Hungarian Spectrum

János Lázár, Fidesz politician and speculator

János Lázár, in addition to being the leader of the huge Fidesz parliamentary delegation, is also the mayor of Hódmezővásárhely. Don't think that Hódmezővásárhely is exactly a metropolis. It is a small town with a population of 40,000. The population might be small but its debt load is enormous. In fact, in the last three years it has grown from 16.3 to 20.7 billion forints. That means that every inhabitant of Hódmezővásárhely owes half a million forints. The Government Accounting Office (Állami Számvevőszék), which just lately looked over the city's finances, recommended that János Lázár devise "a program that would immediately remedy the financial situation of the town."

Under the circumstances János Lázár needed a lot of assistance, and he figured that the softest touch was the lender itself. After all, banks agreed to modify individual mortgages, so perhaps they would help out municipalities as well. He wrote a letter to Radovan Jelasity (Jelašič), CEO of Erste Bank, to which the town owes the bulk of its debt. The town's association with Erste Bank began in 2006 when Hódmezővásárhely issued 694 municipal bonds each worth 100,000 Swiss francs. That means a whopping 69,400,000 francs. At the time one Swiss franc was worth 173.41 forints; at the end of 2011 the exchange rate was 251 forints to 1 franc.

János Lázár pretty well told Jelasity that his bank either shares the losses the town incurred as a result of its exchange rate hit or else. He gave Jelasity one month to make an "offer." "If there is no cooperation," he threatened, "the leaders of the municipality will turn to the Hungarian parliament for assistance." Lázár made no bones about it: if necessary, parliament will change the law in order to force Erste Bank to share the town's losses. And considering that Lázár is no ordinary lawmaker but the most powerful man in the current parliament, the threat was anything but idle.

I read two noteworthy comments in connection with this letter. The first was by Mátyás Eörsi, earlier an SZDSZ member of parliament and now a member of DK (Demokrata Koalíció), who compared Lázár to the leader of a gang (egy külvárosi gengszterbanda feje) who dictates his terms. The other commentator, Zsófia Mihancsik, editor-in-chief of Galamus, was certain that what Lázár did in this letter amounts to the misuse of office (hivatali visszaélés) which according to the Criminal Code is punishable by a three-year prison term.

Radovan Jelasity took his sweet time and wrote an answer on the very last possible day, January 31, 2012. It seems that the head of "the gang" didn't frighten the CEO of Erste Bank. He offered János Lázár a deal that he had to know the town couldn't honor. If Hódmezővásárhely is willing to pay ten billion forints in one lump sum, he is willing to negotiate about the fate of the other ten billion.

Lázár was outraged and complained that "this ultimatum is a clear signal that Erste Bank doesn't consider the citizens of Hódmezővásárhely partners but only debtors." In his opinion, under the present circumstances the banks must assume their share of the losses and they must work together with the municipalities. May I ask: what are the citizens of Hódmezővásárhely if not debtors? 

Today Lázár also gave an interview to the far-right Magyar Hírlap which ran the article under the headline "Implacable banks." By that time Lázár claimed that "foreign banks are initiating a coordinated attack on the municipalities because their goal is to force the central government to consolidate municipal debts."

Simultaneously with Lázár's interview in Magyar Hírlap, Napi Gazdaság came out with an interesting article. It turns out that the municipal bonds Hódmezővásárhely issued in 2006 brought in 69,400,000 Swiss francs worth 12,034,654,000 forints. The interest rate was low and the exchange rate was favorable. A year later, in August 2007, Lázár himself proudly announced that the town had invested the money in currency transactions and as a result had received a handsome profit of 1 billion Hungarian forints. The town, that is, engaged in a series of currency carry trades, a strategy in which an investor converts the currency of a country whose bonds have a relatively low interest rate into the currency of a country whose bonds yield a higher interest rate. The investor buys the higher yielding bonds with the "cheap money" (usually using leverage) and will make a profit amounting to the difference between the interest rates as long as the exchange rate between the two countries remains constant. 

According to Napi Gazdaság the town of Hódmezővásárhely played this high risk game for a number of years. The city council entrusted Lázár to continue the carry trades as long as he found them profitable and advantageous. And he did. In 2009 the Government Accounting Office reported that during 2007 and 2008 Hódmezővásárhely received another 1.611 billion forints as a result of these transactions.

But then came the fall of 2008 and with it the financial crisis. Hódmezúvásárhely lost as much money in its carry trade activities after that date as it had gained in the prior two years.

In his interview with Magyar Hirlap Lázár was still in a belligerent mood. He is planning to sue Erste Bank. In addition, he will ask the council to consider asking for help from the government and from parliament. Thus, he still hasn't given up on his idea of changing the law in order to save his skin in Hódmezővásárhely.

I don't know how successful Lázár will be in convincing Viktor Orbán to endorse his law-changing plans, but I'm rather skeptical about his luck there. Viktor Orbán would find it mighty difficult to defend such a move just before his negotiations with the IMF and the EU. He has enough trouble as it is. As for the courts, if we still have an independent judiciary by the time the case is heard, I somehow don't think that Hódmezővásárhely would win against Erste Bank.

So, here is poor Hungary, attacked not only by those hateful foreign speculators but also, it seems, by speculators from within the government party ranks. 

MALÉV: The sad story of Hungary's national airline

The first time I flew on Malév was in December 1993. An Internet friend living in Stockholm alerted me to a special fare on a direct New York-Budapest flight. Indeed, it was extraordinarily inexpensive but, despite the low fare, the plane was practically empty. Nearby me sat a traveling salesman with samples of his ware. The stewardess who took a fancy to him amiably chatted with him. She was a great deal less attentive to the other passengers. By the way, I made the mistake of talking to her in Hungarian, thinking that after all Malév was a Hungarian airline. It turned out that she knew no Hungarian. If I recall, this particular New York-Budapest flight was a joint venture of Delta and Malév and the two companies shared personnel.

