Neither the markets nor western politicians like Viktor Orbán's Hungary

Ever since the Hungarian government was forced on November 17 to turn to the IMF for a "safety net," as Viktor Orbán prefers to call a desperately needed loan, we hear nothing else but that Hungary actually doesn't need cash because the country is able to finance itself from the market. 

More and more analysts in Budapest and elsewhere have the distinct feeling that IMF-EU negotiations might be postponed indefinitely. If the politicians in Brussels come to the conclusion that one cannot deal with Viktor Orbán, they can simply refuse to negotiate with him. At the same time it is becoming increasingly clear that Hungary cannot finance itself from the market.

The IMF is certainly not in any hurry. While Orbán talks about the resumption of the talks in January in definite terms and expresses his firm belief that the negotiations will be successful, Christoph Rosenberg, the chief negotiator, is not at all encouraging or supportive. On the contrary, he told Reuters that no date was fixed and talked about the possible negotiations in the vaguest terms: "if and when negotiations resume the subject will be a stand-by arrangement with quarterly monitoring and agreed conditionality." And this is what Orbán doesn't want. He just wants the money without any obligations or oversight.

Early this morning CNBC announced that Hungary's debt management agency scrapped a three-year bond auction and reduced its original offer of the ten-year bonds, while it sold 10 billion forints worth of five-year bonds as planned. The auction yield jumped to 9.70% on the 10-year paper from 7.78% at the last auction about four weeks ago. The five-year bonds were sold at an average yield of 9.63%, up from 8.72% only two weeks ago. These are horrendous rates that a country is simply unable to bear. BBC also considered the story noteworthy and added that the last time the Hungarian government had to abandon part of a planned bond auction was in 2008 when it was forced to seek IMF help.

But Fidesz politicians are not caving in the face of market pressure. Just today János Lázár, this time as the mayor of Hódmezővásárhely, handed Erste Bank an ultimatum: the bank is supposed to share the cost of loans to the city amounting to 64.9 million Swiss francs. Hódmezővásárhely is the most heavily indebted town in Hungary in relation to its population, and because of the weakening of the forint against the Swiss franc the financial burden is considerably higher today than it was a couple of years ago. Both the IMF and the EU objected to the government's decision to force banks to accept payments of mortgages and loans in general in one lump sum at lower than the current forex rates. Now, Lázár demands the same treatment for his city. If Erste Bank doesn't oblige, he is threatening the bank with new legislation that would force banks to extend their agreement to cover municipalities as well as individuals. If other cities demand the same treatment and if the Hungarian government obliges, that would practically wipe out all Hungarian banks.

Despite this Fidesz bravado the fact remains that Viktor Orbán is in trouble. Hungary cannot finance itself from the market and the prime minister has managed to alienate both the European Union and the International Monetary Fund. And we can add the United States, a country that has a large say in the affairs of the IMF.

What if the European Union blocks negotiations as long as Hungary's prime minister is Viktor Orbán? The IMF-EU delegation already refused to accept György Matolcsy as the head of the Hungarian negotiating team, and when Tamás Fellegi assumed the position of chief negotiator he was sent there by Viktor Orbán with no authority to negotiate on any terms other than the prime minister's unbending position.

I think the IMF-EU team at the express instruction of the European Commission can stay away indefinitely. Or until the members of the Commission in conjunction with the U.S. State Department are satisfied with the state of affairs in Hungary. And yes, that may mean the removal of Viktor Orbán and his replacement with someone who is more willing to negotiate and who doesn't threaten the democratic process in a country that belongs to the European Union.

This picture depicts Viktor Orbán's situation quite accurately at the moment

But will he be ready to retreat? Will the western politicians and the markets trust him? It is worth repeating that it was reported that to a small circle of friends he announced that if the IMF was coming, he was leaving. During his forty-minute-long interview on HírTV the reporter asked him whether this "rumor" was true. His answer was telling: What a question! After all, the IMF has never left! To my mind, that was an admission. But at the same time this exchange indicates to me that he really didn't mean what he said. When the chips are down he would rather stay. However, by now I have the feeling that it is not his choice.

