple of hours later the Körmend police announced that the story as reported in the media was false. A somewhat similar example, except much more serious, is Lázár’s claim that the Hungarian government has proof of George Soros’s hostile actions against the Hungarian government and that the evidence comes straight from the secret services. The result is that the parliamentary committee on national security is asking to see proof that the secret services are engaged in spying on civic groups.

Lazar Janos4

And then there are the economic lies. Last week Lázár repeated the assertion, made earlier by Prime Minister Viktor Orbán and Mihály Varga, about the government’s remarkable reduction of the national debt. Eurostat figures, however, disprove Lázár’s assertion that the gross national debt of six years ago, which he said was 80%, has since been reduced by 10%. The fact is that at the end of December 2009 the gross national debt was not 80% but 78%, and at the end of December 2015 it was 75.3%, which is only 2.7% less. Nothing to brag about, especially in light of the tremendous amount of money confiscated from millions of ordinary Hungarian citizens’ private pension funds, allegedly to reduce the national debt.

These lies have to be perpetuated by ministers like Lázár or Varga because they cannot contradict the “boss,” who keeps repeating the same false numbers. At one point Varga found himself in a most embarrassing situation when he was giving a lecture in which he maintained that the Orbán government had reduced the gross national debt from 85% to 75% when behind him one could see the correct figures on the screen: in 2009 78%, in 2010 80.6%, in 2011 80.8%, etc. How discomfiting it had to be.

So, as we can see, Fidesz politicians are not terribly careful with their numbers. Sometimes, I assume, they simply get confused. It must be hard to keep the numbers straight when you’re keeping two or three sets of books. But they never “forget” that in 2010 Hungary was close to insolvency. They repeat this same story at every possible occasion. Last Thursday Lázár, in order to demonstrate the great accomplishments of the Orbán government, again returned to the allegedly dreadful state of the Hungarian economy after the 2010 elections. “We were not sure,” he said, “whether we’d have enough money to pay the pensioners.” Another dramatic claim that has no foundation in reality.

When György Matolcsy took over the ministry of the economy from Péter Oszkó, he himself admitted that “without further measures the deficit will be 4.3% of the GDP.” What made the situation critical was not any inherited fiscal irresponsibility but the alarming statements made by Lajos Kósa, a high Fidesz official, and Péter Szijjártó, at the time the personal spokesman of Viktor Orbán, about the disastrous financial conditions they were saddled with. In June 2010 both of them claimed that Hungary’s situation was as bad as that of Greece, then in the throes of a deep financial crisis. I assume it was Viktor Orbán, who was visiting Brussels at the time, who instructed them to exaggerate the country’s economic woes to strengthen his hand in his negotiations with José Manuel Barroso. The great ruse backfired, resulting in a disastrous fall in the forint, which then was followed by innumerable economic missteps that shook the financial world’s confidence in the Hungarian economy.

Lázár is a master of invention. He even lied about details of the Paks-II nuclear power plant. As is known, the European Commission has serious reservations about the Russian state company, Rosatom, receiving the tender to build the extension to the power plant without any competitive bidding. Lázár, without batting an eye, declared that “we cannot take responsibility for installing a different kind of technology alongside the Russian one.” Gábor Szabó of HVG suspects that Lázár told this same story to Elżbieta Bieńkowska, European Commissioner for Internal Market, Industry, Entrepreneurship, with whom Lázár met a couple of weeks ago. According to Szabó, there is general consensus among Hungarian experts that Hungary could have used French, American, or South Korean technology because Paks-II will operate completely separately from the existing plant. So, when Lázár said, after returning from Brussels where he negotiated with Margrethe Vestager, European Commissioner for Competition, that the European Union is close to accepting the Hungarian side’s arguments, we’d better take this information with a very large grain of salt.

May 30, 2016

György Matolcsy, the engine of the Hungarian economy, has his admirers

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.

Lentner on the cover of the right-wing Demokrata "We don't give up the war of independence

Lentner on the cover of the right-wing Demokrata
“We can’t give up the war of independence”

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.

May 29,2016

Viktor Orbán and his entourage in Baku

Not so long ago I wrote about Viktor Orbán’s fallacious theories regarding the direct connection between economic growth and authoritarian regimes. He looked at some of the countries that had plenty of gas, oil, and in some cases minerals and attributed their economic success in recent years to the nature of their regimes instead of to their natural resources. Ever since he became prime minister in 2010 he has been shamelessly courting the dictators or autocrats of these countries, only to discover that some of them are currently in deep economic trouble. One of these countries is Azerbaijan. I will not go into the details of the shocking deal Orbán made with President Ilham Aliyev concerning the fate of an Azeri murderer who was serving his sentence in a Hungarian jail. Anyone who’s interested in the particulars can find plenty of information on this blog.

At one point Orbán was even hoping that Hungary would issue bonds in Azeri currency, the manat, but the idea died a quiet death. And a good thing it did since the manat, which was worth 350 forints in January 2015, today trades at only 182 forints. Azerbaijan is in a deep recession (3.3%) with a 12% deficit and an inflation of 14%. I read somewhere that it is unable to pay for military equipment it ordered from Russia and the Russians are getting antsy.

