Half time: 2006-2008 (I)

A lot of people think that it may not be half time because the Gyurcsány government will not be able to last until 2010 in spite of the fact that even László Kövér, the grey eminence of Fidesz and according to some the real mover and shaker of the party, announced a couple of days ago that early elections were unlikely. I happen to agree with him, something that doesn't happen too often because Kövér is one of my bête noires. I don't think that Viktor Orbán really believes in elections any time soon; he simply keeps talking about them, perhaps in order to keep his followers excited and hopeful. But surely, who could believe that Gábor Fodor's party would allow him to make a deal with Orbán? Writing a letter to Fodor and inviting him for a discussion about early elections was essentially risk free, with a huge potential upside. But the odds were staggeringly against it. To tell you the truth, I don't know why yesterday's conversation took place at all. Why did Fodor agree to the meeting when he announced ahead of time that the topic closest to Orbán's heart would not be on the agenda? And why did Orbán proceed with the meeting nonetheless? Did he think that he could perhaps convince his old college roommate and current political enemy that after all it is in his interest to help him be the next prime minister of Hungary? I understand that Fodor couldn't get out of the meeting. After all, he is the one who claims that all the ills of Hungarian politics stem from the lack of dialogue between the two sides.

The "dialogue," by the way, lasted an hour and a half. Although some people called it long, friendly, and fruitful, I agree with Ibolya Dávid who called it a bust from Orbán's point of view. She used a slang expression meaning that Fodor pulled a fast one on Orbán. I wouldn't go that far, but for Orbán the meeting was not a success. Basically, it was useless and meaningless. Yes, they can say that they met and talked and think alike about many things, but the critical conversation will take place on Tuesday: between Fodor and Gyurcsány. I suspect that there will be no renewed coalition. I doubt that Gyurcsány himself would like to see such an eventuality. Or that the MSZP leaders would be too crazy about the idea in spite of Péter Kiss's repeated insistence on its desirability. Moreover, I don't think that MSZP voters would be too happy if this unlikely event were to occur. Népszabadság asked its readers to vote on what the relationship between the liberal and other parties should be. Among the possibilities: SZDSZ should not be part of the government. This category was by far the most popular among the several possibilities that also included the possibility of a coalition with MSZP. Moreover, I don't think that SZDSZ's "crawling back" to the government would be very popular with core SZDSZ voters either.

My hunch is that SZDSZ, or at least the majority of its parliamentary members, will support the government from the outside and wait for better days. In the next two years they can perhaps rebuild the party, hoping to receive at least 5% of the votes in 2010. Gyurcsány I think is confident that his party will win the elections in two years' time. He not only said that a couple of days ago in an interview, but I'm convinced that he truly believes it. At the moment the overwhelming majority of both the Hungarian people and political observers dismiss this as a pipe dream, but he still has time to make dream come true.

So where do we stand at what probably is half time? Although the critics act as if nothing happened in the last two years and that the little that happened was hastily taken back after the devastating referendum, the situation is not all that bad. The most spectacular success is the very substantial decrease in the deficit: from 11% to 4%. In consequence it is not surprising that the country's economic growth slowed, but there was no recession, and in the last quarter the the GDP was 1.6% higher than a year earlier. During the same period industrial production grew by 6.9%. And the trade balance remains in Hungary's favor despite higher energy prices.

There are even some success stories in health care, allegedly the real disaster of the last two years. For the first time since the change of regime the Healthcare Fund is solvent. I remember when yearly the budget had to kick in 40-50 billion forints. Breaking the monopoly of existing pharmacies made life easier for most people: many new pharmacies opened. And that people could buy over-the counter-drugs outside of pharmacies, much opposed by pharmacy owners and Fidesz politicians, turned out to be a hit. Hospital reform at least resulted in less corruption when it came to waiting lists for operations. In the good old days, a few thousand forints could ensure that people with connections and money would be operated on within days while others waited for months on end. Also, thanks to clever negotiations with the pharmaceutical companies, hundreds of drugs became cheaper.

Because of strategies used to ferret out tax evaders a lot more money arrived in the government coffers. The number of illegally employed workers decreased. Many small businessmen (at least 10,000) received loans under very favorable terms. And it is easier to establish a business than previously. In spite of the close relationship of the farmers' association with Fidesz, there have been no demonstrations because farmers are satisfied. The minister of agriculture is popular.  Money is pouring in from the European Union, admittedly less than to French or English farmers but more than they got before Hungary became a member of the Union. An interesting statistic: I just read that 95% of the farmers who applied for money for different projects from the European Union filed the application electronically. Now, one mustn't think that every Hungarian peasant has a computer, but there are many hundreds of people whose job it is to give advice and help farmers find their way in the labyrinth of the European Union bureacracy.

The huge Hungarian central bureacracy is smaller than before. The numbers employed shrank by about 20%. The government wanted larger cuts but interest groups were up in arms and the process slowed down. The biggest criticism is that the local governments still employ an inordinate number of people. However, changing anything in that area requires a two-thirds majority, and Fidesz refused to touch the local government structure. It's worth mentioning here that Orbán in one of his carefree moments said something about getting rid of half of the people employed in local government. Gyurcsány jumped on it and asked Fidesz to cooperate with the government in this respect. We will see what Fidesz's reaction is going to be when it comes to the nitty-gritty. Most likely they will say no.

