August 14th, 2012

Government’s post-vacation takeover targets: school cafeterias, pharmacies, the rest of your private savings?

Blissfully, the lords of Hungarian politics seem to be taking a summer break from their frenzied intervention in the country’s wheezing business sector. But just as autumn follows summer, within a few short weeks they will be back, and itching to insert themselves into every nook and cranny of economic life.

While it’s always hard to predict what Prime Minister Viktor Orbán and Co. will actually do until they do it – one often gets the sense that Monday morning’s policy is hatched on Sunday evening – before the break there were a few hints of interventions to come:

The renationalization of school snack bars: In early July, the educational portal obtained a document which indicated that the government plans to renationalize school cafeterias, dormitories and other related school facilities currently let out to private contractors, supposedly in order to make them “more efficient.” Universities asked about the proposal are reportedly not too keen, saying the move would instead result in students paying more and in a general decline in the quality of such services. The owner of one cafeteria/snack bar at Corvinus University said renationalization would be a “travel back in time,” adding that the cafeteria was her family’s only source of livelihood.

The “re-guilding” of pharmacies: Towards the end of the month, Orbán announced that the government would be offering long-term, low-interest loans to pharmacists so that they could repurchase pharmacies currently owned by others in the retail sector. According to Orbán, it is in Hungary’s interest that “pharmacies should be owned by pharmacists,” meaning a return to an earlier situation in which a cozy guild of credentialed professionals enjoyed spectacular profits by being sheltered from competition. Note that pharmacists are said to have been among the biggest financial backers of Fidesz in the run-up to the last general election, and that the guild system was dismantled as part of the country’s 2008 bailout deal with the IMF. This means any push by the government to reward its backers by allowing them to overcharge you for ibuprofen could result in a major headache during this fall’s talks with the IMF over a new bailout deal.

Another move on private savings: Around the same time Orbán announced his plans vis-à-vis pharmacies, he made some intriguing – but largely underreported – remarks about how he saw the country dealing with the ongoing drought in bank lending, which he said would continue for the next few years no matter how “bank-loving” the government’s policies were.

After first expressing satisfaction with the increasing volume of purchases of Hungarian government debt by domestic private investors – HUF 100 billion in June and July alone – he went on to say that it would be worth considering how the savings of high-income people could be concentrated into state-run investment funds. As an example, he said such savers could be offered ownership in two or three state funds and these private investors could then decide after eight or ten years if they wanted to cash out or remain the owners of a successful state investment.

Needless to say, coming after last year’s move by the government to seize the country’s privately-managed pension fund assets, such talk may not inspire much confidence in the small number of Hungarians with meaningful amounts of investable capital. So one assumes they may again have to make an offer that is too good to refuse…

  • Democrat

    I suspect the shopping list is much heavier. One mobile phone company (Telenor?), one of the leading banks (Erste?), most of the utilities. Current owners will be taxed into submission. Certainly savings will be ‘directed’ to state funds but the wealthy can find ways around that, so again the poorer folk will suffer. Time to leave….

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