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.

Comments

[Kirsten]

Why did Klubradio not buy Autoradio? I am not sure whether they have not missed a chance. It would still have been a continuation of Klubradio, a weakening of OV or his friends (who did not consider Klubradio negotiable until yesterday).

[GW]

Kirsten, 200M HUF (around 675000 EUR) is a ridiculous price for a frequency in Hungary. This goes to show that the Klubrádió tender for the frequency was closer to the actual value than the overbid by Autórádió. Either Autórádió, a "firm" with no experience in broadcasting, seriously mistook the value of its tender or this was a deliberate plan to extort from Klubrádió from the very beginning.

[Ron]

GW/Kirsten: I believe this was an opportunistic deal from Autórádió (AR). I would not be surprised that they put a tender in and did not believe that they would win the tender. I believe that they were asked to do this.

However, it seems that VO interfered and as a result they won. Now they want to get rid of it.

Unfortunately, AR accepted the conditions set by the Media authority, and if Klubradio would take over they would be required to honor this deal, because if not they would lose the frequency anyhow or they would be penalized.

[Kirsten]

They were offered to run a music channel...? That they (Fidesz) never run out of ideas how to be specifically clever, is amazing. But it is equally amazing that it apparently never occurs to them that others may find it just annoying, not not at all a proof of their genius.

[Petofi]

Autoradio sale....
This is a typical Hungarian business innovation. I've heard that some used car sales lots of expensive foreign cars used to have the sold cars stolen from their new owners; then, some third party would approach the hapless owner to see if he wanted to repurchase his car for half the original price.

Aren't Hungarians clever?

This is the mindset that the EU and the IMF are dealing with.

[Minusio]

This is about the IMF (Eva, you really are like speedy Gonzales!), not Klubradio which we all know was deprived of its frequency by a straw-firm on FIDESZ orders and the Media Authority. (They must feel extremely important now!)

What's new? Nothing. The IMF is right. Eva is right - except where she thinks, or desperately hopes, Orbán might cave in. He won't. This is just not given to him.

What looks like committments to the EU and its requirements, are all caveats, basically not worth his breath.

[Petofi]

Autoradio sale..

Maybe the Media Commission should be asked to explain how they happened to choose a firm whose only interest was to profit by their
newly-won frequency?

[Ron]

I went through the IMF staff report and on page 31

http://www.imf.org/external/pubs/ft/scr/2012/cr1213.pdf

I noticed that the VAT as percentage of the GDP is between 7.7 and 8.9, which considering the fact that Hungary together with Denmark has the highest VAT rate (25%) and no real reduced rate, I expect this to be higher.

I went to the Eurostat Data Explorer
http://appsso.eurostat.ec.europa.eu/nui/setupModifyTableLayout.do

I noticed that Hungary on average is about 25% lower than Denmark (which have the same VAT rate), in fact most of the EU countries are at the same level as Hungary, despite the fact that their standard VAT rate is 10 to 20% lower than Hungary's rate and most of the them have reduced rates.

Here the list of VAT rates EU.

http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf

I first was thinking about fraud, but that is not possible as the difference is too large.

Anybody. Do you have an explanation for this?

[Paul]

Thanks for the 'translation' of the IMF document, Éva. I found it utterly baffling! They seem to have invented a sub-set of English that's complete opaque to 'outsiders'.

But could you explain what the graphic in your piece means please?

[Aurélie Pierre]

Love this picture:
http://www.haszon.hu/noknek/images/stories/borito/2012_1szam_.jpg
I guess it must hurt for a die-hard macho as Orban to know that his fate is in the hands of 2 women (and that he's just a political light-weight in the end; a dictatorial midget, but definitely a midget).

[Paul]

kirsten - the critical point re Klubrádió is that the frequency was redefined as a music channel (which apparently Hungary doesn't have enough of!).

So, even if Klubrádió had retained the frequency, they would have been severely restricted in how much news/opinions of value ('left/liberal propaganda in Orbánspeak) they could have broadcast.

[Paul]

"Apparently, Orbán hates Klubrádió so much that he didn't care."

This is one of the keys to understanding Orbán. He is motivated by a number of things - desire for power, intolerance of criticism/opposition, nationalistic/religious views, etc - but personal hatred based on perceived slights is probably one of his strongest drivers.

The obvious example is Gyurcsány - Orbán's hates him far beyond any political reasons - but Dávid also fell foul of Orbán's 'cross me and I'll finish you' attitude.

This single-minded determination to destroy people can be a strength, and certainly helped Orbán to obtain total power (how well would he have destroyed MDF and MSzP without that strong personal motivation?). But it can also be a weakness, as it diverts attention and energy from more important areas and can even blind the revenge seeker to such an extent that it causes them to take decisions entirely contrary to their interests.

