Hungarian Spectrum

Hungarian Gypsies (Roma): Past and present (Part II)

As promised yesterday I'm moving on to the topic of Gypsies in the work force. Traditionally Gypsies were artisans and traders. In the eighteenth century some of the settled Gypsies worked as blacksmiths and were considered to be very skilled in ironwork. Others were traders, especially involved in the buying and selling of horses. And, combining these two interests, some were farriers, an important profession in those days. Most of them lived in villages in segregated sections, usually at the far ends of the usually one-street hamlets. This is still pretty much the case. Think of the serial attacks on Gypsy houses lately: almost all of the houses burned or shot at were situated at the far end of the village. The Gypsies owned no land although in the eighteenth century there were all sorts of attempts to apportion some land to them, coming from the estates of the local, usually noble, owner whose land was cultivated by the local peasants. Legislation regarding these land grants was even enacted, but in practice nothing came of it. Thus Gypsies had no agricultural experience in a country where more than 60% of the population was employed in agriculture as late as the 1930s.

In 1945 there was a radical land reform. The huge estates owned mostly by the nobility and the Catholic Church were cut up into very small strips of land and given to people who owned no land at all but who were employed as hired hands. Gypsies were excluded. I don't know what the thinking was behind this exclusion. Perhaps they argued that Gypsies who had never worked the land wouldn't be able to take advantage of the opportunity. Or since there wasn't enough land for the non-Gypsy needy they were simply left out. In any event the change that occurred in 1945 didn't make any difference as far as the Roma population was concerned.

As late as 1971 (again here I quote the data of István Kemény) two-thirds of the Gypsies lived in segregated Gypsy settlements. Two-thirds of their huts (one couldn't really call them houses) were made of adobe bricks (vályog in Hungarian). Forty-four percent of these huts had no electricity, only eight percent had running water, and only three percent had toilets. Thirty-two percent of these huts didn't even have outhouses!  Most of the houses Gypsies live in today in the countryside still have no running water; water must be brought from a well, often quite distant.

During the socialist period there was one major change from earlier times: 85% of the heads of households worked, mostly in factories either in Budapest or in bigger cities nearby. Admittedly, among Gypsy men only 11% were skilled and 10% semi-skilled workers. Thirteen percent of them were employed in agriculture, doing mostly heavy physical work. Some migration took place between the countryside and cities, but many Roma men shuttled between home and workplace either daily by train if the workplace was close enough or stayed in workers' hostels during the week and went home only for the weekend.

The full employment fostered during the socialist period concealed the fact that most of the work these people did was superfluous. In 1989-1990 came the moment of truth. Factories producing unwanted goods had to be closed, more profitable ones were sold to mostly foreign companies that brought along modern equipment. This meant that they needed fewer workers and those that they hired had to be skilled. An incredible number of workers lost their jobs. After 1990 only 29% of Roma men managed to retain their jobs in contrast to 64% of the non-Gypsies. And in the last twenty years there has been no improvement in this respect. By now perhaps even two or three generations of Roma families live on welfare. The youngsters don't see their fathers or grandfathers get up in the morning and go to work. Gypsy girls get pregnant at an early age and women in their thirties might already be grandmothers. They have large families as is usually the case with the less educated, but in the case of the Roma their love of children is legendary. The more children the larger the cash benefits from the government, but even so most Gypsy families live in poverty. Because most of them live in the countryside job opportunities are practically nonexistent, and they either have no transportation to travel to work or they can't afford the fare. And there is also discrimination against them. Gypsies complain that as soon as employers find out that the applicant is Gypsy suddenly the advertised job has already been filled.

Non-Roma resent the welfare payments doled out to able bodied men and women who are, according to them, simply lazy. They don't want to work. Mayors who are responsible for distributing some of the welfare money started demanding public work for assistance. That demand turned out to be illegal. Then the second Gyurcsány government tried to take the wind out of the sails of local potentates by introducing a public works program for the able bodied. What happened to this project I don't know because there was a change at the head of the ministry of social welfare after Gordon Bajnai became prime minister and I haven't heard anything about it since. The Orbán government tried to tie family assistance to school attendance, which I thought was a good idea. However, the socialists then in opposition attacked the legislation and after 2002 they abolished it. In the last few months of the Gyurcsány government the idea resurfaced, mostly to appease the non-Roma population and to reduce tensions. Again, lately I've heard nothing more about this plan either.

There are constant complaints about Roma thievery. Of course, not all Gypsies steal, but Jobbik and the Hungarian Guard introduced a new concept: "Gypsy crime." Liberals have been fighting this stigma. After all, they argue, there is no such thing as "Hungarian crime." Those who don't find the term objectionable claim that in police textbooks the term exists and describes petty thievery: stealing wood from the forest, taking fruit from other people's trees, stealing a couple of chickens at night from neighbors' yards. Apparently, the Hungarian police refuse to look into these petty crimes because they don't bother with any loss that is under 20,000 forints. And the resentment grows. With it the prejudice. A vicious circle. Jobbik and Hungarian Guard offer simple solutions: "we will keep them in line." They want to bring back the gendarmerie, a notorious force that was in charge of the countryside before 1945. Some people want to send them back to India. Actually, the European Gypsies are most likely from the area where today the Pakistani and American forces are battling the Taliban!

As we know from other examples, the integration of a fairly large group that is different looking is a difficult business. The integration of American blacks who in many ways were a great deal better off fifty some years ago than Hungary's Gypsies are today is still a work in progress despite the fact that United States has a black president. It takes time, targeted legislation, and a lot of money. Quite a few billions of forints were already spent without making a dent. Apparently, a large portion of this money never reached those who were supposed to benefit from it.

Once the economic crisis passes, the European Union should pay some attention to this question because after all there are many European countries with large and ever growing Roma populations. The problem is particularly acute in Eastern Europe where the concentration of Gypsies is the greatest. Unfortunately these former socialist countries have the least resources. Therefore perhaps western countries should come to the rescue, not just with money but perhaps by sending social workers and volunteers. I just read that Péter Balázs, the new foreign minister, had a meeting with Hilary Clinton yesterday and the two of them talked about the "Gypsy question." There might be some U.S. help, not necessarily financial. Perhaps American experience in integrating American blacks might be helpful. Help is sorely needed.

The first fifty days of the new Hungarian government

Public relations are not a strong suit of left-liberal governments in Hungary. In fact, some MSZP voters just moan and say that the government's communication is outright dreadful. The opposition on the other hand is excellent in this department. For example, some of the relatively minor accomplishments of the Orbán government, like the Széchenyi Plan, were magnified beyond recognition in government communications. A couple of billion forints of investment in this plan was sold to the public as the cornerstone of the country's bright economic future. This kind of strategy might be successful for a while but it has its obvious pitfalls in the long run. What if the promises are not fulfilled? What if claims are contradicted by facts? Ever since 2002 Fidesz's strategy has been to repeat ad nauseum that everything is terrible. They built a whole election campaign in 2006 on the slogan that Hungarians' "lives are worse now than four years before." The only problem was that everybody knew this was simply not true. The problem was just the opposite: people lived too well. To my mind, Fidesz has been making the same mistake of late. I know people will counter: How can you say that when all opinion polls predict a smashing Fidesz victory? Yes, that's true, but how long can Fidesz keep saying, for example, as Péter Szijjártó did today, that the fifty days that have elapsed since Gordon Bajnai formed his government "have been fifty days of hopelessness"?  Not for long when the facts contradict this assertion.