Many people think that the reform of Hungarian higher education is a total failure because the voters rejected the introduction of tuition. However, this is not true. First of all, even now half of the students pay tuition. Those whose entrance exam didn't reach a certain level. The unfairness of the system is that the students' paying or non-paying status was forever fixed, regardless of their grades. This will be changed. From here on a student's grade point average will make a difference. Someone who in the first year had to pay tuition may not the following year if he worked hard and received good grades. At the same time, originally non-paying students might end up paying tuition if their grade point average is unsatisfactory.

As for infrastructure and big government projects, an incredible number of superhighways were built in the last few years. The first fruit of this investment is Daimler-Benz's decision to establish a factory in Kecskemét. One of their reasons for choosing Hungary was the existence of a good infrastructure. What would have happened if the government hadn't invested money in building roads as was the norm during  Viktor Orbán's tenure between 1998 and 2002? It seems that Orbán has a strange idea about saving money: on important investments in the future of the country. It was during his ill-fated talk with Kéri's students that Orbán announced that when he becomes prime minister he will stop all these projects: roads, bridges, metro, everything. A sure way of killing economic development.

These are the success stories, but of course there were many failures as well. The list is long enough to fill another blog on another day.

Comments

[John Hunyadi]

"The first fruit of this investment is Daimler-Benz's decision to establish a factory in Kecskemét. One of their reasons for choosing Hungary was the existence of a good infrastructure." Well, if infrastructure were the main criterium they could have chosen anywhere in the Central European automotive region that takes in eastern Czech Republic, western Slovakia, NW Hungary, parts of Austria and Poland. But I suspect that planned costs were lower in Kecskemet as Daimler only has to compete for land and workers with the barack palinka-brewing industry!

Nevertheless, your basic point was well-founded; if the M5 had not been built from Budapest to Kecskemet than it would never have been considered as a location to build a major factory. But wasn't that part of the M5 built in the mid-to-late 1990s?

[Eva S. Balogh]

Hunyadi János: "Well, if infrastructure were the main criterium they could have chosen anywhere in the Central European automotive region that takes in eastern Czech Republic, western Slovakia, NW Hungary, parts of Austria and Poland."

Poland and Slovakia are not too well endowed with stradas. Slovakia was not considered. Romania was (Cluj/Kolozsvár)considered but there are no modern roads at the moment.

[Eva S. Balogh]

Hunyadi János: "if the M5 had not been built from Budapest to Kecskemet than it would never have been considered as a location to build a major factory. But wasn't that part of the M5 built in the mid-to-late 1990s?"

Yes, it was built during the Horn government (1994-1998). What I was alluding too that during Orbán's tenure there was practically no road construction and Orbán in his chat with the young political scientists said that he would stop all construction. I think that infrastructure is important and it would be very foolish to save money on that.

[John Hunyadi]

Well neither is Hungary too well endowed with autostradas. In fact, by UK norms (3 or 4 lanes in each direction) I'm not sure if Hungary has any! The main problem in Hungary seems to be land ownership/planning permission - at least that is what Hungarians have proposed to me to explain why Hungary still has not completed (M7) what Croatia had (A4) several years ago.

Western Slovakia has fairly good infrastructure; good enough for PSA to build one of Europe's largest car factories in Trnava and KIA to build another one in Zilina.

I think the only reason that Daimler didn't consider Slovakia is that there is no more room for car factories there! It has the highest per capita production of cars in the world.

[Eva S. Balogh]

John Hunyadi: "Well neither is Hungary too well endowed with autostradas. In fact, by UK norms (3 or 4 lanes in each direction) I'm not sure if Hungary has any!"

This isn't quite fair. England already in the sixties had quite a few "motorways." Hungary had none. One must compare the speed of building four-lane highways of this government with its predecessor's dismal performance.

[John Hunyadi]

Well, I think you were being unfair on Poland and Slovakia. I believe they have been no worse than Hungary in building up infrastructure in the past 15 years. I haven't seen any data on road building of the current government versus the previous one; I take you word for it. But, in fact, I think there is an overemphasis (not just in Hungary but across the new Member States and promoted by the European Commission) on road-building versus investment in other forms of transport. The railway system has been criminally neglected in Hungary. To be fair, it has in the UK too.

[Eva S. Balogh]

John Hunyadi: "But, in fact, I think there is an overemphasis (not just in Hungary but across the new Member States and promoted by the European Commission) on road-building versus investment in other forms of transport."

One can certainly make a good case for rail transport, but as things are at the moment, without roads there can be certainly no economic development. As for Slovakia and Poland, I will certainly check, but to best of my knowledge both countries are in worse shape in this respect than Hungary. Romania was the other contender (Cluj, but the Romanians could only show plans for a super highway and it seems that this wasn't enough.