About a year before, in November 1992, the Italian national airline Alitalia and an Italian bank purchased a 35% share in Malév, but this partnership did not last. In December 1997 Hungarian banks repurchased the Italian share so that Malév was owned almost completely by the State Privatization and Property Corporation (ÁPV). However, the state desperately wanted to get rid of Malév because it was a constant financial burden. After many years of trying, ÁPV manged to sell the airline to AirBridge, a Russian company, largely owned by Boris Abramovich. That was in 2007. Two years later a minority stake of AirBridge was acquired by the Russian bank Vnesheconombank and the daily operation of the airline was run by this Russian bank.

The Russian connection didn't last long either. After three years, in February 2010, the majority (95%) owner of the airline once again became the Hungarian state. Since Malév was in financial straits, the Bajnai government injected 25.36 billion forints into the company only a few months before the national elections. Wizz Air, a competitor, initiated proceedings against the Hungarian government's financial aid package for Malév, which, they contended, was "illegal state aid" according to European Union rules.

After the elections the Orbán government tackled the Malév problem. Viktor Orbán hoped that the Eastern wind would blow a Chinese investor to Hungary who would purchase Malév. There was a lot of talk but no results. In August 2011 the Hungarian media hinted about an alleged Czech offer for the purchase of Malév. By December Tamás Fellegi mysteriously announced that serious negotiations were underway for the creation of "a new Hungarian national airline with Budapest as its center." 

In January 2012 came the very bad news that the European Commission had determined that the state aid to Malév was indeed illegal and that Malév must pay back all the money it received from the Hungarian government ever since 2003. The amount was a staggering 88 billion forints. Certain bankruptcy was predicted. So, two days later the Hungarian government stepped in and rescued Malév. Shortly before its creditors could salvage what was left of the firm after its payment deadline expired, the government declared Malév "a company of strategic importance." This provision in Hungary's bankruptcy regulations allows the state to protect businesses that are endangered but that allegedly serve some great national interest.

By yesterday, in spite of the steps taken to shelter Malév, it looked as if the Hungarian government was preparing the ground for the airline's bankruptcy. For instance, it issued regulations about the compensation of passengers holding tickets.

And yet the CEO of Malév repeated again that the government is committed to "the existence of a national airline. "I'm becoming suspicious that this "national airline" may not be Malév. Let's not forget Fellegi's announcement last December about serious negotiations with certain European investors over "the creation of a new national airline." What do Viktor Orbán and his canny friends have up their sleeves? Perhaps if that national airline is no longer called Malév, it doesn't have to pay back the 88 billion forints the airline received from the Hungarian government or its other financial obligations.

It wouldn't be the first time shrewd businessmen behind Fidesz come up with such innovative solutions. Lajos Simicska and Csaba Schlecht "sold" twenty Fidesz-owned bankrupt companies owing millions and millions of forints to two foreign guest workers in Germany, a Turk and a Croat. Neither man knew anything about the transaction. Their passports were either stolen or borrowed. Fidesz got rid of the companies in part because they owed an incredible amount of back taxes. I wrote about this case on September 8, 2008. In any event, I'm suspicious.

Two days ago Malév was obliged to delay the departure of a plane full of passengers bound for Brussels for an hour and a half. The prime minister was supposed to take that flight, but it seems he was running late. In fact, when he still hadn't arrived at the airport after an hour and a half, the plane left without him. Viktor Orbán has a history of treating Malév as if it were his private plane company. During his first stint as prime minister he pulled this kind of stunt several times. But if my suspicion is at all well founded, then it really doesn't matter how much it cost Malév to delay that plane. It will all be forgotten and some fool may actually purchase "a new national airline."

János Kornai on centralization and decentralization. Part II

Yesterday I dealt with János Kornai's ideas on centralization and decentralization. I stopped about halfway through the essay, the place where Kornai on the basis of eight criteria discussed the theoretical pros and cons of centralization versus decentralization. 

Today we continue with the specifics of the centralization that is taking place in Viktor Orbán's Hungary. This "unbridled" centralization is an instrument for "the more complete seizure of power and once that has taken place to hold onto this power for as long as possible."

What are the requirements for building an effective power pyramid?

First, the goal is to create the shortest possible chain of command.

Second, Every Boss, every Deputy Boss and every Deputy-Deputy Boss must be the Supreme Boss's own trusted man. That aim by itself is good enough reason to reorganize every existing institution and office. The change of personnel must take place down to the lowest levels of the pyramid.

Third, the main criterion for appointment must be unquestioning loyalty to the apex of the structure. Knowledge and expertise are useful, but they are secondary in appointment decisions.

Fourth, dependence must be strong on both the upper and the lower levels. Orders must be executed without the slightest hesitation. Often the order from above is not even necessary: the subordinates know the party line.

Fifth, the Boss doesn't have to discuss matters thoroughly with his employees. Similar to the army, the perfect example of vertical coordination, only information coming from above has any weight. No suggestion is expected or even tolerated from below. The system is especially intolerant of any kind of criticism.

Sixth, in order for this vertical coordination to work well, it is important to insist on discipline. Lack of discipline must be punished. Those who are disobedient must be removed from responsible positions.

The vertical coordination not only punishes and threatens. It also rewards. For loyal service ample monetary compensation can be expected. But perhaps even more important, the Bosses, the Deputy Bosses, and the Deputy-Deputy Bosses are themselves the recipients of power. They must be obedient upward, but they can give orders to the subordinates. Once these people receive power they don't want to part with it. Thus, the Supreme Boss at the apex of the pyramid is not alone. His interests are shared with great, middling, and little mighty ones.

The lives of people on the various levels of the VO pyramid (as Kornai calls Orbán's regime) is not that difficult. They don't have to think too hard. They don't have to spend time on complicated issues. They simply follow the orders of the party and the government. If something goes wrong, they don't have to take responsibility. After all, they only followed orders.

A hierarchical vertical power structure never works absolutely smoothly, and if there are problems the answer is further centralization. If that is not sufficient to iron out the difficulties, then comes punishment. In the socialist system it was deemed "sabotage" if the prescribed plan couldn't be fulfilled. The instrument of the Orbán regime is "breach of fiduciary responsibility." Up to now the Hungarian judicial system has been independent enough not to stage show trials. "However, there is no guarantee that the use of repressive instruments will stop at this point." There are more and more insinuations and false accusations and there is more and more pressure on the judiciary.