The question is when the rest of the Fidesz leadership will come to the conclusion that "the beloved leader" must depart. Surely, at the moment the support seems to be strong and united. As Adam LeBor recalls in his latest article in The Economist there is a joke circulating in Budapest:

Q: What is the difference between a flock of sheep and the Fidesz parliamentary fraction?

A: Sheep have a mind of their own.

Mind you, one has the feeling that these "supine MPs" as Adam LeBor calls them don't even know what they are voting on. Here is a typical late night scene from the Hungarian parliament:

 Some of "the Fidesz flock"

Pressure or no pressure, nothing seems to wake up Viktor Orbán and the men and women who blindly follow him. Thousands are demonstrating against the Fidesz MPs in front of parliament, and the crowd calls the government "bóvli," the Hungarian word for junk bond. It is not enough for them that two employees of state television have been on a hunger strike for nineteen days; yesterday the CEO of the organization responsible for all the public media stations fired them. And after they blasted "Jingle Bells" day and night to drive the demonstrators half crazy, this morning they decided to put a high fence around them.

In no time several MSZP and DK politicians with the assistance of some civilians dismantled the fence. The video showing Ildikó Lendvai (age 65) kicking the fence with full force was quite a sight.

And then there are the heroes of the hunger strike, Balázs Nagy-Navarro and Aranka Szávuly, both as of yesterday former employees of MTV. The two have been on a hunger strike for nineteen days. At the beginning they were sitting practically alone at the entrance of the Public Television Bureau along a busy road with lots of cars zooming by but few people around. But lately crowds are gathering there. Hundreds and hundreds of people came to give them blankets and hot drinks. By now five more people joined the two.

Nagy-Navarro was not seeking any kind of political leadership yet he has become an emblematic figure of the protest. Today he announced a huge demonstration in front of the parliament building for December 31. As he said this afternoon, he and Aranka Szávuly began their hunger strike on account of the manipulation of news but by now their protest has been widened. Their aim is the removal of Viktor Orbán's undemocratic regime. They are ready to unite with all who are ready to fight.

Balázs Nagy-Navarro and Aranka Szávuly a couple of days ago

Orbán Viktor received New Years greetings from the Belgian prime minister and leader of the Liberals in the European Parliament, Guy Verhofstadt. It wasn't exactly the usual message at this time of the year. Verhofstadt wrote that "cutting back on media freedoms, independence of the Constitutional Court and Central Bank, freedom of religion and sexual orientation drives you closer to the communist past." I may mention in passing that the newly appointed CEO of the organization that is responsible for all the public media outlets has an informer past. Details can be read even in Heti Válasz. Orbán is not finicky when it comes to his followers' less than immaculate past. At any event, it is this man who is now defending Orbán's "democracy" against the hunger strikers.

Comments

[An]

I just wonder how these voting machines in the Parliament get up in the morning and look in the mirror... especially the smarter ones. No bad feelings, not a spark of conscience; they just let OV drive the country to the wall. For example, Navracsics, a former professor of political science. He really should see that what OV is doing is the mockery of democracy.

These people really deserve to be called "bovli"; or rather, junk (junk has a lot stronger negative connotation than "bovli" in Hungarian)

Well, I'm trying to cherish what's good about Hungary by making some Hungarian beef goulash (marhaporkolt).

[Ron]

An: Vorosboros Marhaporkolt? Most Hungarians cannot afford this anymore.

[An]

Ron, I know (and yes, found some cheap vorosbor in the fridge)... it's becoming quite a treat here too.

[Paul]

Slightly OT - but here is the reply from the BBC to my complaint about the biased Klubrádió 'coverage':

"Thank your for your email commenting on our coverage of the closure of the Hungarian radio station Klubradio. We chose to cover the story in the context of the protests against the government because we didn't feel that it merited a separate piece on the day. The protest was a good way to get into a story for our readers. The reason we carried the government statement on the closure of Klubradio was that this was the story on the day.

I can assure you that we have no attachment of any sort to the Hungarian government and therefore you have no need to worry about bias. However we are certainly monitoring the implementation of the media law in Hungary and hope to do a story in the near future about the hunger strikers. So I can promise you we won't ignore Hungary in the coming days and months."