Klubrádió is a very good example of this. Although Orbán has given himself the power to control the media, he has (wisely?), so far, chosen not to use it. The left/liberal publications continue to criticise him without sanction, the feared heavy fines haven't materialised, and no steps have been taken against opposition oriented internet sites and blogs.

As he controls domestic TV and nearly all domestic radio anyway, and he knows that the majority of the public don't read the left/liberal press, he has no need to risk the negative reactions of the EU, US, etc by actually using the act. He has very little to gain, but much to lose.

So why does he risk all this, just to silence one little radio station?

Could this be his Achilles heel? Perhaps the opposition’s tactic shouldn’t be to play down the ‘hated’ Gyurcsány, but to actively promote an opposition coalition jointly led by him and Dávid? Not as crazy as it sounds – it would distract Orbán to the point of madness. What hope would there be for the saner heads in Fidesz to steer the party to victory in 2014, when their leader is totally obsessed with destroying his nemeses – at all, and any, costs?

[Paul]

Excellent picture, Aurélie Pierre. Orbán must absolutely hate this cover.

Mme Lagarde is also taller than him!

[Eva S. Balogh]

Aurélie, this picture is priceless. And to Paul, Lagarde not only taller than Orbán (that is not very difficult!) but very, very tall.

[Paul]

Actually it's nearly total height humiliation for the Viktator - he is listed on the net as 174cm (5' 8.5" in English) and Merkel is (apparently) 173cm .

If she wears heels, even with his built-up shoes, she's going to be taller than him!

[Joseph Simon]

ALLOW ME TO REPRODUCE THIS LETTER HERE FOR YOU ALL.
Lipták Béla nyílt levele Konrád Györgyhöz

Lipták Béla mérnök-professzor, az 1956-os forradalom egykori résztvevője, az Amerikai Magyar Lobbi vezetője nyílt levelet intézett Konrád Györgyhöz, aki a szerdai The New York Timesban közölt publicisztikát a magyarországi helyzetről. Az alábbiakban teljes terjedelmében közöljük a levél fordítását.
(Lipták Béla, az '56-os műegyetemi 16 pont egyik megfogalmazója )

Kedves Gyurka,
Sok víz lefolyt a Dunán, mióta együtt álmodoztunk arról a szép jövőről amikor majd népünk kezébe veheti saját sorsának irányítását, amikor majd magunk formálhatjuk gyermekeink jövőjét. Rohannak az évek, omlanak az álmok, de azért jó is történik, mert legalább a tudomány területein kezdünk eredményesek lenni, szót értünk az otthoni fiatalokkal és segítjük egymást.
Viszont most mégis a Times OpEd-ededdel kapcsolatban szeretnék feltenni pár olyan kérdést, melyek félek, hogy neked rosszul esnek, de remélem, hogy nem sértelek meg velük, hanem inkább elgondolkoztatlak azokkal; ugyan lehet, hogy naiv vagyok, és nem mondok újat, de azért megpróbálom. Kezdem azzal, hogy joggal vagy dühös, tudom, hogy Orbán Viktor sok hibát is elkövetett és azt is tudom, hogy még mindig van otthon bőven antiszemita, és ezt nehéz lehet elviselni. Mégis:
- Nem kellett volna írásodban megemlítened, hogy te is szeretnéd, ha hazádat kisegítené az IMF/EU a gazdasági kátyúból? Nem illett volna egy magyar írónak ezt a legnagyobb gondunkat legalábbis megemlíteni?
- Nem gondolod, hogy amikor azt adod címül egy írásodnak, hogy „Magyarország szemét demokráciája", akkor azzal nemcsak a kormányt kritizálod, hanem az összmagyarság jó hírét rombolod?- Nem gondolod, hogy a fasisztázással meg Kádárhoz hasonlítással elvetetted a sulykot? Nézz a tükörbe!
- Nem gondolod, hogy ha te tényleg demokráciát szeretnél, akkor több tisztelettel kellene írnod népünknek egy szabad választáson kimondott döntéséről?
- Nem gondolod, hogy más népek ellenzéke nem a világ közvéleményének nyomásával próbálja elérni belpolitikai céljait?
- Nem gondolod, hogy egy kormány megbuktatása nem rád tartozik, hanem az ország szavazó polgáraira és az őket képviselő Parlamentre?
- Nem gondolod, hogy a demokrácia eszköze nem az utca, hanem a szavazófülke?
- Nem gondolod, hogy a baloldali tüntetésekre jobboldali tüntetés lesz a válasz, és ezzel a káosz magját ültetitek el?
- Nem gondolod, hogy az ilyen írásokkal csak olajat öntesz az antiszemitizmus tüzére, és ezzel csak a Jobbikot támogatod?
- Mit gondolsz, ha egy előre hozott választással sikerülne megbuktatnotok a kormányt, kiket segítenétek a hatalomba?
- Mit gondolsz, kiegyensúlyozott lelkű magyar írónak tart az olvasó, amikor hazád demokráciáját szemétnek nevezed, de egy szót sem ejtesz legnagyobb gondunkról; elszakított nemzetrészeink sorsáról, a beneši deportálásokról vagy a mai megaláztatásukról?
- Mit gondolsz, mit érzünk mi, 56-osok, akik egy fél évszázadot dolgoztunk azért, hogy Nyugaton megbecsülést és tiszteletet szerezzünk a magyar névnek, amikor ezt a pocskondiázást olvassuk?
Ne haragudj szókimondó kérdéseimért, inkább beszélgess el azokról mondjuk Csoóri Sanyival vagy Duray Miklóssal, mert ideje, hogy kilépj egy percre abból az elszigetelt kis körből, mely egymást hergelve mocskolja a magyar nevet a nagyvilágban, elvégre 56 elveit egyszer Te is osztottad, és annak lényege az összefogás volt!
Lipták Béla