Kornai's description of centralized vertical coordination is well known to those who have studied the socialist political and economic system. In the Soviet Union and in Eastern Europe that system could function for decades because the same system was in place across the entire area. Moreover, private property for all practical purposes didn't exist. The situation today is different. How can the centralized system of Viktor Orbán exist without a socialist system surrounding it? How can it exist alongside a capitalist market economy?

The horizontal system of the market and the vertical structure of the state live side by side throughout the developed world although their cohabitation is not always easy. What the Orbán government has been doing in the last twenty months, however, is almost certain to lead to an antagonistic relationship. The Orbán government's decisions are capricious. It can easily happen that in any given law there are pro-socialist and pro-capitalist elements. The final product, Kornai argues, is incoherent, combining the least attractive features of socialism and capitalism.

Finally, Kornai lists the pro- and anti-capitalist verbiage of Viktor Orbán. If Orbán had stayed with words it wouldn't be so bad but unfortunately there have been decisions that are unacceptable. Perhaps the most egregious was the confiscation of private savings. Nationalization also seems to be on the agenda. It's enough to think of the state's purchase of MOL stock and 75% of Rába. Just today the Hungarian postal service received the last available frequency to set up a company providing cell phone service.

Moreover, the Orbán regime doesn't even honor the most fundamental feature of capitalism, the sanctity of private contracts. The government can also regulate what can be sold at gas stations, how many pharmacies can operate in any given town and where they are located. Recently the sale of tobacco products became a state monopoly with the government regulating the number of state-run tobacco shops. The government determines whether someone can build and open a supermarket. And the Orbán government makes a distinction between firms and firms. Hungarian owned firms, especially if their owners are in good standing with Fidesz, are favored and foreign companies are discriminated against. And we all know what happened to the Hungarian banking sector. The result is a lack of credit and thus a lack of economic growth.

Although Kornai claims that his example of an American football game is not really appropriate, the Orbán government's methods bear some resemblance to those of a defensive squad. There is a fighting squad on one side (the government) that is ready to trample down everybody on the other side. The other side is Hungarian capitalism which on the surface is at a disadvantage. It doesn't have a unified party, it doesn't have a politburo, and it doesn't have a general staff. But it has another kind of power: the market, made up of tens of millions of participants. This market has a special language. It is enough for it to withdraw and do nothing. If the market with its invisible hand refuses to purchase government bonds or its representatives refuse to open new factories, the centralized vertical state is stymied. It might have political power but it is powerless in the face of a market boycott.

Kornai concludes that the Orbán regime managed to grab power by centralization and the expansion of the state, but that autocratic rule, unbridled centralization, and state domination run wild are incompatible with the healthy workings of a modern capitalist market economy. By going along this road, the current Hungarian government will be incapable of putting the currently stagnating economy on the path of sustainable growth.

János Kornai on centralization and decentralization. Part I

It was just a little over a year ago that I summarized an important article by János Kornai, the best known Hungarian economist, on the first ten months of the Orbán government. It was entitled "Taking Stock." In it Kornai talked about the political and economic consequences of Viktor Orbán's revolution in the voting booths. Kornai was one of the first people to call Orbán's regime an autocracy.

Now Kornai is focusing on the centralization tendencies of the current Hungarian government. More than fifty years ago Kornai began his career as an economist with a dissertation--later published as a book--on the over-centralization of the economy during the Rákosi regime. He never thought that he would have to return to this topic. But as he looks around he sees a very rapid, almost maniacal centralization that has taken place in the last twenty months.

Kornai brings up thirty-three examples. Some are more important than others but the tendency is clear. This centralization is brought about by the mistaken notion that the vertical model of organization is superior to the horizontal one. It is faster, more efficient, and therefore less expensive.

The vertical model looks like a pyramid at the apex of which stands the Supreme Boss under whom there are, let's say, ten Bosses, and finally rows and rows of Deputy Bosses until we reach the bottom of the pyramid where there are people who only receive orders.

The horizontal model is not so neat. In it no one is subordinate to anyone else. Orders cannot be given, all decisions must be arrived at by negotiation.

Of course these models are simplified extreme cases. No vertical model is always as clearly defined and no horizontal model is that egalitarian.

The state apparatus resembles, though not in such a pure form, the vertical model. The financial markets and nonprofit organizations more closely resemble the horizontal model.

At this point Kornai compares the two models. First, he examines the effectiveness of the two models. Critics of decentralization argue that the horizontal model is wasteful. There are many organizations side by side which in their activities often overlap. Supporters of the vertical model argue that their model is superior because one can save money on administrative costs. However, Kornai points out that the alleged savings of the vertical model don't always materialize because decisions are often made ad hoc and without consultation with experts.

When it comes to competitiveness, it is clear that centralization limits competitiveness. Admittedly, competition is expensive. One must advertise, one must convince the buyer about the worth of the product. But competition is the body and soul of innovation. Competition is also necessary in the intellectual sphere, in education, in science, and in the arts. Here Kornai tells the story of Paul A. Samuelson who wanted very badly to stay at Harvard after receiving his Ph.D. but didn't get a job there. So, he went to MIT and convinced them to start a department of economics. They decided to hire him. Today the two institutions have a healthy competition in the field of economics.

Kornai moves on to "adaptation and selection." Centralizers think that within the walls of their office they can plan perfect outcomes. Decentralization has a huge advantage over centralization by moving along with the flow of real life. Google and Apple did not come into being by some central decision. They just happened. The arrogant Supreme Boss believes that he is infallible. But making decisions from the top will necessarily end up being no more than experiments that need further adjustments. All that with great speed.

Kornai also takes a look at a key ingredient of decision making: information. For a centralized model to work perfectly one would be need to be able to foresee all future contingencies. But life is full of uncertainties and inaccurate information. The inaccurate information is not always accidental. It can be deliberate. For example, it might be in the interest of the subordinate to deny existing problems and misinform his superior. Or, the other way around, to create nonexistent problems. The Boss cannot correct wrong decisions because his subordinates are afraid to tell him he made a mistake. By contrast, in the horizontal model "the person who receives the information is the same person who uses this information and therefore it is in his interest to get accurate information."