Today Gordon Bajnai made sure that Hungarians understand some of the accomplishments of his first fifty days as prime minister. He and his closest co-workers made several appearances starting with Magyar Rádió in the early morning and continuing with a press conference while his finance minister had a long interview in the afternoon with György Bolgár on KlubRádió. As for his style, Bajnai was modest: "We don't have reason to celebrate but we should certainly give an account." He emphasized that the steps he and his government have taken will ensure long-term economic growth and will allow the country to extricate itself from the economic crisis. Bajnai, I think correctly, talked about the international community's positive opinion of his government's activities to date. He emphasized that his government doesn't really care about the election results of this weekend or next year; rather, he wants to ensure the economic well being of the country for decades to come. He mentioned the strengthening of the forint against the euro and the U.S. dollar and claimed that people who took out loans in foreign currencies decreased their payments by 400 billion forints. He mentioned that in the last fifty days the swap rate decreased by half. The IMF renewed its loan agreement with Hungary, and during the day there were half sentences uttered to the effect that perhaps the country might not even need the next installment. Sooner or later people will have to realize that there are improvements, especially if one can believe that globally the second half of 2009 will begin to show signs of recovery.

The solid majority (MSZP and SZDSZ) behind the government facilitated legislation. A legislative marathon began a few days after Bajnai took office. A few numbers from the last fifty days: 21 pieces of legislation, 26 executive decrees, and 32 government regulations were voted on or acted upon. The legislative activity didn't stop for a minute. The decision was made to invest 1,800 billion forints (EU money) into the building industry, and the government established a fund of 1,400 billion forints to provide credit to middle-sized and small enterprises. Another 30 billion was put aside for a program for companies in financial trouble. Their employees worked for only four days and received wages accordingly while the fifth day was spent improving their skills at the government's expense.

The less popular legislative activity involved saving money on welfare programs, like thirteenth month pensions to 3.5 million pensioners or not giving an extra month's wages to 700,000 public employees. They reduced the salaries of ministers and managers of state-owned companies. Changes in the tax system are aimed at stimulating employment by reducing payroll taxes and boosting personal consumption by lowering the income tax.

And finally I would like to show two charts that appeared in today's Népszabadság. The left column of the first chart shows the expected budget deficit of EU countries for 2009. The worst are Ireland, the United Kingdom, Latvia, Spain, and France. Hungary's -3.9% is not bad, especially if we compare it to countries in the region: Poland (-6.6), Slovenia (-5.5), Lithuania (-5.4), Romania (-5.1), the Czech Republic (-4.3), or Austria (-4.2). The right-hand column shows the year over year drop in industrial orders as of March 2009. Again, although the situation is not rosy in Hungary it is better than in most European countries. As I said earlier, it will be difficult to maintain for another year that Hungary is in ruins and is a country of hopelessness. If I were an advisor to Fidesz I would suggest a change in strategy. Although a few polls indicated further erosion in the MSZP voter base, the declines are not substantial in spite of the severe cutbacks introduced by the Bajnai government. The European parliamentary elections will most likely bring a huge Fidesz victory, but if the MSZP doesn't lose its nerve the successful government activities should bring more positive political results. And the socialist party shouldn't lose its nerve because from their point of view it would be moronic to hold elections now when everybody claims that MSZP's popularity is at its lowest.

Let me reproduce here another chart of the year-to-date movement of the Hungarian forint against the euro. That is, how many forints does it take to buy one euro? The forint is still not as strong as it was at the beginning of the year, but it has gained strength in the last fifty days. And if we compare it to the high of the year, in the neighborhood of 316 forints to the euro, it has done remarkably well. A very strong forint has its pitfalls, as we all know. A weaker currency is good for Hungarian exporters. Admittedly, it is not so good for people who want to travel to other countries or for those who took out loans in foreign currencies. The lower bar chart shows the rates of unemployment in select European countries in addition to the EU average. The blue indicates the situation in March 2008 and the magenta a year later. Yes, Hungarian unemployment went up but not as dramatically as in some other countries. The European average in March 2008 was 6.7% ; today it is 8.3%. In Hungary it was 7.4% and now is 9.2%. Admittedly, the Hungarian rate is artificially depressed because the percentage of active workers in the population between the ages of 16 and 60 is very low by European standards. The new tax code may help to increase the size of the work force. Another government program is directed at welfare policy. People who are able bodied will no longer receive welfare payments gratis. They will either be employed by local governments in public projects or, if they haven't finished grade eight and are under the age of 35, they will have to go back to school.

One rarely has the opportunity to read in one place all the changes that have been made in the last fifty days. The sporadic news of positive steps is drowned out by the daily noise that predicts the total collapse of the country. Viktor Orbán, for example, doesn't say that his government's first job will be to lead the country out of the recession. Its "first task will be the removal of the rubble." I really doubt that this strategy will be as effective as it appears at the moment.

A "successful" Hungarian strike without "results" and other happenings

I'm sorry if I have to give another Hungarian lesson to my readers but István Gaskó's choice of words forces me to. Gaskó's "general strike" that shrank from 3 million participants to tens of thousands and most likely in reality fewer than that abruptly ended today at noon. The strike began at midnight and was supposed last for eighteen hours. In plain language it was to end at 6 p.m. This is not the first time that Gaskó ends a strike earlier than announced. But he always finds some creative way of explaining that the early close actually meant a great victory. This time the explanation was a linguistic sleight of hand. He announced that "a sztrájk sikeres volt de eredménytelen." "Sikeres" means successful. Its antonym, "sikertelen," means unsuccessful but so does "eredménytelen." That is, it's a synonym of "sikertelen." I assume István Gaskó believes that most Hungarians are so ignorant of their own language that they will think that this debacle was in fact the greatest success in the history of Hungarian trade unions.

It was doomed from the start. During the night, that is between midnight and six o'clock in the morning, 70% of the trains were moving. After the shift change at six o'clock 90% of the trains left for their destinations. Mind you, there were not too many travellers because most people found other means of transportation anticipating the usual chaos at the railroad stations. I will be curious to see how Mr. Gaskó further embellishes his "success with no results" when he makes his rounds of the TV stations.

