The Hungarian government’s measures to stabilize the economy in the wake of the coronavirus pandemic were released today. The market weighed in immediately, with the Hungarian forint dropping further against the euro. Viktor Orbán’s announcement didn’t convince too many people that his government can handle this economic crisis.
One reason for the lack of confidence was the vagueness of the announcement. Another was his seeming determination to steer the Hungarian economy along the same path as before. For instance, he said the government would invest 450 billion forints to create new jobs, even though the concern of most people is holding on to their existing jobs.
Although a couple of days ago I was certain that Orbán would be true to his word and would not give “free money” to anyone, in his speech today he made a vague reference to a “unique Hungarian solution,” which involves governmental assistance to those whose work hours have been reduced. But, as far as I can see, there is nothing unique about this program; it already exists in Germany. Moreover, he offered no specifics about how this program would be implemented in Hungary.
What would Viktor Orbán spend the 450 billion forints (€1.1 billion) on? It seems to me that the prime minister is so pleased with the present structure of the Hungarian economy that he is planning to continue where he left off a couple of months ago. He will pour more money into tourism, construction, the film industry, agriculture, the healthcare industry, logistics, transportation, the food industry, and transportation. If I am reading it correctly, he isn’t planning to increase funding for the healthcare of the population but most likely will put some money into Hungary’s pharmaceutical industry and into biopharma research. Otherwise, tourism still holds the pride of place in his mind, despite the very real possibility that, after this devastating pandemic, enthusiasm for traveling or even receiving tourists will diminish. In addition, he plans to help Hungarian companies to the tune of €5.5 billion (2 trillion forints), mostly through low-interest loans.
There was not a word about the sizable segment of Hungarian society who subsist in deep poverty or those who live from hand to mouth. Unemployment insurance and child benefits remain untouched, but to make sure that Hungary’s pensioners, people over 65 years of age, will not abandon Fidesz at the next national election in 2022, he promised a gradual reinstatement of the extra month pension, which had been foolishly introduced by the Medgyessy government (2002-2004) and continued for seven years, until in 2009 the Bajnai government was forced to abolish it because of the deep recession that hit Hungary after the 2008 economic crisis. Today, as we watch the world economy collapsing around us, Viktor Orbán’s mind is focused on political gains. He generously announced that in February 2021 every pensioner will get an extra week of pension. The same thing will happen in 2022, 2023, and 2024, a couple of months before the election.
The above ad appeared on Fidesz’s website only a couple of hours ago. It reads: “Handling of the crisis in 2009 and now: The left took away the 13th month pension, took away one month’s worth of salary from the employees, and called in the IMF. The national government will give back the 13th month pension, will protect jobs, and will restart the Hungarian economy. Send it on.” In the midst of an enormous health, social, and economic crisis, Fidesz is already in campaign mode.
Hungarian economists are aghast at the fiscal stimulus package, partly because of Orbán’s vague solutions and partly because the economic hardships of a large percentage of the population are not addressed at all. Tamás Mellár, a retired professor of economics at the University of Pécs and a member of parliament since 2018, called on his colleagues to get together and formulate their solutions to the crisis. Several people have already joined him: Péter Bihari (former chief economist of the Budapest Bank), Péter Ákos Bod (former chairman of the central bank), Attila Chikán (minister in the first Orbán government), Péter Felcsuti (former chair of the Banking Association), Dóra Győrffy (professor of economics), Júlia Király (former deputy chairman of the central bank), Zoltán Nagy (former president of the Hungarian Competition Authority), Gábor Oblath (senior researcher at the Institute of Economics of the Hungarian Academy of Sciences), Éva Palócz (CEO of Kopint Tárki), Mária Zita Petschnig (Pénzügykutató Intézet), András Vértes (president of GKI/ Economic Research Institute), Werner Riecke (former deputy chairman of the central bank), and Ágota Scharle (Budapest Institute for Policy Analysis). They are ready to respond once the Orbán government produces an economic program that can be professionally evaluated.
I think most economists would agree with those opposition politicians who have so far responded to Orbán’s announcement. Most of them are convinced that, without offering financial help to the vast majority of those who have lost their jobs and thus their livelihood, the engine of the economy cannot be re-started. They believe that the Orbán government’s remedies will only aggravate the problem. If no financial help is offered to people who have lost their jobs, hunger might appear in certain parts of the country, especially in areas with a large Roma population, although even many better off people cannot hold out longer than a month without a steady job. Politicians are also appalled that none of Orbán’s favored oligarchs seems to be taxed while Orbán is taking away money from the cities and towns which serve the citizens in the most direct way.
It is also worrisome that the handling of the crisis is entrusted not to Mihály Varga, minister of finance, or to a respected economist but to, of all people, László Palkovics, an engineer whose expertise is automotive brake systems. But he has proved himself to be a jack of all trades for the Orbán government. He already managed to ruin the public education system and is in the process of doing the same to the universities. We will see how he will solve the economic crisis.
April 6, 2020