Centralization works against diversity. The beauty of life is variegation. Not all students should be taught the same thing. And although it might be cheaper to produce fabric in a single color, people like to dress in clothes of many colors. 

Finally, the vertical model can be politically dangerous because of who is on top. Is a well-meaning dictator at the apex of the pyramid?  Even if he is well meaning, is he someone who often makes mistakes? Or, what if he is not so well meaning? What if he has too many faults, is dictatorial, can't stand criticism, is stubborn, and doesn't adapt easily? Perhaps this is the biggest problem with the centralized model. The more efficient the system the more it can become the instrument of dictatorial power.

Central planning interferes with self-determination and personal autonomy. Kornai brings up the case of higher education where the present government is defining the limits of tuition free enrollment. On what moral grounds can the state decide what youngsters should study? What happens to the sovereignty of individuals and families?

And finally, the more centralized a society the more the state must take over the care of every citizen. "Centralization is the twin of paternalism."  If this is true, the Orbán government is working against its own stated goals because it is fighting paternalism and is preaching self-help but at the same time is promoting centralization. The two goals are incompatible.

To be continued

Jobbik's Gábor Vona tells all: they are the enemies of democracy

Jobbik had quite a day yesterday. The party held a large indoor gathering, setting the stage for a new year of political activity. Gábor Vona, the chairman of the party, made a speech. I don't know how many foreign papers will cover it, but I believe it was a noteworthy speech that warrants an audience beyond the borders of Hungary. The message was: "We are not communists, we are not fascists, we are not national socialists, but we are not democrats either." Clear talk, no beating around the bush.

Well, one could say that this is not all that new, but I don't think that until now any Jobbik politician had been so plain speaking as the party chairman was yesterday. Vona outlined where the party's "intellectual center" is not, though where it is is far from clear. According to Vona, this center has nothing to do with the power of class or the power of the state. It has nothing to do with race or "with money and intellectual capital." By this point I was lost in the labyrinth of Vona's ruminations.

As for the future, according to Vona the worldwide economic crisis is "the crisis of liberal democracies" and it is linked to an avoidable armed conflict in the next decade or so. From the context it seems that Vona is thinking in terms of a conflict that will take place in Europe because "Jobbik has the duty to assist the Hungarians in developing their self-defense and their capacity for survival." To be prepared for this conflict he and his party will "fight tooth and nail against the materialistic and ultraliberal forces and will forbid any deviation and opportunistic deals with the enemy."

Vona's further message was that "our politicians must understand that they are not supposed to seek compromises; their duty is to fight, fight, and fight." They "are not going to make peace with this regime that is against the nation, against men, and against God." It is not quite clear which regime Vona is talking about. The present Hungarian government or the western democracies.

Jobbik's duty is to prepare the Hungarian society for this new world. Vona's conclusion is that Jobbik's politics in the last few years has been successful because "the [Orbán] government incorporated many of Jobbik's suggestions into its own program.... The spirit of Jobbik is capable of moving the government even with its two-thirds majority in the right direction." As an example, he talked about the Peace March whose participants demonstrated under the banner "We will not be a colony" which was, after all, Jobbik's slogan.

The message is crystal clear

The speech was delivered before a large audience made up mostly of young people, and thus Vona had an opportunity to bring up the average age of the Fidesz demonstrators a week ago, which bordered on the geriatric. He criticized the Orbán government's economic policies as well as its failed "economic war of independence."

Vona then vented his anti-European Union feelings which, as I mentioned yesterday, are not shared by all of his followers. He didn't advocate outright secession but suggested holding a referendum on the question. Even though only a few days ago it was reported that Hungary received five times more money from Brussels than she paid into the common coffers, Vona insisted that "it is only on paper that we receive more money than we pay in."  How? Hungary loses on the free movement of capital and labor and the lack of custom duties.

"Hungary is not only an economic colony but by now a political one as well. Hungary has as much independence as a state within the United States of America." The longer the country remains in the Union the more capital will be syphoned off by foreigners. In the end it will not be able to leave the Union because it will be too weak to stand on its own two feet. Instead of the European Union, Hungary should seek its fortune in the East. Vona's latest idea is an orientation toward Turkey and Russia. A pro-Russian stance is curious considering Jobbik's wide ranging anti-communist rhetoric.

Vona, whose speech lasted an hour and a half and apparently was very well received, finished his talk with a review of the current Hungarian political scene. He sems to have spent the most time on Ferenc Gyurcsány whom he labeled as "unscrupulous, power hungry, cynical, a liar, a traitor, and not really normal."  In MSZP "members of the retro-squad fight with the Kádár-Jugend while the LMP will soon dissolve in the slough from which it came."

What does Vona think of Viktor Orbán? Not much at least on the surface since, according to him, "the Gyurcsány and the Orbán governments by different means together brought ruin to Hungary."

This speech provided Fidesz with a wonderful opportunity to express its condemnation of Jobbik. Gabriella Selmeczi emphasized that "Jobbik openly wrote itself off from Hungarian democracy."  She added that it is absolutely clear that "only Fidesz is capable in the spirit of national cooperation to show the way out of Hungary's difficult situation."  Naturally, she didn't add that Fidesz demonstrators also said something very similar to what Vona had to say: Hungary will not be a colony.

Renewed international effort at turning Hungary around and the reaction of Viktor Orbán

International criticism is pouring into the Hungarian ministries nowadays. The European Commission, the European Parliament and the Council of Europe, in addition to the United States government, have serious misgivings about the way the Orbán government is steering the ship of state. Viktor Orbán made up his mind, most likely a long time ago, that given the opportunity he would remake the country in his own image. The opportunity was given and a rapid-fire parliament passed law after law. Orbán wanted to make the transitional period as short as possible. By January 1, 2012 the Hungarian people and the international community were faced with a new Hungary. Even the colors of the ambulances were changed. Nothing could remain the same as before.

One of the new laws that the international community finds especially vexing is the media law. Politicians often have a rocky relationship with the media, but few are given the opportunity to enact a media law that would ensure the subjugation of the written and electronic media to government authorities. When the media law was released and criticisms started to pour in, the Hungarian government pointed to the same or very similar laws in other countries within the European Union.