As bland as expected, but at least they're aware of the hunger strike.

[Gábor]

The Clinton letter:
http://nol.hu/media/file/attach/25/14/00/000001425-6248.pdf

[An]

One of the last minute modifications to the new Constitution (that goes into effect January 1st) passed today:

The Chief Prosecutor has the right to choose which court (and thus practically which judge) tries which case . This was originally found unconstitutional by the Constitutional Court, and had to be taken out from the new Criminal Code.

But Fidesz solved the problem by adding this rule to the new Constitution itself! (the Constitutional Court cannot rule on the Constitution)

Beautiful.

[oneill]

Paul,

"As bland as expected, but at least they're aware of the hunger strike."

I got a similar although not identical reply, which I have posted on an earlier thread. The important point is that the complaints of bias have been registered and I suspect Thorpe will be a bit more circumspect in the future.

[Gábor]

An, yes and no. Actually when this summer they investigated whether they can deal with amendments of the constitution in terms of their constitutionality they formulated very carefully and did not exclude that in the future they have to intervene and interpret the constiution (or even decide over the constitutionality of such legislation) in order to ensure its compliance with Hungary's existing international obligation. I tend to interpret the way they pointed at the international treaties in their respective decision as a warning shot... It was all the more interesting as Péter Kovács, the specialist of international law in the court attached a deviating opinion arguing even more strongly in favor of examining constitutional amendments according to their compliance with international treities and Kovács is an in-law of János Áder.

[An]

@Gabor: I am very doubtful that this highly diluted constitutional court will have the guts to speak up against this. They definitely should, even if that wouldn't change anything and even if with such a move they would risk their "powers" further diluted by OV in retaliation. Just out of principle, they should speak up.

[Ron]

EUR/HUF= 313, was 315 earlier.

http://www.xe.com/currencycharts/?from=EUR&to=HUF

[Some1]

An, I assume they were all sleeping when they voted on this change. I think the last two weeks work should be tossed out on technicality at some point. At this point I do not have any doubt It will not be a challenge to any new incoming government to toss out the whole garbage Fidesz heaped up. Signing any contract under undue pressure, unreasonable time frame, under the influence (sleep deprivation) and contrary to existing laws are just a handful of reasons why it would be invalidated at any court. You do not even need a good lawyer, just proof that any of those basic conditions for signing a contract were not meet.

[Gábor]

@An: I was only referring to whether Fidesz solved the problem with cementing the rule in the constitution.

[An]

@Gabor: I did not bring this up to show how Fidesz "cemented" this rule, as I hope that some1 is right and the whole forced-speed law-making process can be legally challenged.

I was just quoting this to illustrate how insolent, arrogant, cynical and undemocratic the Fidesz machinery has become... to those readers who still need more proof to see that.

[Gábor]

Well, if the Constitutional Court will listen to the spirit of the time they can carry out a legal coup d'état, simply annul every single act of Fidesz and dismiss their minions. But I fear they would need very hard proof that it would be the safest way to save themselves. :)

[Welcome to the Monkey House]

While I'm worried sick over what this stubborn tyrant and his boy-friday, Cross-eyed Georgie are doing with Hungary, I cannot resist to comment that the reference to Hungary as "a country that belongs to the European Union" is most inappropriate, at least I very much hope so. As much as we are aware of where the money is and where power lies, I certainly hope that Hungary does not belong TO the EU,but rather belongs IN the EU.

[I love Hungary]

Hungary will soon belong TO China.

As the Chinese will happily fund a puppet in Europe.

Orban will happily be the puppet of anyone who lets him play dictator- and finances it.

Ironic that the former Young Democrat will lead his country to become the first EU (former) country back into the status of "commuinst sattelite"- even though he is National Socialist.

Seems the young democrat wasn't battling tyranny at all, he was battling against a competing tyrant for absolute power.

Welcome to North Korea, West.

As an American, I am really tired of being forced into these power games by baby dictators.

But I am afraid the EU will turn to us for leverage on dealing with China on this situation.

The US will probably feel compelled to help.

Thanks Orban, for putting Hungary on the map. Again.

Don't be wringing your wrists when your map shrinks. Again.