Meanwhile there is some good economic news. The first is that Germany is slowly recovering from its economic slump. In March, for the first time in half a year German exports and imports both grew. While in February imports shrank by 4.8% in March they were up by 0.8%. And this is a welcome development for Hungary because the country is heavily dependent on exports. Germany is perhaps the most important trading partner of Hungary. Another good piece of news was that in March Hungarian industrial production grew by 4.3% over the previous month. The forint has strengthened in the last few days. At the moment 1 euro trades for 277.993 forints while at the beginning of March it peaked at 316.5 forints. See chart below. Of course, Hungarian exporters were happy with the weak forint. According to a businessman friend of mine an exchange rate of 1:290 would be just perfect.  Those who took out loans in euros or Swiss francs would be less thrilled with a weak forint. Although it is true that some other currencies in the region have also fared well, the Hungarian forint has outpaced them. Even the most skeptical analysts admit that the Hungarian government's speedy reaction to the crisis and the parliamentary support it received made a difference. The Budapest Stock Exchange (BUX) is also showing signs of improvement. Like most world markets the BUX had a horrific start to the year, bottoming in early March. Since then it has recouped almost 50% of its value and is positive on the year. See chart. The situation is the same with OTP (Országos Takarékpénztár), Hungary's largest bank, and MOL, the oil refining company that plays an important role even outside the country. Another good bit of news is that after months of being unable to raise money by issuing government securities, yesterday not only were all issuances sold but they were oversubscribed. The ÁKK (Államadósság-kezelő Központ/Center for Handling State Debts) announced the availability of three-year, five-year, and ten-year bonds. Each offering was for five billion forints. The three-year securities were oversubscribed three times, the five-year four times, and the ten-year six times. Thus ÁKK eventually issued not five but six and a half billion forints worth of ten-year bonds. Some analysts hinted that it would be time to lower interest rates. All this gives a lift to the new Bajnai government.

Meanwhile the Pécs mayoral election, scheduled for Sunday, is heating up. MSZP decided to send 2,000 activists (mostly women) to Pécs to campaign in districts that used to be MSZP strongholds. Certainly not downtown. Meanwhile, Mr. Páva got cold feet. He and Katalin Szili were supposed to have a television debate tonight but in the last minute he bowed out. His alleged rationale was that his opponent's campaign is unfair and he demands an apology. One strange aspect of Páva's campaign is that although he is clearly Fidesz's candidate, he doesn't use the party logo or its orange color to identify himself on posters. I'm somewhat baffled. The only thing I can imagine is that Fidesz is unsure of itself in the contest and doesn't want to have too high a party profile in case of a loss. Whatever the case, I'm sure things will just get curioser and curioser.

Hungarians' fear of the economic crisis

I guess nobody who knows anything about Hungary and Hungarians will be terribly surprised to hear that according to an opinion poll conducted by TÁRKI and the Central European Opinion Research Group in the four so-called Visegrád countries (Poland, Czech Republic, Slovakia and Hungary), the fear of the consequences of the current economic crisis is greatest among Hungarians. In all four countries the majority of the population agrees that there are already palpable effects of the world economic crisis, but it is only in Hungary that a majority means 93 percent of the population! In Poland, it is 57%. It is also interesting that 70% of Hungarians claim that the crisis has touched them and their families personally. Twenty-five percent admitted that they haven't noticed any change in their economic situation, but they are certain they will feel negative effects of the crisis in the future. Only six percent cheerfully announced that they will not be affected. In contrast 25% of the Poles, 12.5% of the Slovaks, and about 20% of the Czechs are optimistic that the crisis will not touch them personally.

Well, one knows simply by looking at statistics that 70% of the country's population hasn't been economically affected by the crisis. Moreover, people who have visited the country lately claim that there is very little outward sign of economic distress. Yet Hungarians already feel deprived, and the austerity program is still nowhere. Why is this? I don't believe that the only explanation is that Hungarians just pessimistic by nature. I'm convinced that politicians, economists, and the media are largely responsible for this doomsday atmosphere. If one hears from morning to night that the end of the world is at hand, eventually one believes it. And Hungarian politicians, economists, and members of the media do everything in their power to spread the bad news. And if there is no bad news they create some. Everybody knows that predicting the future is a risky business especially in the present economic situation. Therefore, how can one of the vice presidents of the Hungarian National Bank say with incredible certainty that this crisis in Hungary will be deeper and last longer than anyone has predicted until now?  With such pronouncements she can do damage to the economic prospects of the country whose interests she is supposed to defend. Not to mention the damage to the mood of her countrymen. A lot of people watch Napkelte every morning.

(By the way, a team of Goldman Sachs strategists recommended on April 8 that investors in European stocks should increasingly favor manufacturing, technology, and other industries that rely on economic growth as the global recession eases. "Recent data make us more confident the worst in the economic cycle is past, and we further move towards cyclicals from defensives." Admittedly, prognostication in the stock market is no better than it is anywhere else. A famous line from Warren Buffett reads: "We have long felt that the only value of stock forecasters is to make the fortune tellers look good.")

But back to Hungary. The chorus of pessimistic economists has been relentless. They started their lament well before the actual crisis hit the United States and from there spread to Europe, including Hungary. The terrible predictions about the high deficit and the convergence program began more than two years ago. Economists warned the government that if this or that is not done, the whole country will go to the dogs. At least three different "packages" were prepared, one sounding worse than the next. In the meantime Fidesz politicians kept repeating that the country is already bankrupt though the population doesn't know it yet. Under these circumstances it's not surprising that Hungarians, pessimistic by nature, are convinced that life is bad and will only get worse.

Let's contrast the Hungarian scene with the American politicians' way of handling the crisis. At the time of Barack Obama's inauguration there was incredible euphoria and a false sense on the part of many that everything would be fine practically overnight. At that point both Obama and his team had to dampen expectations. They kept talking about the difficulties, the size and depth of the crisis. They warned that the crisis and its effects might last a long time. They kept repeating that they will try everything in their power to stimulate the economy but it might take years before the stimulus package has its full effect. After a few weeks (and a fair amount of criticism that they were too negative) they changed tactics. Now they are giving out optimistic signals--"green shoots" and all. Obama tells people to go out and buy stocks, the Fed chairman makes optimistic predictions, and economic players are following suit. And the result? Spectacular. In the middle of January only 15% of Americans felt that the country was moving in the right direction. Today it's 39%. Optimism is growing and without optimism there really is no bright future. Self-fulfilling prophecy. We know all about it.

Accomplishments of the last seven years: an MSZP self-assessment

Even supporters of the government constantly complain about the "lousy communications." Although the government hired more and more communications experts, nothing ever changed. While Fidesz gave at least two and sometimes three "press conferences" a day on the most trivial things, the government was sluggish in its reactions to accusations and hopeless when it came to boasting. Modesty might be a virtue but not in politics. Now that Ferenc Gyurcsány's tenure as prime minister is coming to an end Zsolt Gréczy, director of communications in the prime minister's office, decided to boast a bit. Where? On the website of MSZP. And who looks at that website? Mostly supporters. The bragging should have been done earlier and to a wider audience. In any case, here is what is touted as the accomplishments of the Medgyessy and Gyurcsány governments. Unfortunately most of the accomplishments came with a very high price tag.