In December 2010 and January 2011 the Orbán government released two statements summarizing the main criticisms of its new laws and providing examples of regulations from 20 European and EU-member states as precedents for Hungary's media legislation. At this point the Center for Media and Communication Studies at the English-language Central European University located in Budapest commissioned media policy experts in each of these countries to examine every example cited by the Hungarian government.

While freedom of expression and the press are fundamental rights all over Europe there is no uniform model of media regulation within the European Union.The experts who contributed to the volume thus had to look at 56 media regulations that were cited by the Hungarian government as precedents for its new media laws. "The study found that Hungary's media laws are largely inconsistent with the cited European practices and norms, based on an examination of the legal precedents provided and on the expert analyses of how these precedents are implemented in these European and EU-member countries."

It turned out that in a majority of examples experts found that the Hungarian government omitted or inaccurately characterized other countries' regulatory systems. In many cases the government accurately presented a portion of a legal provision or regulation, but the reference either omitted elements of the regulation or disregarded the means by which the regulation is implemented. All in all, "the study finds that the European media regulations cited by the Hungarian government do not serve as adequate precedents for Hungary's new media laws."

The list of the contributors is impressive. They all experts in the field and they all concentrate on the media laws of their own country. An absolutely sterling list of names. This was the volume Neelie Kroes's study group relied on and this is the one Karola Kiricsics, who was labeled the female Péter Szijjártó and a full-fledged member of the "parrot commando" after her performance on ATV, had to attack somehow.

The colors are nice but the message is monotonous

Kiricsi's first reaction to the renewed criticism of the media law was that the study is unreliable and its findings are wrong. The only proof she offered was an alleged error concerning the Media Authority's right to fine media outlets. So, claimed Kiricsi, instead of relying on a study put together by a group of international experts, Neelie Kroes should have asked the Media Authority itself. They would have been glad to provide her with the "right"  information. An interesting idea, and so typical.

The media law is just one of many on the table at the moment. Orbán is under siege from all directions. But as far as I can see, true to himself he remains a masterful schemer.

First, he decided to enter the "lions' den" in Strasbourg because most likely he knew ahead of time that half of the lions would not be there. What do I mean by that? I suspect that Orbán knew before he decided to appear before the European Parliament that members of the Christian Democratic People's Party would stand by him. This way Orbán could reinforce his earlier contention that the dispute between the Hungarian government and its critics is not really about democracy but about party politics. The socialists, the liberals, and the greens attack him and his government on ideological grounds.

Second, the mass demonstration for January 21, only three days before his meeting with José Manuel Barroso, president of the European Commission, was carefully planned. It was organized not only as a demonstration in support of the prime minister and his government but also as a proof of anti-European Union sentiments. A huge crowd demonstrated against the colonization attempts of Brussels. At least this is what the posters said. The gathering was meant to show Barroso and the Commission that they must handle Hungary with kid gloves because people's sentiment is in favor of Hungarian sovereignty. The message was: Don't push us too hard on our democracy deficits and don't insist on changing our laws because we are ardent patriots who will defend our independence.

A Hungarian manipulator

Yes, this was the message and it wasn't wasted on Brussels. And yet the European Union's politicians shouldn't be misled by a mass demonstration. Fidesz has a fantastic ability to bring large crowds out on the streets. This has been in the case ever since the spring of 2002. But the size of the crowd doesn't change the facts: according to the latest statistics only 16-17% of the voting age population would vote for Fidesz. And there is another statistic that just came out. The great majority of Hungarians support Hungary's membership in the European Union. Even half of the euroskeptic Jobbik voters. So kid gloves are unnecessary.

History lesson: Hungarians and the outbreak of World War I

One of the readers of Hungarian Spectrum got into a heated debate about the Treaty of Trianon and Hungary's role in the war that Hungary, along with Austria, lost. He argued that the conduct of foreign policy was in the hands of the Austrians and thus Hungary was dragged into the war against its will.

I promised at that point that I would write something about the topic because it is becoming evident that a fair number of Hungarians, old and young alike, have a very distorted view of Hungarian history.

So, let's start with the Austro-Hungarian Foreign Ministry. Between 1867 and 1918 there were thirteen Austro-Hungarian foreign ministers out of whom six were Hungarian nationals: Gyula Andrássy, József Szlávy, Gusztáv Kálnoky, István Burián (twice), and Gyula Andrássy, Jr. As for the staff of the ministry, naturally in the first couple of decades of the Austro-Hungarian Monarchy Hungarians were in the great minority but by 1914 they were well represented. And finally, the declaration of war could be vetoed by the Hungarian prime minister. István Tisza, somewhat reluctantly, endorsed the move. So, let's not pretend that Hungary was an innocent victim of Austrian power games.

I mentioned during this debate that years ago I wrote an article about the war enthusiasm of Hungarian poets and writers. Let me add that these writers were not faithful conservative adherents of the status quo. No, on the contrary. They were so-called "progressive writers," people who gathered around the famous periodical, Nyugat (West).

The whole population suddenly became one in condemning Serbia and looking forward to a "cleansing" war. The monarchy, long beset by ethnic conflicts, showed a remarkable transformation. Czechs and Germans buried the hatchet and enthusiastically cheered their emperor. The Hungarians, who suddenly forgot all their grievances against Vienna, energetically sang the the formerly despised Austrian national anthem and marched together with Slovaks, Croats, and Romanians. Only the Serbs were subdued, fearful, and quietly antagonistic. In every city there were spontaneous, cheerful demonstrations and the enthusiasm was contagious.

The most famous English war poet Rupert Brooke, in his well known poem "Peace," captured his generation's feelings of liberation from the shackles of inactivity when he talked about awakening from "sleeping" and expressed his joy at the thought of escaping from "a world grown old and cold and weary."

The Hungarian Gyula Juhász used almost identical language: "Wondrous days! Our soul which almost perished/In sterile and sickly peace is found again,/Oh, long gone is the mournful, listless and idle spirit/The disdainful, almost foreign Budapest." Or here are a few lines from Dezső Kosztolányi: "Today's man--grown up in a hothouse, pale, and sipping tea--greets this healthy brutality enthusiastically. Let the storm come and sweep out our salons. Let us confess that there is a lot of trash in them and that what gets destroyed is no great loss.... Who feels sorry for the old culture? May the change, the new, the bloody dough which will leaven the future be blessed."