Hungary, however, remains a steadfast ally of Azerbaijan. Not only did Viktor Orbán, his wife, and practically half of the Hungarian cabinet visit Aliyev in Baku, but it was announced during the trip by Foreign Minister Péter Szijjártó that the Hungarian Export-Import Bank has opened a $200 million line of credit to Azerbaijan to expand bilateral economic cooperation with Hungary. Aside from this announcement, the Hungarian media couldn’t discover any earth shattering reasons for the trip, certainly nothing concrete regarding “bilateral economic cooperation.” Although Viktor Orbán tried to give the impression that Azeri-Hungarian trade has soared since the Orbán government decided to treat Azerbaijan as a “stable partner, ally, and friend” of Hungary, the truth is that Hungarian exports to Azerbaijan today are only slightly above where they were in 2009. In fact, between 2010 and 2012 they decreased dramatically. Azeri exports to Hungary during the same period were flat.

Members of the cabinet nonetheless keep insisting that Azeri-Hungarian bilateral economic cooperation will be important to Hungary’s economy. Mihály Varga, minister of economy, spoke fleetingly about cooperation in the energy field, pharmaceuticals, and healthcare. Varga went on to emphasize Azerbaijan’s fantastic development in the past few years and stressed that the country is “the most important partner” in the South-Caucasian region. Which is not to say much. Hungarian exports to Azerbaijan amounted to a mere $65 million. Sándor Fazekas, minister of agriculture, chimed in, claiming that “Azerbaijan is the most promising agricultural partner of Hungary” because “since 2012 our exports to the country have quadrupled,” but, again, given the low level of trade volume that doesn’t mean much.

The Hungarian politicians felt obliged to say something about the changed circumstances of the Azeri economy. As Szijjártó cryptically put it, “we must place Azeri-Hungarian economic cooperation in a different dimension.” A Mandiner opinion piece sarcastically remarked that the “new dimension is the $200 million line of credit extended to Azerbaijan.”

Every time Orbán visits a country that is not exactly a democratic paradise the Hungarian media, with the exception of sycophantic publications like Magyar Idők, Magyar Hírlap, and Pesti Srácok, point out Orbán’s servile gestures toward his hosts. This trip was no exception. Csaba Káncz, formerly an advisor to the European Union, wrote that Orbán’s trip to Azerbaijan will not produce any tangible results,“it will [only] bring shame to the country.” One of the reasons for this shame is that Orbán and his wife lay a wreath on the grave of Heidar Aliyev, father of the current president of Azerbaijan, and his wife, Zarifa Aliyeva. The elder Aliyev’s political career was infamous. As first secretary of the Azeri communist party he ruled the country uninterrupted between 1969 and 2003 when he appointed his son to be his successor. Since 1995 there has been not one free election in the country. The last election, in 2014, was so free and fair that the results were announced the day before the actual election. Currently there are more than 100 political prisoners in Azerbaijan.

Led by Viktor and Anikó Orbán the Hungarian delegation is visiting the grave site of Heidar Aliyev and his wife

Led by Viktor and Anikó Orbán, the Hungarian delegation visits the grave site of Heidar Aliyev and his wife

In light of Azerbaijan’s dictatorship (in force ever since 1920) it was jarring that the Hungarian prime minister praised “the leaders of the country who have made Azerbaijan one of the most respected and often envied countries in the world.” People rarely appreciate the success of others, but sooner or later hard work brings triumph, and of late Azerbaijan’s “weight and prestige have grown.” Looking at it from the vantage point of Europe, Azerbaijan is successful and “committed to cooperation between East and West.” Surely, Orbán didn’t want to say much about Azerbaijan’s current economic and financial woes. He merely suggested diversification, in which “Hungary can be a useful partner” and which will make Azerbaijan even more successful and stronger.

A pilgrimage to the grave of the elder Aliyevs wasn’t enough groveling before the Azeri dictator. Viktor Orbán decided to honor the wife of the president, Mehriban Aliyeva, who serves as chairperson of the Aliyev Foundation named after Heidar Aliyev, by conferring on her the Commander’s Cross of the Order of Merit. And then the Hungarian entourage packed up and left. Another pretty useless and very expensive trip.

March 7, 2016

Viktor Orbán on a diplomatic mission in Mongolia?

Hungarian opposition papers usually have a jolly time making fun of Viktor Orbán’s slim pickings when it comes to making fancy state visits to countries that, from the vantage point of Budapest, don’t seem especially important. Certainly not important enough to visit with an entourage of sixty or seventy people, including five cabinet ministers and about fifty businessmen. This was certainly the situation when the prime minister’s office announced on January 18 that Viktor Orbán would spend three days in Ulaanbaatar, Mongolia’s capital.