Gréczy entitled his piece "A modest summation of what Fidesz could only lie about." He claims that the "economic accomplishment of the country" in 2001 was only 9% better than in 1989, the last year of the old regime. In 2008 it is 36% higher. Between 2001 and 2008 the GDP grew by 25%. In 2001 the purchasing power of pensions was 18% less than in 1989. Today it is 16% higher. In 2001 the average value of pensions was 38,000 Ft. In 2008 it was more than 82,000 Ft. The purchasing power of pensions is 40% higher than seven years ago. During the last seven years both the gross and the net income almost doubled. In 2001 the average gross salary was 104,000 Ft but out of this the employee received only 65,000. In 2008 the average gross salary is 199,000 and the average take home pay is 122,000. The purchasing power of the average salary is 30% higher than it was in 2001. In seven years government support given to families with children has grown more than twofold. In 2002 the government spent 250 billion forints; in 2009, 540 billions forints. That includes support for all children under the age of 23 and gyes and gyed given to new mothers. The amount of money given to children didn't change between 1998 and 2002. Since then it has grown from 9,400 Ft. to 26,600 Ft. in 2008. The purchasing power of child support has grown seven-fold since 2002.

In the last seven years 258,000 new apartments have been built and close to one million people could move into new homes. Annually, between 1998 and 2001 22,000 apartments were built; between 2002 and 2008 37,000. The number of automobiles was 2.6 million in 2001. Today it is 3.1 million. Today every second family owns a car while in 2001 only 39% of the families had a car. In the last seven years 1.3 million new cars were sold. That averages out to 178,000 new automobiles a year as opposed to 148,000 in 2001. In 2001 there were 49 cell phones for every 100 inhabitants; in the last quarter of 2008 that number is 122. The number of families with a computer has grown threefold. In 2001 only 18 families out of 100 had a computer. In 2007 that number was 53. The number of internet subscribers has grown fivefold. In 2002 there were 445,000 subscribers while in 2008 2,319,000. Even more spectacular is the growth of internet subscribers who use the internet at home. In 2001 only 6% of homes had an internet connection, by 2008 47% of all families have an internet connection. Ninety percent of the internet connections are broadband. In 2001 only 40% of them had that luxury.

In seven years the length of superhighways has doubled from 534 km to 1,100 km. Today one can reach Miskolc, Nyíregyháza, Debrecen, Szeged, Dunaújváros, Nagykanizsa, all the way to Slovenia and Croatia. Three new bridges were built over the Danube: at Dunaújváros, at Szekszárd, and at Megyer. Gréczy claims that thanks to the new superhighway from Budapest to Debrecen 1,300 new jobs were created in that city.

As far as Hungarian agriculture is concerned today a great deal more money goes for agrarian and regional development than previously. In 2002 213 billion forints were spent while in 2008 438 billion forints. Between 2002 and 2008 the amount of subsidies quadrupled: from 8-12,000 ft/hectar to 40,000.

After many years of ever increasing cost of drugs in 2007-2008 the government managed to strike a deal with the pharmaceutical companies and as a result the price of about 1,000 meds decreased by 23% in 2007 and 850 others became cheaper by 13% in 2008. While earlier there were restrictions on how many pharmacies can operate (and therefore the current owners had a monopoly) the Gyurcsány government changed that policy. As a result 400 new pharmacies were opened. Moreover, today about 400 over-the-counter medications can be purchased outside of pharmacies in 700 different stores for everybody's convenience. Several hospitals were renovated and modernized.

The MSZP-SZDSZ government, mostly on the insistence of SZDSZ, put an end to conscription. The Hungarian army today is a 40,000 strong professional army. 1,000 Hungarians serve in different international units from Afganistan to Kosovo.

The birthrate is still low but it is no longer decreasing. In fact in 2008 2,400 more children were born than in 2002. Statistics of infant mortality are also much better. In 2002 there were 7.2 deaths per 1,000 live births. In 2008 only 5.6. Life expectancy also improved: in 2002 72.4 years while in 2007 73.3 years. The number of nurseries had decreased prior to 2006 but from that date their numbers have grown from 532 to 556. (By the way, still not enough!)

As a result of the strict adherence to the convergence program the budget deficit which was 10% in 2006 in two years has decreased to 3%. Hungarian companies' investments abroad today is 12.5 billion forints. This is the second best in the region after Poland with a population four times greater than that of Hungary. Today one can establish a firm in an hour and the expenses involved have decreased from 100,000 Ft to 15,000. In comparison to 2005 the value of exports has doubled (18.3 billion euros). Because of attempts to widen trade with certain countries there is spectacular growth of trade with Russia (5.7 times), Ukraine (5.3 times), and China (4.8 times). The government made serious attempts to enlarge the tax base and as a result in 2008 alone the central budget received 250 billion more forints than the year before. The number of people who allegedly receive only minimal wages and therefore don't pay taxes has also decreased.

In comparison to 2002 there are 50,000 more students in colleges and universities today. While in the school year of 2001-2002 there were 193,000 registered students, in 2007-2008 there are 243,000. The percentage of students who don't have to pay tuition has also grown. In 2002 51% of students were exempt; in 2008 65%. The government started the National School Renovation Program which will renovate and modernize 500 schools. From 2010 on the study of English will be compulsory. Between 2002 and 2008 800,000 students passed the official examination in English.

Hungary became a member of the European Union in 2004. In 2008 she became part of the Schengen zone and thus citizens of Hungary can travel without passports as far as Portugal. Hungarians can now travel to the United States without a visa. The Hungarian government also initiated joint cabinet meetings with the Romanian, Austrian, Croatian, and Slovenian governments on a regular basis.

Between 1998 and 2002 the parliament enacted 464 laws. Between 2002 and 2006 574, while between 2006 and February 2009 399. There was a serious attempt to cut down on the expenses of the central government. Between 2006 and 2008 the number of administrative units decreased from 429 to 182. The number of employees of the different ministries decreased from 8,000 to 6,000. That is a 27% reduction.

In 2007 850,000 people visited foreign countries in organized groups while in 2002 only 520,000. That is a 60% increase. Between 2002 and 2008 the foreign visitors' number has grown to 4.1 million which is a 30% increase.

These are impressive figures and I must say that although I follow Hungarian political life diligently, I didn't know a lot of these statistics. But as I said, this self-aggrandizing should have been done repeatedly. It is not enough to say something once or twice because it will not sink in. One has to repeat it a hundred times. This is what the MSZP-SZDSZ government didn't do. Its opposition, on the other hand, kept repeating how wonderful everything was between 1998 and 2002 and since then the country has been in continuous crisis. They said it so often that by now most people believe that the Orbán era was paradise itself. As we have seen from this list, the standard of living is much higher today than it was seven years ago. People have bigger apartments, they have newer cars, they go abroad more often, and one could go on. Yet the mood of the country is decidedly downbeat. MSZP did something very wrong in the communication department.