Or here is Zsigmond Móricz, the greatest Hungarian prose writer of the interwar period. According to him, the pre-war years were a time of "cursed tranquility and cancerous peace." He was convinced that "decrepit Europe, like the aged Phoenix reborn in fire, must be rejuvenated" as a result of the war. Móricz in his short stories written at the time often talked about the vitality the war gave to people. His Hungarian peasants, whether in the trenches or in marching columns, are full of life; they are invigorated: "the boys are just shaking of joy." Going into battle, according to one of his characters, is "sheer pleasure because at least one knows there what he is doing"; moreover, all this is done during "a beautiful spring which was never more beautiful."

Ready to fight

The Hungarian writers' support of the war had in addition to the above mentioned benefits seemingly firmer, more political foundations than their misguided belief in their own redemption and the universal yearning for change. For years, political critics charged, Austria-Hungary's foreign policy had been timid and the monarchy's statesmen on the defensive. And for years, Serbia, with Russia's assistance, had been systematically trying to undermine the Dual Monarchy. The mistrust, indeed hatred, of Serbia was widespread. Even Endre Ady, before he realized that a conflict between Serbia and the monarchy would lead to a world-wide confrontation, was prepared to support a local war which, if won, would not only preserve but revitalize the monarchy's standing in world affairs. In "Torony az éjszakában" (Steeple in the night), he wrote: "Perhaps tomorrow, washed in blood,/Our godly guardian, the steeple/Will glitter,/The Word of the martial past rumbles:/We shall die or triumph."

No doubt these people felt that the monarchy was threatened; despite Austria-Hungary's declaration of war on Serbia, they were convinced that this was a defensive war. Ignotus, one of the editors of Nyugat, set the tone for the Hungarian intellectual elite in an August 1 editorial entitled "War." "This war," he wrote, "had to be; without it, we would have ended up like Turkey." Zoltán Ambrus, a writer and theater critic, put it this way: "the question was to be or not to be." Even Mihály Babits, who was among the skeptics in 1914-1915, was initially confident that the war was defensive in nature.

These Hungarian intellectuals also viewed themselves as the defenders of traditional western liberties in the face of Russia's decision to enter the conflict. The Hungarian fear of Russia reached pathological proportions by 1914, and this fear was not altogether unwarranted. After all, the Tsarist regime inspired little confidence even in the Entente countries. Gyula Juhász wrote: "Always woefully glorious name:/Magyar, today new splendor is yours/Once more you defend the millions of great nations/By defending your own fatherland!" Or here are a few lines from Zsigmond Móricz: "The work of the Hungarians, forever and ever, a thousand-year-old task: to stand before the sea of the East ... in order for other, happier nations of Fate to turn the wheels of Culture."

I could continue to give examples of the incredible patriotism and war enthusiasm that gripped Hungary. I should add that this enthusiasm, as the war dragged on and on, turned to opposition and disillusionment. But by then, it was too late. And finally, let's not blame someone else for the country's leaders and the people's mistakes.

A few words about the current state of the Hungarian media

She looks nice enough until she opens her mouth. I'm talking about Karola Kiricsi who accepted the unsavory job of being the spokeswoman for the new Media Council. I understand that most people need a job in order to eat but still... 

 

 Karola Kiricsi, spokeswoman of the Hungarian Media Council 

It is not only what she says, that's bad enough, but how she says it. Anyone who would like to hear her in her own voice should listen to her interview with Olga Kálmán on ATV's Egyenes beszéd (Straight Talk). It's an experience.

Of course, the occasion for this interview was the future of Klubrádió. Thanks to the ill-conceived scheme of the Orbán government to deny the station a frequency, Klubrádió's name is becoming internationally known. One wonders whether government officials are really that dense. Don't they realize that no one in the West is going to believe their protestations to the contrary and that they will be labeled an undemocratic regime unfit to belong to the European Union? Is it worth it?

At least on the public relations front Klubrádió is making inroads. András Arató, managing director of Klubrádió, and György Bolgár, the host of a much loved (or hated, depending on where you stand politically) call-in show, received an invitation from Neelie Kroes, European Commissioner for Digital Agenda. As it turned out, the Hungarian Media Council offered Kroes its assistance in properly interpreting the Hungarian media law but received no answer from the commissioner. Kiricsi was surprised and hurt!

But that's not all. Neelie Kroes even posed for an official photo with Arató and Bolgár and posted it, of all places, on her Twitter site.

 András Arató, Neelie Kroes, and György Bolgár in Brussels

All this must be truly annoying in government circles, as became apparent during a conversation György Bolgár had with Gergely Pröhle, assistant undersecretary of the Hungarian Foreign Ministry, this afternoon. Pröhle, who is normally politeness itself, was not exactly civil to György Bolgár. Bolgár wanted to know whether the Foreign Ministry informs the government of all the adverse news about Hungary coming from abroad. Moreover, Bolgár inquired whether the Foreign Ministry ever gives advice to those who are in charge of making policy. Bolgár didn't say it in so many words, but his aim was to find out whether the ministry perhaps warned the government that trying to eliminate Klubrádió would result in such bad publicity to Hungary that it wasn't worth it.

Pröhle's reaction was anything but conciliatory. In fact, just the opposite. He claimed, incorrectly by the way, that Klubrádió is trying to portray itself as an "independent" organ when in fact it is an "opposition" radio station. The accusation is baseless. Klubrádió makes it quite clear that it is critical of the government. And there is a genuine need for such a radio station. Let's see why.

Nyilvánosság Klub (Open Society Club) monitored several television and radio stations, both public and commercial, between November 7 and December 16, 2011. The findings are telling. They monitored the daily news programs of the Hungarian public radio station (Magyar Rádió), Klubrádió (an opposition radio station), and Lánchíd Rádió (a commercial right-wing radio station). They monitored the evening news programs of M1 (MTV, Hungarian Public Television), TV2 and RTL Klub, ATV, and Hír TV, all commercial stations. ATV is an opposition station while Hír TV is a pro-government one.