For Hungarians, Mongols will always be associated with the visit they paid to Hungary in 1241-1242, with devastating consequences. Their brief conquest of large parts of the kingdom is considered one of the many tragedies that have befallen Hungary over the centuries. Otherwise, most Hungarians know little about the country, except perhaps that there are more horses than people in Mongolia. This vast country has only three million inhabitants. Although 30% of the Mongols are still nomadic herders, in recent years the country’s extensive deposits of copper, coal, tin, tungsten, and gold have emerged as a driver of industrial production. Mining now contributes 22% to the GDP and agriculture only 16%. Yet Mongolia is a poor country where 22% of the population lives on less than $1.25 a day. In 2011 GDP per capita was $3,100. Because of the boom in the mining sector, Mongolia had high growth rates in 2007 and 2008 (9.9% and 8.9%), but since then, with the world financial crisis and the commodity bust, its economy has slowed substantially. In 2015 GDP growth was only 2.3% and inflation was 8.9%. As for the future, analysts are not exactly sanguine. They predict slower growth due to drought-affected harvests and tight monetary and fiscal policies. The country is riddled with corruption and graft is endemic. The judiciary is vulnerable to political interference. In brief, it is a country where Viktor Orbán would feel at home.

After the announcement of the impending visit of the prime minister to Mongolia, 444.hu reported that Viktor Orbán had signed an agreement for Hungary to lend $25 million to Mongolia through the state-owned Eximbank. The money will be spent on the reconstruction of the Songino Bio Kombinat, which apparently Hungarians built back in the socialist period. The Bio Kombinat produces veterinary medicine, which is of vital importance to Mongolia’s livestock. This “financial assistance” package met with mixed emotions in Hungary. 444.hu wondered why Mongolia would need a loan from Hungary while others felt that this money could be used more profitably at home.

A quick look at Hungarian-Mongolian relations in the last couple of years indicates that the Orbán government has far-reaching economic plans as far as Mongolia is concerned. In October 2014 a Mongolian Cultural Institute was established at ELTE in Budapest, which was opened by President Tsakhiagiin Elbegdorj. On January 1, 2015 Hungary reopened its embassy in the Mongolian capital, and in April President János Áder visited Ulaanbaatar. In May, after a visit of Péter Szijjártó to Mongolia, Magyar Hírlap triumphantly announced that “Mongolia will be Hungary’s new technological target country.”

On January 25 the large Hungarian delegation arrived at Genghis Khan Airport. The temperature, a bone-chilling -32C, didn’t prevent the usual military fanfare, part and parcel of a state visit, from taking place. After meeting with Prime Minister Chimedin Saikhanbileg, Orbán as usual was full of praise for both the host country and Hungary which, according to him, has been thriving in the last few years. In fact, it, along with other eastern European countries, is the engine of the European Union’s economic growth. Both Mongolia and Hungary are successful countries which should join forces. “We have returned,” he said, referring to the earlier closing of the Hungarian embassy in Ulaanbaatar, because Hungary under his guidance has created an entirely new social and economic regime. He specifically noted that 400 Mongolian students have studied in Hungary. I assume that this number includes those who spent time in Hungary during the socialist period. In turn, the Mongolian prime minister welcomed the reopening of the embassy, a gesture that shows that “Hungary considers bilateral relations with Mongolia important.” From his speech we learned that Hungary has doubled the number of scholarships to Mongolian college students, from 100 to 200.

Viktor Orbán and Chimedin give a press conference after their talk

Viktor Orbán and Chimedin give a press conference after their talk

On the surface, these conversations seem to have been dull, but we learned from Péter Szijjártó that Viktor Orbán and his foreign minister Péter Szijjártó wanted to achieve something more than expanding business opportunities in Mongolia. They would like to use Mongolia as an intermediary between Russia and the European Union. While the two prime ministers talked about the economic successes of their countries and the advisability of cooperation, Szijjártó had a conversation with Foreign Minister Lundeg Purevsuren. After the meeting Szijjártó revealed that the two men had discussed the chances of “pragmatic cooperation” between Russia and the European Union. Mongolia could be a great help. According to Szijjártó, it is in the interest of Europe to develop cooperation between the European Union and the Eurasian Economic Union. “The earlier concept of a free trade zone from Lisbon to Vladivostok was never more important than now.” Mongolia signed a partnership agreement with the European Union and is in the middle of negotiations with the Eurasian Economic Union (EAEU) for a similar partnership. Therefore Szijjártó asked his Mongolian colleague to use his good offices between the EU and the AEEU. I consider this opening gambit by Szijjártó a naïve move leading nowhere.

As for the actual business deals, the results are meager. While Hungary lent $25 million to Mongolia, the Hungarians signed business ventures amounting to $40 million. But there were many future plans that may or may not materialize. Miháy Varga, minister of national economy, held conversations with the Mongolian finance and industrial ministers. According to him, “decidedly good cooperation may develop in food processing, construction, transportation, alternative energy, and even in mining.” They specifically talked about selling Hungarian buses to Mongolia. Earlier attempts at increasing trade and business opportunities with other Central Asian countries brought no results. Perhaps Mongolia will be different, but I doubt it.

January 26, 2016