But we mustn't forget that this relative well being of the population was very costly to the country and to the government as well. Most of the foreign loans were spent on higher salaries, higher pensions, greater child support. Viktor Orbán not long ago said that his government didn't take out loans in order to provide social benefits. I don't know whether this claim is correct. But the country's indebtedness was high even in the 1998-2002 period. The fact is that Hungarians have been living on borrowed money for a very long time, ever since the early 1970s. This is what has to be stopped. But, unfortunately, first they have to pay back the loans. It won't be easy.

One possible prime minister: György Surányi

Yesterday Medián published the results of its poll on the Hungarian public's reaction to Ferenc Gyurcsány's resolve to ask for a constructive motion of no confidence against himself. As part of the survey Medián asked about possible successors to Gyurcsány. Lajos Bokros's name is the best known. Eighty-seven percent of the people know who he is. Péter Kiss, minister in charge of the prime minister's office, is next in line with 71% followed by László Békesi, finance minister in 1994, and Gordon Bajnai, minister in charge of the economy in the present government, each with 69%. Then came György Surányi, former head of the Hungarian National Bank, András Simor, current bank president, each with 67%, and finally, József Gráf, minister of agriculture, with 66%. So, with the exception of Bokros who has been the subject of numerous front-page stories of late, the possible successors are pretty well clustered in terms of name recognition.

By now I feel safe in dropping from my scorecard all the members of the current government--that is, Gráf, Kiss, and Bajnai--because after the first meeting of MSZP and SZDSZ it was evident that neither party wants a politician or a member of the cabinet as the next prime minister of the country. That leaves four possibilities from Medián's list. Let's start with the clear losers from the poll: László Békesi and Lajos Bokros. Their popularity is low: only 39% of the population think that either should head the new government. The most controversial figure is Lajos Bokros, perhaps because people remember only too well the "Bokros package" of 1995 and are also aware of his draconian ideas about future austerity measures. Békesi, one of the architects of the Reform Alliance, is also well known but unpopular, perhaps because Hungarians consider even the Reform Alliance's program too drastic. The clear winner with 47% is György Surányi, followed by András Simor with 42%. Simor already announced that he hadn't been asked and, if he were, he would say no. I don't think that he has to worry. Yesterday a new name surfaced: Tamás Mészáros, an economist and president of Corvinus University (formerly Karl Marx University of Economics).

If I had to handicap this "race" I would put the odds in Surányi's favor, especially since he was seen this morning leaving the headquarters of SZDSZ. Although there have been rumors in the last two days that Surányi would head a "national government" only if Fidesz supported him, it's unlikely that these rumors have substance. First of all, Viktor Orbán talks only of early elections; Fidesz would not support any interim government, "national" or not. Moreover, the relationship between Surányi and Orbán was rocky after the formation of the Orbán government when Surányi was the president of the Hungarian National Bank.

So who is György Surányi?  He was born in Budapest in 1954 and graduated from the Karl Marx University of Economics (today Corvinus University of Budapest) in 1977. After graduation he worked at the Research Institute of Finance (Pénzügykutató Intézet) attached to the Ministry of Finance. In 1986 he left the Institute to work for a year at the World Bank in Washington. In 1990 he was chosen to be the first chairman of the independent Hungarian National Bank. His stint at the National Bank was brief; a change in the law in 1991 gave Prime Minister József Antall the opportunity to name Péter Ákos Bod, an MDF member of parliament, to the post. Apparently at that time Surányi was quite close to Fidesz (then in opposition as a liberal party) and during 1992 and 1993 he met frequently with Viktor Orbán. However, after that date the relationship between Surányi and Orbán soured. It's not clear what drove them apart, although according to an article that appeared in Élet és Irodalom in early 2000 Orbán already at that point wanted to achieve economic growth with the help of the state, an idea Surányi fiercely opposed. After Surányi lost his job at the National Bank he became president of CIB Bank, an affiliate of the Italian Intesa Sanpaolo.

In 1994 MSZP won the elections and Gyula Horn formed a government with SZDSZ. Péter Ákos Bod, the chairman of the National Bank, was not one of Horn's favorites and Horn made no secret of the fact that he "couldn't work with Bod." I remember so well his exact words. Under pressure Bod eventually resigned and for a good three months there was no chairman of the central bank. And during the winter László Békesi, the minister of finance, announced his intention to resign, giving Horn two months to find a replacement. So there was no central bank chairman and the finance minister was on his way out. All the while the country was in dire economic straits. At last Lajos Bokros was named minister of finance on March 1, 1995, and, on the same day, Surányi became central bank chairman. His great accomplishment as bank chairman was his successful fight against inflation. Inflation in June 1995 was 31%, by the end of 1996 only 23.6%, a year later 18.3%, and all the way down to 10% in the last few months of 1998. This accomplishment brought Surányi international recognition. While he was in office the Hungarian forint also became partially convertible. However, inflation remained stuck at the 10% level, and Surányi suggested to the Orbán government that they introduce a more flexible foreign exchange policy because their monetary policy kept the forint too strong. Details of Surányi's proposal are not known, but it was rejected. Interestingly enough, as soon as Surányi left and Zsigmond Járai was named as his replacement the changes necessary for a weaker forint and complete convertibility were introduced.

In any case, Surányi's relations with Fidesz had become strained even before the Fidesz-Smallholders coalition won the elections. Prior to 1998 a study for internal use written by the economists of the Hungarian National Bank that was critical of the economic plans of Fidesz got into the hands of the socialists, who used it in their campaign. Orbán was certain Surányi was somehow complicit. [A footnote to Fidesz's economic plans during the campaign. The economic goodies promised to the population were extravagant;  if the promises had been kept, all the accomplishments of the Bokros-Surányi team would have been undone. However, as we know, Orbán didn't honor his promises and instead pursued a strict fiscal policy in his first two years in office. The victim of these campaign "lies" was László Urbán, who was initially proposed as the new finance minister. However, Urbán happened to say that "there is a difference between the campaign and government programs." At that very moment, Urbán's political career came to a screeching halt.]

Surányi served his full six-year term, which expired in 2001, when he returned once again to head CIB Bank. Once out of public office he didn't say much about monetary and fiscal policy, but here and there he criticized his successor's policies. He considered both Járai's efforts to lower inflation "by artificial means" and the Orbán government's spending spree in its last two years harmful.

In 2006 he was asked by Ferenc Gyurcsány to take part in the work of Convergence Council that was to prepare a program acceptable to the Council of the European Union. The gist of the convergence program was to lower the deficit to under 3% in the shortest possible time in order to receive subsidies from the Union designed to help the less developed countries move closer to the more developed west.

