The government’s decision to let the holders of Swiss franc-based credits repay their loans early at a far below market rate of exchange sent a shock through the banking system. While the early reactions predicting the collapse of the entire banking system were over the top (and the government also provided some relief by tightening requirements for debtors and consequently softening them for banks), the plan itself, the lack of consultation about it and the vehement rejection of any criticism show a pattern that is probably disquieting for potential investors.
The problem of indebted families, among them foreign-exchange borrowers, is one of the most serious issues for the economy and society. The dramatic strengthening of the Swiss franc raised monthly repayments significantly. The government, after 15 months of doing nothing except several misleading PR stunts, now wishes to create the possibility for borrowers to pay back their loans unilaterally in a single instalment at a fixed exchange rate. The consequences could be disastrous in the worst-case scenario.
At the start of the autumn parliamentary season, Fidesz still does not know exactly what measures it will take in an attempt to bring the financial crisis, which has gained fresh legs, under control. As a consequence of the deteriorating economic circumstances, the steps that have been announced are far from upbeat: the increase in excise taxes (on alcohol, diesel oil, cigarettes and gambling) and more stringent tax collection may be adequate to patch up the budget for the time being, but far greater adjustments will be needed in 2012 if the budget deficit target is to be kept. What that means is that the coming years will look very different from what Fidesz had in mind when it came into power.
In a stunning policy reversal, the government was briefly contemplating last week the introduction of a solidarity tax, which in effect would mean the abandonment of its most treasured reform, the flat tax. Economic policy overall has failed to deliver on the government’s projections, which were not all too ambitious to begin with. Most pressing, however, are the budgetary troubles, as sluggish growth yields less revenue than anticipated.
The election result in Gyöngyöspata does not signify that Jobbik has gained ground countrywide but it does put paid to those views that the party’s political opportunities have narrowed and internal conflicts are hobbling the organisation. On the contrary, Jobbik managed to achieve a striking local victory by closing ranks and fanning the flames of the Gyöngyöspata conflict. The political tendencies defining the coming period (decline in support for the governing party, focus on the topic of Roma integration and continuing austerity measures) could create a favourable political climate for Jobbik to stabilise and strengthen its voting camp.
In 1989 Viktor Orbán, then a young opposition leader, organised Central and Eastern Europe’s only protest against the Tiananmen Square massacre. Twenty years on and things have turned on their head as Prime Minister Orbán waxed lyrical about the new alliance between China and Hungary. Hungary’s courtship has been widely construed as the triumph of economic pragmatism over democratic principles but it is far from certain that economic interests are the only driving factor.
Street demonstrations have been among the most powerful manifestations of opposition to the government. These protests appear to be picking up steam. At first they drew only urban intellectuals and youths who demonstrated against acts harmful to democracy and the rule of law. Now that the government of Prime Minister Viktor Orbán is cutting key benefits and entitlements, the number of those adversely affected by its policies is growing, as is the ratio of those willing to express their dissatisfaction publicly.
Hungarian foreign policy fluctuates between an occasionally aggressive rhetoric, an ambitious ideology and a more sober and less ambitious diplomatic reality. Fidesz seeks a more assertive foreign policy that marks a break with the Hungarian Socialist Party’s (MSZP) subservience to foreign domination (Fidesz’s own interpretation) or, alternatively, the Socialists’ inability to formulate an independent and coherent foreign policy strategy that moves beyond blindly orienting Hungary’s diplomacy along the lines set by powerful actors that Hungarian leaders wish to please (our interpretation).
After a relaxed start the government has been very active enacting changes in many walks of life. A lot of it seems to lack planning, while another portion seems wrong-headed or dubious. This week we are going to take a look at the third group, the dubious: we will review the measures that we find most positive. Many of these are small acts that improve small slices of everyday life. Other measures herald greater changes but also harbour greater risks.