The Open Society Club's first observation was that coverage of foreign news has suffered a lot in the last few years. In 2007 32% of the news was devoted to news from abroad. Today it is only 23%. In the public television station's news coverage serious political news also decreased by 30% while tabloid news items multiplied. In M1's evening news 50% of news items are now devoted to tabloid news. The situation is even worse at TV2 and RTL Klub. There out of ten items nine are about murders, gossip, accidents, etc. The monitors found the most balanced coverage between serious and tabloid news was at ATV's new program. András Bánó, the editor-in-chief of ATV's Híradó, is doing the job that public television should be doing by providing balanced and responsible coverage. I might also mention that ATV has a special news program dealing exclusively with foreign affairs, "Világhíradó."

Criticism of the government hardly ever surfaces on MTV, MR, or the right-wing Hír TV. During the six weeks Nyilvánosság Klub monitored MTV and MR there were only two mentions of foreign criticism of the Hungarian government. It was only ATV and Klubrádió that mentioned any criticism coming from abroad.

No criticism or negative opinion was ever uttered about Viktor Orbán and his policies either on MTV, MR, or Hir TV during November-December 2011. Praise, on the other hand, was abundant, especially on Lánchíd Rádió. ATV's coverage of Viktor Orbán was more balanced: the evening news mentioned the prime minister in a positive light 16% of the time and 30% in a critical manner.

It is sad that MTV doesn't fulfill either the role of balanced reporting or its mission of educating the public. We also must keep in mind that MTV can be seen everywhere in the country as opposed to ATV, which is available only on cable.

It is very important to have Klubrádió remain on the air because otherwise about half a million regular listeners will be deprived of a station that balances out somewhat the entirely one-sided public and pro-government organs and the two most popular commercial stations that shy away from political news altogether. 

Reality check: IMF's yearly assessment and the EU media advisory panel's findings

This morning Viktor Orbán in an interview with The Wall Street Journal claimed that currently he is facing the biggest intellectual challenge of his political career because of the economic and financial difficulties the country faces. However, he thinks that with "the economic policies we have today, the budget we have, we are on the right track." The problem is that the IMF doesn't think so.

The IMF yearly survey on Hungary's economic outlook, which was released today, starts with these sentences: "External financing risks are rising in the wake of growth and financial spillovers from the Eurozone crisis. Stock vulnerabilities remain high while fiscal and external buffers are under pressure. Meanwhile, obstacles to higher medium-term potential growth–-namely poor investment growth and low labor participation-–persist. Unexpected and interventionist policy measures, many affecting the financial sector, have further increased policy uncertainty, contributing to elevated risk premia and a weakening of the exchange rate." It sounds rather ominous. And what comes afterward is no better. Under "Fiscal policy" we read that "ambitious deficit targets remain appropriate, although their attainment may be jeopardized by deteriorating macroeconomic conditions and policy slippages. The increasingly complex tax system should be revisited to take account of medium-term growth and distributional aspects, planned structural reforms should be implemented in full, and distortions in the labor market must be avoided."

Our war of independence has been won, we signed a cease fire and now we are ready for peace

This is a problem, isn't it? It is becoming obvious that the International Monetary Fund sees the Hungarian situation differently from the Hungarian prime minister, who seems to be perfectly satisfied with the "economic  governance" under György Matolcsy. Viktor Orbán made it clear that the person of his "right-hand man," György Matolcsy, is not negotiable. However, some commentators, after reading the IMF report, came to the conclusion that there might be additional pressure on Orbán to part with Matolcsy.

Even more important, Hungary might have funding difficulties this year, especially if the euro crisis worsens and the economy slips into recession. The IMF survey predicts a slowing economy, including "the emergence of an external funding gap." In plain language, the inability of the country to honor its sovereign debt obligations.

Although Orbán tries to give the impression of easy sailing once the negotiations begin, the going might be rough. The IMF most likely will insist on a review of the flat tax introduced a year ago that is largely responsible for the growing problems of the central budget. The IMF will demand a strengthening of the Fiscal Council that the Orbán government rendered toothless.

The IMF called the Hungarian government's attention to the present lack of investor confidence after possibly inflicting "large and lasting damage" on the country's reputation with the unilateral revision of bank contracts. The full text of the report, by the way, is available on the IMF's website. 

In addition to the report there is also an interview with Christoph Rosenberg, IMF mission chief for Hungary. Rosenberg talked about the adverse social effects of the Orbán government's economic policies. He brought up a few examples that "overly burdened the most vulnerable." For example, the elimination of the basic tax allowance (under the new regime people pay taxes from the first forint they earn), a steep 18 percent hike in the minimum wage, a complicated system of wage recommendations and compensations for employers, and a sharp increase of the standard VAT rate to 27 percent and excise tax hikes across the board. The IMF's concern is that all this will lead to real income losses and reduced employment opportunities for lower-skilled workers. 

This last point brings me back to Viktor Orbán's interview with The Wall Street Journal where he announced that his government "wants a middle-class based democracy." What can that be? If we check a good dictionary we find that the word "democracy" means "government by the people, exercised either directly or through elected representatives," or in sociology "the practice or spirit of social equality." But a middle-class based democracy? A contradiction in terms. The Orbán government doesn't make a secret that its preferred sociological stratum is the better-off segment of society. The poor and the less well-off are not only neglected but they are the ones who are supposed to provide higher living standards for the upper- and upper-middle class people. A dangerous and highly undemocratic social policy.

Bad news came not only from Washington but also from Brussels. Last October Neelie Kroes, European Commissioner for Digital Agenda, set up an advisory panel to investigate the controversial Hungarian media law. The head of the panel, former Latvian prime minister Vaire Vike Freiberga, denounced the "extraordinary concentration" of power in the press under the leadership of Viktor Orbán which "undermines his nation's media freedom." Reiberga believes "Hungary and its leaders would be wise to reconsider the laws and regulations that they have passed so as not to stand in contravention of various fundamental principles." Her report also mentioned the situation of Klubrádió whose frequency was taken away under highly suspicious circumstances.