Surányi received many prizes and accolades. For instance, in 1993 the World Economic Forum named him the "Global Leader for Tomorrow." In 1996 Euromoney honored him as "The Best Central Bank Chairman in Central Europe." Tomorrow, if it still looks as if Surányi is a viable candidate I will try to outline his current ideas on the path Hungary should follow in this world economic crisis.

The day after: total confusion in Hungarian political life

Ferenc Gyurcsány's announcement that in two weeks he is going to initiate a constructive vote of no confidence was a bolt of lightning from a clear blue sky. No one expected it. Of course, there are "clever people" who claim that they had suspected something like it for quite a while, but the truth is that although there were rumors that people on the left within MSZP were unhappy with the prime minister there was nothing new in that. These people have been unhappy for the last five years or so. Yes, it is true that the popularity of the party was at an all-time low, but the opponents of Gyurcsány within the party weren't strong enough to dethrone him. No one thought that the prime minister himself would come up with such an ingenious solution: calling a constructive vote of no confidence against himself. The only case where such a solution was invoked was Willy Brandt's resignation in May 1974 when a close associate of the chancellor and SPD president, Günter Gauillaume, turned out to be an agent of the East German Stasi. At that time Brandt and Herbert Wehner, a key man in the socialist party, figured out a way to have a new head of government without new elections: to initiate a constructive vote of no confidence in favor of Helmut Schmidt, minister of finance in the SPD-FDP coalition government.

Fidesz was obviously caught by surprise. The top brass, after spending hours pondering the situation, came up with the same old plan: new elections. On Monday they will initiate a motion to discuss the dissolution of parliament. As we know, such attempts have been made several times and they all failed for the simple reason that the opposition parties can't agree on such a plan of action. I'm almost certain that they themselves know that their motion will fail again, but since they have no intention of sitting down and talking to MSZP, Gyurcsány or no Gyurcsány, they have to come up with a plan of their own. As for the other parties, SZDSZ is considered to be the most willing to come up with a "government of experts." If one can believe Gábor Fodor, the head of the party, they are not thinking in terms of a coalition; in my opinion this might change. This morning Károly Herényi was fairly negative when asked whether MDF would negotiate with MSZP and SZDSZ. Instead he kept emphasizing that they would support the politicians of Fidesz in their quest for early elections. However, by this afternoon MDF changed its mind. They are willing to negotiate. Everything can turn on a dime these days in Hungary.

This morning the "presidium" of MSZP (president, vice presidents, and head of the parliamentary caucus) held a meeting after which Gyurcsány gave a press conference. According to him, MSZP would like to see an "open, national government whose aim is to make decisisions that would help the recovery of the country's economy." What does "national government" mean? I don't think that it means a grand coalition because Fidesz would never take part in such a coalition. Moreover, the way Gyurcsány formulated the presidium's position, it was clear to me that  a "national government" for the MSZP presidium simply means a government with a "comfortable majority." He added that they would like to see "wide support"--presumably, a common platform of the three parties: MSZP, SZDSZ, and MDF. Of course, Gyurcsány spoke as if they were also counting on negotiations with Fidesz, but surely he knows as well as almost everybody in the country that such negotiations will not take place. Not even if Tibor Szanyi, the self-appointed leader of the left within MSZP, announced today that a grand coalition should be formed "without Gyurcsány and without Orbán." Orbán would have to promise that he wouldn't seek the position of prime minister for at least a year! I can already see how eagerly Orbán would accept Szanyi's more than naive proposal. Gyurcsány in his speech yesterday clearly had Szanyi and some of his friends in the party in mind when he warned against "left-wing populism" that is no better than its right-wing variety.

As for the time table, according to plans MSZP (and whoever joins them, I guess) would put forth the motion of constructive no confidence on April 6 and parliament could vote on the motion on April 14. Gyurcsány stated that the new government should have a more far-reaching economic program than the one he and his government originally contemplated. The current government will do everything necessary to prepare the foundation of such a program, but it will be the duty of the new prime minister to decide to what extent he wants to follow the recommendations. Gyurcsány will try to be helpful. He said that the new prime minister should decide the composition of his cabinet, which led me to believe that the cabinet might include people from the other parties. He was also optimistic that the parties (without Fidesz in my opinion) will be able to agree on a suitable person for the job.

So who might the next prime minister be? It is almost certain that it will not be one of the MSZP bigwigs or members of the current government. Therefore we can discard some names currently circulating: Gordon Bajnai, József Gráf, Péter Kiss. It will most likely be an outsider whose background is in economics and/or finance. Lajos Bokros is unlikely because MSZP would not support his nomination and I doubt that SZDSZ would either. After all, SZDSZ thought that Bokros was their man and now he is heading MDF's European Parliamentary list. László Békesi says such awful things both about MSZP and Ferenc Gyurcsány that I very much doubt that MSZP would pick him. I wouldn't either, because I find his utterances undiplomatic if not outright rude. Like a bull in the china shop. Then there is András Simor, the current head of the Hungarian National Bank. His decisions in the last few months have not exactly shown him to be a capable future leader of a country in the middle of an economic crisis. Moreover, I found his constant blabbing outright injurious to the country's interests. That leaves György Surányi, central bank president between 1990-91 and 1995-2001. He was a very good bank president and during one of the years in office he was chosen as bank president of the year in Europe. The problem with Surányi is that he hasn't said much until now about how he would try to solve the current economic problems. But perhaps that might be his strength! In any case, my feeling is that among the experts he would be the most acceptable to the three parties that might be called upon to decide on the person of the prime minister. Here is a "family portrait" of those whose names are circulating as possibilities:   

Meanwhile, I'm just hoping that those people, followers of Fidesz, who are bent on having early elections will not cause any disturbances. The trade unions promised a huge demonstration for April 4 and one can only hope that those who see this whole constructive motion of no confidence as no more than a trick to keep MSZP in power will not join in. Or perhaps the leaders of the trade unions will have enough sense to scrap their march under the circumstances. That's all the country would need. Meanwhile, one newspaper is sure that because of Gyurcsány's resignation the forint will be even weaker on Monday while others predict that the market will soar upon hearing the good news. Rumors are floating every which way and it is difficult to keep up with the flow of information. One can write this blog in the morning and by evening the situation is entirely different. If everything works out well, I am hopeful that the political situation will be better than it is now. If Gyurcsány can concentrate on party matters and the coming EP elections, perhaps the outcome will not be an MSZP rout. With a comfortable majority the work of parliament will be smoother and more predictable. And finally an "expert" prime minister three parties can support will be able to make bolder moves in economic matters.

The Reform Alliance's program is dead

Although parliament is just beginning discussion of the government's planned economic reforms, according to information that leaked out earlier the cabinet, on the advice of its economic experts, has rejected the program of the Reform Alliance. The government is pretty certain that there will be enough votes to defeat the program put forth for discussion by SZDSZ and MDF. Of course, the government is right. Fidesz in no way supports the program. Thus a very small minority will vote for its acceptance: at most about 25-30 people. But, of course, then comes the second round: the government's own proposal.

