With accounts of the Hungarian currency, the Forint on the brink of collapse, and imminent economic melt down in Hungary the actions of Prime Minister Victor Orbán have been condemned on many levels. In the ensuing media frenzy there have been factual reports, although some tabloids have not refrained from giving their personal opinions on the Hungarian tempest. Orbán has subsequently stated that anyone who is not privy to all the facts has no right to offer prejudicial criticism. He has also commented that Hungary will not accept anyone questioning Hungary’s commitment to democracy, human rights, and Hungary’s place in the democratic community.
Why all the Interest?
Why has a small country on the periphery of the European Union radar caused such a furore? A request by Hungary for the provision of a possible 10-15 billion EU loan, which may or not be needed at some time in the future, seems to have been the catalyst for the recent events.
This seems to have provided the European Union, and International Monetary Fund with an excuse to try and implement some of the requested internal policy changes within Hungary, which Orbán has so far refused to do. This insignificant amount which is pocket change compared to the payments given to the large developed EU countries, has opened a can of worms, and has started a great deal of political wrangling.
Even within Hungary there has been a lot of debate, and opposition parties have taken the opportunity to organise demonstrations against Orbán. Most Hungarians see him as a political leader who is trying to act in the best interest of his country, and not give in to political pressure. to highlight this, a peaceful march is being organised on the 21st January in Budapest, and a large turnout is expected in support of the Government.
During the past weeks, a great deal of criticism has been levelled at Hungary regarding its internal politics and the recent changes to its constitution, as well as the controversial changes to the Reserve Bank Act, although Orbán denies that either poses a threat to democracy, or is against EU laws.
But is this just the tip of the Iceberg? Popular opinion in Hungary is that the EU reaction has been unjust. It seems that in 2004 Hungary made similar changes to the Reserve Bank Act, and at time there was no EU objection. Why now? Is the European Union worried about Hungary setting a radical precedent in Europe? Even while Hungary hosted the EU presidency in 2011, Victor Orbán managed to ruffle many EU feathers when he took a strong stance in regulating media, and banking laws within Hungary.
Is it also possible that in the eyes of the EU, the trade agreement Hungary signed with China in 2011 was another nail in Orbán’s political coffin?
Hungary’s Stance
Some reports have disapproved of Hungary's seemingly autocratic policies, while others, including Poland have applauded Hungary’s actions in standing up to the European Union. Unfortunately each time Orbán flexes his muscles Hungary’s credit rating is downgraded, which has caused the Forint to plummet.
Orbán feels that Hungary’s internal politics, and financial policies have no bearing on anyone else, and even Bloomberg agreed that this is technically true, however, they also added that sometimes a bailout means giving up autonomy. Although the question remains: at what cost? Even at the cost of the welfare of its citizens?
This may be the crux of the matter. Many of the smaller EU countries feel that they are being overshadowed by the larger EU founding members who set impractical, and inflexible policies. It is unrealistic to expect a country like Hungary who has suffered political and financial suppression for several decades to be on financial par with the likes of Germany and France, especially after EU policies have destroyed most sources of income the country previously had.
Hungarian Economy
This state of affairs seems typical for many EU countries. The Greek economy is shrinking as Ireland sinks back into recession. The majority of Hungarians also feel that EU policy in terms of setting quotas, and what each country should manufacture, and grow has been detrimental to the Hungarian economy. The feeling is that these policies only favour France, a strongly agricultural country, and Germany, an industrial giant. Since joining the EU, agriculture, and most manufacturing within Hungary has come to a virtual stop, which Orbán rather belatedly is now trying to revive.
Agriculture and Industry
Hungary used to be known as the bread basked of Europe, yet now all it seems to grow is Rape Seed. The country had a thriving sugar beet and animal industry, which have almost completely died. Foreign companies flocked to Hungary, and cheaply acquired most of its agricultural and industrial assets, the only intention was to gain a monopoly within the country after which the factories were closed, and abandoned. Subsequently the very same products were imported from other sources, as far a field as South America, and sold more expensively for a higher profit, which Hungary now has to import. What little industry is left, remains in the hands of International companies, which ensures that most, if not all the profits leave the country without benefit to the Hungarian economy. This is the reason Orbán has implemented the crisis tax on large multinationals as well as the bank tax on predominantly foreign financial institutions.
Austerity Measures
The EU expects Orbán to introduce further austerity measures, although economically it makes more sense to help revive agriculture and industry, and encourage the country to stand on its feet. This would certainly benefit the country financially far more, than reducing already inadequate pensions.
Hungarian citizens already have one of the lowest incomes per capita, and one of the lowest standards of living in Europe. Most are already living in conditions of depravation. Further austerity measures would not revive the economy significantly enough for the country to repay its debts, but would certainly cause massive hardships for its already suffering citizens.
Social Benefits
Hungarian citizens have been used to a number of social benefits, many of which have already been changed, amended, or abolished. Orbán realises that it would not be advantageous to the citizens or the country, to remove what little social benefits are left. At present, Hungary has a negative population growth, and should Orbán abolish the three-year maternity leave benefit, any hopes of reversing this trend will become impossible.
If Orbán were to extend the retirement age, this would further limit jobs for school leavers and university graduates. Yet, in order to produce a thriving economy, young and enthusiastic workers are needed to revive Hungary’s failing industries, and promote long-term growth. This would have a further knock on effect with regard to the population growth. If young people are unable to find work they will be disinclined raise a family, and the population growth in Hungary will further decrease.
What Does the Future Hold?
Is it surprising that Orbán has tried to implement policies that are less damaging to his country even at the expense of crossing swords with the EU and IMF? On the other hand perhaps some EU countries feel that this may set a dangerous precedent, which has to be contained. Orbán maintains that he cannot deal with generalities, but as soon as he receives specifics from the EU, and if Hungary is in breach of EU laws he is prepared to negotiate, and resolve the matter.
Perhaps the EU should consider that a one size fits all policy does not always work. Each country has its own language, culture, values, and its very own problems that are often unique to each individual country therefore umbrella policies may not be the answer. Nobody is asking for favouritism, only that perhaps, Goliath should learn to listen to David.
Sources:-
11/01/2012 Bloomberg News
09/01/2012 Why is the world focusing on us
11/01/2012 Hungarian economics and politics
Erika Gösi - I was born in Hungary, but I have lived abroad all my life where I was fortunate to have experienced many wonders of Africa and Australia, ...