[An]

@Paul: "personal hatred based on perceived slights is probably one of his strongest drivers.......Could this be his Achilles heel? Perhaps the opposition’s tactic shouldn’t be to play down the ‘hated’ Gyurcsány, but to actively promote an opposition coalition jointly led by him and Dávid? Not as crazy as it sounds – it would distract Orbán to the point of madness."

Excellent point. The only chance against Orban is if he looses his cool; that is when he makes mistakes. And, as you point out, he can easily be driven to do that.

[enuff]

Eva, your comment on height made me laugh!

Paul, well done for finding this fact!
I search in vain after the reading

174cm not too bad, I've seen lots of short men in HU as I'm almost always taller at 175cm

[Eva S. Balogh]

Paul: "But could you explain what the graphic in your piece means please?"

I tried to convey with this piece of art that today's media is very very complex and impossible to control it. Orbán can try but he won't succeed.

[GDF]

Joseph Simon:"ALLOW ME TO REPRODUCE THIS LETTER HERE FOR YOU ALL.
Lipták Béla nyílt levele Konrád Györgyhöz"

Another piece of garbage from Mr. Liptak. He should stick to engineering.

I guess he is upset because his (or his son's) influence wasn't sufficient to stop Konrad's article.

[Paul]

Thanks Éva, I actually thought you were trying to convey the opposite - how many media outlets were owned or controlled by Fidesz supporters (although I couldn't work out where Youtube fitted in!).

It's actually surprisingly easy for a government to control the internet, I'm surprised it doesn't happen more often. All they have to do is to tell the ISPs to block sites. It’s as simple as that.

The technically savvy can get round this by using external ISPs or other tricks, but 99.9% of the population have to use ISPs based in their country.

Orbán could issue an order tomorrow that all Hungarian ISPs had to block Typepad (or even just your blog), or lose their license and/or be fined, and that would be it - no one in Hungary could read your blog.

There would of course be an outcry, but since when has Orbán taken any notice of such things? And Fidesz would just explain it away by pointing to the anti-Semitic stuff on the Jobbik oriented Typepad blogs, or claiming that it was done under the prevention of terrorism act, or in 'national security interests', etc.

This is why Google are so careful with the Chinese government – they can’t afford to lose a billion customers.

[Paul]

JS just doesn't get it.

When all this is over and some other poor sods are trying to rebuild something from the wreckage of Hungary, he still won't understand what happened or why.

[Wondercat]

@GDF: "Nestbeschmutzer" criticisms -- usual in Austria (Bernhard, Jellinek) -- you're making your own people, your own society, look bad in the eyes of the world. Show some loyalty to your own kind!

Not those who befoul the nest but instead those who point out the filth are criticised as Nestbeschmutzer. An interesting word, then.

[Karl Pfeifer]

I met Orbán once in Budapest in December 1988, when he greeted me and my friend Zoltán Zsille with flowers at the Keleti railway station
http://www.hetek.hu/kulfold/199903/nyilt_level_orban_viktor_miniszterelnok_urnak
I am 169 cm high and I remember him as being not as tall as I am.Probably he is using shoe inserts.

[Mutt Damon]

@Joseph Simon Pretty much all the Hungarian extra-right, ant-semite, fascist loony blogs posted this Bela Liptak letter. Why can't you just use a link to one of them?

Beacuse what wouldwe think about YOU if you post a link from these rags?

By the way where is the English original? You know, the one the Times refused to publish because it's garbage.