The government rejected the Reform Alliance program because its economists, after studying the proposals, came to the conclusion that if the program were introduced economic growth would slow by an additional 0.5% in both 2009 and 2010. By 2011 the problem would be even greater: 1.0%. They claim further that the program would take a deficit currently under 3.0% and increase it to 3.4%. The other problem is that inflation under the Reform Alliance program would be higher than that anticipated by the government. In the next three years inflation would be 0.7-0.8% higher than current projections. In addition, although the number of jobs would increase in the private sector the overall number of actively employed people would be lower than today due to cuts of about 8-10% in the public sector.

Péter Róna, an American trained banker and economist currently residing in Hungary, projects even worse results. According to him the Reform Alliance program would give rise to a serious decrease in the population's purchasing power. As opposed to the Ecostat/Hungarian government projection of a 3.5% decrease in GDP Róna thinks that the Hungarian economy will shrink by 5%. But, he continues, if the plans of the Reform Alliance become a reality that number might be as large as 7 to 9%.

In addition to these opinions there is an article by an economist who in the last few years has supported SZDSZ's reform zeal. Yet the very title of Károly Attila Soós's piece tells his opinion of introducing "reforms" that are basically nothing more than a series of severe austerity moves: "Wrong refoms at wrong time!" (Népszabadság, March 16, 2009). He goes so far as to say that even the government's very mild reforms will be counterproductive in the midst of an economic crisis. He considers raising the value added tax (VAT) harmful, hurting the poorer strata of society and lowering consumption. The cartoon that accompanies the article tells a lot. The caption reads: "It was neglected a bit but perhaps the therapy will help!" János Kóka, head of the SZDSZ caucus, seemed to like the boxer metaphor because today in parliament he talked about László Papp, the famous Hungarian boxer, who won gold medals in 1948, 1952, and 1956. What would have happened to him, asked Kóka, if someone had tied Papp's hands and put a stocking on his head? This is obviously what is happening to Hungary thanks to a government that is too afraid to jump into the middle. Kóka also compared the Hungarian economy to an overweight athlete who smokes and carries a forty-pound sandbag on his back.

Once he finished with the athletes, he moved on to medicine. Hungary is sick. At first, people thought that the country had a mild cold, but then it turned out that it had the flu, and by now it is clear that it has pneumonia! The government has been doing nothing for six solid months. Kóka announced that if the Reform Alliance's austerity program is accepted "it will hurt much and many," but these drastic reforms are necessary to win the game or get well again. He did admit that perhaps SZDSZ had a hand in Hungary's economic woes, but only insofar as they didn't insist on greater reform plans while in a coalition with the socialists. He seemed to have forgotten the botched healthcare reform (in SZDSZ hands) and the Fidesz inspired referendum that put an end to even that.

I'm inclined to side with those who say that in the middle of an economic crisis one doesn't venture into unknown territory with possibly grave consequences. One doesn't even know the extent to which Hungary will be affected by the global financial crisis. It has problems of its own making, of course, which the government is working to remedy. But the hit to the Hungarian economy will also depend on the depth of the crisis in the countries that are Hungary's trading partners. No deep reforms in Hungary will address that issue.

Hungarian pessimism

It's legendary. Hungary leads the pack in all of Europe, perhaps even in the world. Especially if one considers the relative economic well being of most of the country's citizens. This pessimism is nothing new. A 1991 piece in The New York Times entitled "Hungarians Are Thriving, Gloomily" reported that "Poll after poll shows this nation to be the gloomiest in Eastern Europe--more unhappy and more fearful about the future than neighboring countries where unemployment is twice as high, inflation is about to surge back into the double digits and nationalist extremists are whipping up old hatreds." The author also quoted Jozsef Antall who in an earlier interview had said, "A Hungarian will always see the worst. It comes in part from a peasant mentality, which will never predict a good harvest." Antall continued, "Just as there is American optimism, which is the motor of American life, so Hungarians have a tendency to be pessimistic. Every renewal in our history was always born in pessimism. Even our anthem is pessimistic."

Whatever the cause, people today in countries nearby Hungary with much lower standards of living are  more optimistic than the Hungarians. Hungarians bemoan the fact that they have always been the losers of history. All those horrible happenings: the Mongol hordes, Mohács, the Turkish occupation, Habsburg rule, Trianon, two lost wars, 1956. Should I continue? Poland certainly hasn't been luckier than Hungary in modern times. In fact, Poland disappeared from the map after 1795 and yet the Poles always believed that Poland would be reborn one day.

The 1970s and 1980s was one of the few times that Hungarians felt economically superior to some of its neighbors (which, of course, is not the same as feeling optimistic). Hungary was doing well in the sense that living standards were on the rise while in Poland, for instance, eventually there were only empty shelves in the stores. Then Hungarians were self-satisfied and made ugly jokes at the expense of their Polish "brothers." Just think of the Polish saying: "Polak-Węgier dwa bratanki - i do szabli, i do szklanki!" Oh, yes, every Pole knows the saying, including the Polish guy who worked on my roof when he found out my country of origin. But in those days of relative Hungarian plenty Polish-Hungarian brotherhood was forgotten. The saying in Hungary was--and I have to quote in Hungarian because of a word play--"keresztek helyett inkább búzát kellene vetniük." In rough translation, instead of crossing themselves they should work.

Well, now Hungarians think that Poles are doing splendidly while they are the nation that is the worst off, and not just in Europe. Of course, they are wrong. There is a severe financial and economic crisis the world over. But Hungarian politicians keep harping on the theme that the economic problems Hungary is experiencing are unique to Hungary. Certainly Hungary was the first country in the region to be in trouble because of the very high government and private indebtedness and it was the first to receive IMF and World Bank assistance. But just look around the region now. It seems that sooner or later all countries will be in pretty much the same boat. Romania is now trying to get some IMF loans and Slovakia, a country always brought up as a shining example of fiscal management, may end up in a serious recession due to its heavy reliance on the auto industry.

Yesterday I was asked by József Orosz, anchorman of Kontra (KlubRádió), to comment on the Hungarian doomsday attitude toward the economic crisis. He brought up some examples. A former minister in the Medgyessy government announced a few days ago that "Hungary is already in intensive care but not yet dead." Here are some Hungarian headlines of late: "The situation is worse than in October" (Index). "The German chancellor is reminded of the second world war" (Hírszerző). "Crisis: According to Bajnai amputation is necessary" (Hírszerző). "We are sitting on a timebomb of bloody social strife" (Hírszerző). "Hope is not in sight" (Heti Válasz). As opposed to generally more optimistic headlines in English and American papers. One of my favorites (Bloomberg) cited Jeremy Grantham, known as a "perma-bear," who nonetheless in a March 4 commentary entitled "Reinvesting When Terrified" urged a "shift to stocks before 'rigor mortis' sets in." And it was not the economy he was describing as dead; it was the investor. To quote a bit more from his commentary: "Every decline will enhance the beauty of cash until . . . 'terminal paralysis' sets in. Those who were over invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance. So almost everyone is watching and waiting with their inertia beginning to set like concrete. Typically, those with a lot of cash will miss a very large chunk of the market recovery." In brief, a call to action.

