Well that was fast! It’s been barely a week since leading members of the newly triumphant Fidesz launched what appears to be a major, coordinated campaign against Hungarian National Bank (MNB) president András Simor and it already seems like Simor has won. First we have PM-designate Viktor Orbán backing away from the idea of merging market watchdog PSZÁF and the MNB, which would have given the new government a constitutional path to replacing Simor. Then former Fidesz FinMin (and incoming PM office chief) Mihály Varga went further, saying Fidesz should back off of Simor altogether. And now this morning Simor has published a big open letter on Index.hu (summarized in English by Bloomberg News) which basically says “I’ve got you cornered, so listen up.”
As for what might be behind Fidesz’s sudden about-face, this should be pretty obvious: the markets. While the ongoing global freakout can of course be partly blamed for the fall in the forint over the past few days, it can’t have helped that the incoming government was seen to be openly challenging the independence of the central bank. According to Bloomberg, as of today the forint is the worst performing emerging-market currency out of 25 they track.
In his letter, Simor said the constitution demanded that he serve out his term – it ends in 2013 – and stoutly called for the incoming government to stick to the path of fiscal consolidation followed by the outgoing administration, essentially dismissing as fantasy Fidesz’s pledges to cut taxes and boost spending to “jump-start” the moribund Magyar economy.
What’s amusing is that while conceding that Fidesz needs to tread carefully when dealing with the MNB Varga still said it was necessary that the country’s fiscal and monetary policies fall into lockstep, not realizing that Simor seems to heartily agree. It’s going to be a long three years.
So the IMF puppet stays. Is this good news?
It is not good news that the IMF muppet stays.
The problem is you have a second muppet and that is Orban Viktor.
The common ground, or compromise, between Fidesz and MNB governor Andras Simor will never have a chance to be investigated. Spend, Spend, Spend, Orban (remember last time?) will not get the chance to get his hands on the cash because, ‘Big Brother,’ says so.
Hungary suffers as per usual and the nasty medicine currently administered by IMF and EU is to make sure there is no chance of a default on the loans.
The situation in Greece has compounded the problem and there are a lot of nervous people out there including heads of state.
Angela Merkel and the Germans have most to lose. But Germany and France were over zealous in their pursuit of forcing the single currency, the euro, onto backward economies.
Spain, Portugal, and Italy are queueing up with outstretched arms. The begging bowl of Oliver Twist is still in vogue!
@Ledger: The “nasty medicine” is aimed at slowly
weaning Hungary off its long habit of borrowing from
abroad to finance consumption. But without said
medicine, no one will be willing to finance the
ongoing gap in the first place. So what’s your
solution here? Doesn’t seem like there are any good
options here…
Erik. To digress possibly for a moment. Every time I discuss political and social issues with my neighbor he often comes up with this: well, we are not a mature democracy like the UK and America.
It will take us time to adapt. OK. But I think Hungarians adapt quite well if it suits their purpose. The soviets went and the West was pleased and gave Hungary pots of money to play around with.
I believe the gravy train mentality became engrained in the Hungarian psyche and the honeymoon period has gone on too long.
Basically the question is: how long should it take
an ex-communist country to transform itself into
a dynamic, free market, player?
So many imponderables. The first concern is dodgy and inefficient politicians that simply cannot deliver the reforms that would bring about real change for the common good.
We are totally in the hands of the politicians at the moment to set an economic climate where we can all thrive. It is not happening.
My two cents worth is that we need to draw up a program that has consensus across the political spectrum and set about implementing it forthwith.
Tax and justice reform, local admin updated, constitutional amendments, the new civil code gathering dust on the shelf needs to be discussed and agreed.
All these things are up for debate. The intelligentsia needs to get stuck in with the help of the Press in an attempt to try and drive home the fact that Hungary needs to change its ways P.D.Q.
@ledger: My question was a lot more specific and
practical than all that. You say “Basically the
question is: how long should [Hungary] take an ex-
communist country to transform itself into a
dynamic, free market, player?” but the problem at
hand is one countries that were never communist are
dealing with. The question is, what’s a better
alternative to the IMF/market “medicine” of fiscal
consolidation? Because I just don’t see one. Monetizing the debts?
Erik. I know your question was directed at fiscal/economic matters.
There is no alternative to borrowing money because Hungary, like Greece, has not balanced the books.
That is why I extended my rant to a whole raft of things Hungary has to do to start putting things right to make it competitive and a viable proposition in the real world.
Everything in Hungary as far as administration goes is a dog’s dinner.
And, I home going to say this one last time. Over the past three years Hungary has had golden opportunities and squandered them. This is a disgrace. Opportunities other countries have not had.
Vándorló and yourself are far more au fait with economics and statistics than me.
I am just stating the obvious.
Twenty years of mismanagement has caused the problems endemic in Hungary.
So, to sum up: borrowing money (euros) which is used to buy the forint to make it stronger is a good idea? How can this help to kick-start the economy?
Orban Viktor wants to spend again but Simor and Big Brother say “NO”!
You cannot simply take one aspect of the economic problem, quarantine it, and expect to come up with answers. It is a lot more difficult than that.