Impossible to control

Meanwhile, something very strange happened in Hungary. It turns out that Autórádió, the mysterious buyer of Klubrádió's frequency, is up for sale. They approached three already existing radio stations, including Klubrádió. The price: a mere 200 million forints. Klubrádió declined the generous offer.

I will throw it out to you. What do you think is going on?

According to people in the know, it was Viktor Orbán himself who insisted on depriving Klubrádió of its frequency despite Media Council Chief Annamária Szalai's warning that the case might create an international uproar. Apparently, Orbán hates Klubrádió so much that he didn't care.

I have the strong suspicion that Orbán will not only have to bow to the economic demands of the IMF and will have to assure the European Union about abandoning his undemocratic practices but he will also have to give in on the media law. Of course, the question is whether this man is capable of turning around and being the very model of a democratic gentleman. I personally doubt it.

Orbán's Canossa?

I really didn't think that by the time I normally sit down to write my posts we would have much information about the outcome of Viktor Orbán's negotiations in Brussels. So, originally I thought that I would return to my original calling, history, and write something about World War I, specifically about the enthusiasm of Hungarian writers and poets for the war.

However, I think I will be able to scrawl a few preliminary notes on the Hungarian prime minister's trip to Brussels that was described by a fellow politician as "Orbán's Canossa." I got the distinct impression that Viktor Orbán was almost certain that "a political deal" would be sealed during his conversation with José Manuel Barroso. The conversation lasted two solid hours and, although Orbán tried to put on a good face and announced his great satisfaction with the way the talks had proceeded, the very fact that Barroso was nowhere to be seen after the meeting was not a good sign.

Here are two pictures taken on the occasion. The first one was shot before the talks with Barroso and the other after he talked to Martin Schulz. On the first picture one is struck by the forced grin Orbán is capable of, especially when he is in a tight spot:

This is exactly the same smile he put on when, shortly after becoming prime minister, he tried to convince Barroso that the European Union should allow Hungary to have a 7% budget deficit.

And as long as we're in the picture gallery mode, let's see how Orbán looked after his talk with Martin Schulz, the president of the European Parliament.

Yes, Orbán's day in Brussels started with Martin Schulz. One ought to know that Schulz is a German Social Democrat. Until about a week ago when he was elected president of the EU parliament, he was the leader of the Progressive Alliance of Socialists and Democrats caucus. So, Schulz's political views are far removed from those of the populist right-winger Viktor Orbán. Another problem the Hungarian prime minister had to face while negotiating with Schulz was that the German Social Democrat is very well informed about the political situation in Hungary. He has visited the country innumerable times, and naturally his closest ties are to the Hungarian socialist politicians. Also, he seems to be doing his homework and knows only too well that Orbán is a master of double talk. He talks in Brussels as a real democrat and a trustworthy ally while in Budapest he compares Brussels to Moscow in the Soviet times.

It is quite clear that Mr. Schulz doesn't like Viktor Orbán. In fact, according to Brussels gossip there are few people among EU politicians who actually like the Hungarian prime minister. He managed to alienate most of them. And that is a real drawback when it comes to negotiations of this sort.

But at least Schulz agreed to a joint press conference after their talk, which is more than Barroso did. According to the reporter for the BBC, during the press conference Orbán was largely quiet while Schulz lambasted him for using "European rhetoric" in Brussels and attacking it in Budapest. This is an "inadmissible approach." And he continued: "So, the Europeans should take into account that he is a clever man as a party leader, but he should take into account that the European leaders are not stupid." Finally, Schulz shared his feeling that his talk with the Hungarian prime minister "would lead Prime Minister Orbán to reflect." Or, as the correspondent of CBS put it: "Orbán found himself standing by listening while Schulz doled out criticism." Put it this way, I wouldn't have wanted to be in Orbán's place at that moment. 

It was evident even before Orbán's talk with Barroso began that he couldn't expect much better treatment from the president of the European Commission. As it turned out, Barroso and Schulz had agreed on a common platform before Orbán's arrival in Brussels.

What do we know about the Barroso-Orbán conversation? Not much because unlike Schulz, Barroso said nothing after the meeting and unfortunately Orbán's descriptions of such negotiations are normally misleading. He did mention a few unimportant items that Barroso insists on, but otherwise he was quite vague. He praised his own performance (I had a good day!) but had to admit that he has no idea "how some of the open questions will influence the start of the credit negotiations with the IMF," adding that "we can only offer our good intentions and therefore we hope for a speedy beginning." Hungary received the legal objections and the Hungarian government will answer them soon.

From the rather incoherent summary of his press conference it seems that even the question of György Matolcsy's dismissal must have been discussed, but currently Orbán's attitude is that "Hungary is a serious place with serious ministers" so I assume the prime minister is not moving toward Matolcsy's departure. But to show his earnestness to be a willing and serious partner in the Union, suddenly he offered Hungary's adherence to the financial pact of the eurozone countries. The one he originally vetoed together with David Cameron of Great Britain.

However, I don't think that this impressed Barroso. After the meeting he released a communiqué in which he emphasized that the talks were "constructive" and that the Hungarian prime minister stressed his willingness to come to an understanding. He is looking forward to the Hungarian answers to the points raised in the accelerated infringement proceedings against Hungary. However, Barroso also made it clear that small legal changes will not be enough because "it is necessary for a member state over and above the laws of the community to also embrace the common values of the Union." And finally, and perhaps this is the most weighty line in the communiqué, "even after the negotiations there are political misgivings in the wider sense about Hungary which must be handled by the government."

Orbán's fellow politicians, government and party spokesmen were belligerent this morning. Tibor Navracsics said that the retirement age of judges is not negotiable and Gabriella Selmeczi, Fidesz's spokeswoman, announced that Klubrádió will "not ring out." She emphasized that Klubrádió offered only a fraction (sic!) of the money the winner of the frequency did. This is the law of the land and no one will tell Hungary what to do. However, at about the same time András Arató, the owner of Klubrádió, was received by Neelie Kroes, European Commissioner for Digital Agenda, who promised her help in making sure that the only opposition radio station will continue in Hungary.

Orbán's misfortune is that by now everybody knows his game and no one trusts him. So I have the feeling that the EU will keep holding his feet to the fire.