I heard an interview on Napkelte (MTV) yesterday morning. The reporter was interviewing a well known economist. Her very first sentences went something like this: "A few weeks ago you said that this recession would end by the middle of the year. What are you saying now?" The poor economist tried to explain that the situation changes from day to day and that it is difficult to predict the future. But that didn't satisfy our reporter who kept outlining the worst possible scenarios. When the economist tried to give a somewhat more nuanced picture, she contradicted him and tried to prove that the situation was dire. One could see that she was very frustrated when she didn't get an answer about the immediate economic collapse of the country.

Okay, one could say: this is just a not too bright reporter who doesn't know much about economics or finance. Or the headlines are simply sensation-seeking. But what about the chairman of the Hungarian National Bank who announced yesterday that the country is in such trouble that it can sink to the bottom of the ocean? In fact, the water is up to "our noses." András Simor, the chairman, almost daily (except during his vacation last week when the country was sinking!) makes some such horrific pronouncement and then seems to be surprised that the Hungarian forint is not doing well. The chairman of the central bank has to be very careful what he says and Simor ought to know that. So why is he saying these things? Inexperience? Ill will? Habit? Hard to say. His predecessor, a former minister in the Orbán government, certainly knew what he was doing. But Simor?

Then there are those economists. Economics the dismal science as Thomas Carlyle called it. It may be dismal, but it isn't a hard science with confirming or falsifying experiments. There are economic theories, different economic schools, different beliefs, but Hungarian economists expound their own remedies as the gospel truth. András Gerő, the historian, rightly pointed out that it would be appropriate for these economists to preface their theories with "in my opinion." However, they do not. The economists of the Reform Alliance are certain that their remedy is the only appropriate one while Lajos Bokros is convinced that his "shock therapy" will be the salvation of the country. Lately he has been making the rounds from television station to television station, proudly announcing that he has just returned from Ukraine where he was obviously invited to fix up the Ukrainian economy. Good luck! His supporters point to the splendid results he achieved in Slovakia. But what will happen if in the next quarter Slovakia will also be in recession? Then what will they say about Lajos Bokros? That his remedies didn't work in the long run? Or that the Slovak government did something that mitigated the results achieved by the Slovak Bokros package? If Lajos Bokros is the key to solving the world's economic and financial crisis then maybe he should be invited to the United States where all the problems started and everything would be okay in a jiffy.

Hungary is not unique and at the moment not even as badly off as some other countries. However, all this negativism can be destructive, creating an adverse feedback loop. A weakening economy and a pessimistic population can become mutually reinforcing. I'm neither an economist nor a medical doctor but I know that in both fields optimism is a critical component of recovery. In the United States and in Canada people who perhaps are hit harder by the financial and economic crisis than are the Hungarians remain by and large optimistic at the same time they are scared. They know that this deep recession will end, even though they don't know when. And some, following the lead of Obama, believe that the downturn provides an opportunity for fresh ideas, new beginnings, a revitalization of American business and society. Who will start a campaign in Hungary to change people's attitudes? 

Ferenc Gyurcsány swings into action

It is almost inevitable that when there is really big trouble, Gyurcsány's adrenalin surges.This was the situation in late 2005 and early 2006 when MSZP trailed far behind Fidesz and Gyurcsány launched an incredible campaign to sell MSZP and his program. Miracle of miracles the MSZP-SZDSZ coalition won the elections. In the process he even managed to rally the normally apathetic MSZP troops: for instance, a huge spirited crowd gathered at an outdoor meeting and enthusiastically sang the catchy campaign song.

A similar burst of energy can be observed in the last few weeks, especially in the last few days. Most likely because the European parliamentary elections are near, Gyurcsány's verbiage is becoming sharper. Until now he was very careful not to emulate the tone of Fidesz politicians, although Gyurcsány can be devastatingly sarcastic if he is aroused. He was merciless when he made fun of Tibor Navracsics in parliament on February 16 and yesterday when in a speech he called his opponents "political con-men."

Yes, Gyurcsány is full of ideas and spares no energy to promote them. His latest is that he wants the European Union to arrange a package of as much as 180 billion euros to help East European economies, banks, and companies survive the economic storm. Here he is competing for attention with Viktor Orbán who on February 22 in Vienna scolded the west for not keeping its end of the bargain by not helping eastern Europe. He referred to a "contract" that had been broken, though it is not at all clear to me what contract Orbán was talking about. A couple of days earlier he apparently had talks with the prime ministers of Poland and the Czech Republic about some kind of cooperation among the East European countries. Today Orbán had a 50-minute talk with Angela Merkel. Since Merkel said nothing about the conversation with Orbán we have only Orbán's description of the meeting. According to him, he made three suggestions. (1) Western banks should resume cash flow to their branches in the region. (2) The European Central Bank should sell euros under the same conditions to non-eurozone countries as within it. And (3) Western governments should urge their companies to continue their investments in Eastern Europe. He didn't divulge Merkel's reactions, though he remarked that "minds are already open but not the pocketbooks." Orbán is even more ambitious than Gyurcsány: he wants 350 billion dollars or 276 billion euros. I think one can count one's blessing if Gyurcsány's suggestions bear fruit. Orbán's surely won't. For one thing, however bright his political prospects may be, he is not currently a major player on the international scene.

Gyurcsány already gave a name to his 180 billion euro plan: the European Stabilization and Integration Program. It would include short-term financing for governments, restructuring of private debt, capitalization of banks, and liquidity for companies in twelve different countries. Gyurcsány will present his plan at the March 1 European Union summit in Brussels. The Hungarian government already warned the Hungarian public not to expect results at the summit. It is not enough to convince the Western European leaders of its necessity; the plan would have to be put in place, which as we know only too well can be a daunting task. The program would help Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Romania. In addition two non-EU countries would benefit: Croatia and Ukraine. Meanwhile the European Bank for Reconstruction and Development and the World Bank launched major lending programs. The EBRD will lend 11 billion and the World Bank about 7.5 billion euros.

Gyurcsány has another favorite plan: to shorten the waiting period for admission to the euro-zone. Hungary has substantially reduced its deficit in the last two years. Right now the deficit is under 3%, comfortably below the 3.5% insisted on by the European Union. Inflation not surprisingly will also be low. Most likely well under 3.5%. According to the current rules Hungary would have to wait two years while holding the current figures before admission. This is what Gyurcsány would like to change. It seems that Poland will support the Hungarian proposal to shorten the waiting period. Whether the proposal will find support outside of the region is questionable. But Gyurcsány can be very persuasive. If he manages to pull this off his chances at the polls in 2010 would greatly improve.