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The prospect of talks with the IMF and the EU

January 30th, 2012

Left wing newspapers remain highly critical of the government’s economic policy and of Minister György Matolcsy personally, after a week which witnessed PM Viktor Orbán meeting EC President José Manuel Barroso, the IMF issuing its annual Staff Report and Mr Matolcsy facing the Economic Committee of Parliament. Pro-government columnists talk about relative successes and the cabinet’s intention to accomplish a shift in its policies.

After his meeting with the President of the European Commission José Manuel Barroso in Brussels, PM Viktor Orbán said progress had been made, and that certain issues had yet to be clarified with the Commission. José Manuel Barroso said he expects a swift response from Hungary to concerns over discrepancies between Hungarian and EU law, and stressed that in times of financial and economic crisis it was exceptionally important that the markets and people should have trust in Hungary.

On Wednesday, the International Monetary Fund issued its (highly critical) annual Staff Report on Hungary in which the Executive Directors describe the 2012 budget deficit target of 2.5 percent of GDP as “ambitious but broadly appropriate”, and suggest “identifying contingency measures, focusing on durable and fiscally-sustainable measures that help lay the groundwork for a credible medium-term fiscal stance”.

In Magyar Nemzet István Pataky, compares the meeting between the Hungarian PM and the President of the European Commission – to a football match which ended in a draw, “although the end of the war is still far away”.

The right wing commentator believes that the attacks against the Hungarian government were planned immediately after the landslide victory of Fidesz in 2010. Slovenia’s former Social Democrat PM Borut Pahor was in fact quoted last year as saying that “we (the European Union) will try to isolate Viktor Orbán as soon as Hungary’s EU presidency is over”.

The debate in the European Parliament (see BudaPost, January 20th) made the situation clear, but PM Viktor Orbán had to realize that he was facing stronger pressure than previously expected – writes István Pataky. He believes that pressure is unjustified and that left wing parties should in fact have “given a standing ovation to the Hungarian government”, because it has so far managed to avoid major restrictions, and has kept the budget in order without sparking social tensions.

Another right wing daily, Magyar Hírlap compares the markets to Hollywood: investors, that is the “audience” come and spend their money if they buy our stories. Which means we must be able to sell them. The commentator, Csaba Szajlai thinks the government has introduced several important measures over the past year but was not good at explaining them to investors.  Just lately, however, there have been two stories that sold well: the meeting between Viktor Orbán and President José Manuel Barroso (and its conciliatory tone), and the agreement between the government and the Banking Association on early debt repayment last December.

What Csaba Szajlai pinpoints as the missing factor is the ability to understand the credit rating agencies. “As long as the market takes them seriously, they remain players one must listen to,” the columnist advises. In addition to the ratings themselves, Hungary must also study the comments the agencies attach to their communiqués: in those comments it becomes clear that the government should focus on growth and carry on with reforms.

Szajlai reminds readers that Hungary needs the safety net of the IMF because it has to repay the 20 billion Euros borrowed by the Gyurcsány government back in 2008. But earlier the government planned to raise that money from the markets. Asking for a new credit line is not a good story in itself, but it is still better than to default. Now it seems that the government is determined to accomplish a shift in its economic policy and in its political line. But that in itself could be transformed into a good story – Csaba Szajlai concludes.

In Népszava, columnist Tamás Mészáros claims that Viktor Orbán is just playing for time in his negotiations with the European Union. The left wing commentator contends that the Prime Minister will “never restore the rule of law”, because he “will not give up the totalitarian power he has managed to grab”. Mészáros suggests that if Mr Orbán was sincere in his negotiations with the European Union, the first thing he should do is to dismiss his Minister of Economy, whose policies have clearly failed and whose “unorthodox” measures must now be rectified before any agreement is to be reached on the credit line so badly needed. But since the Prime Minister insists on keeping his Economy Minister in place, Mészáros is convinced that he is not prepared to make significant concessions in exchange for the financial life-belt he is asking for.

In Népszabadság business commentator Miklós Blahó criticizes György Matolcsy for failing to stimulate economic growth, attract investment and credit and speed up consumption. The government’s ad hoc decisions neutralized each other and made its policy unpredictable, and “that’s how the wonder model turned into junk”.

While the Hungarian government is waging its “freedom fight”, the rest of the European Union realizes that not even the big rich member states can follow their own course. Népszabadság quotes former German chancellor Helmut Schmidt who said that all those who favour national pride instead of European integration, act against their own interests.

The progress made at the meeting between Viktor Orbán and José Manuel Barroso was forced by the bare necessities, but the IMF-talks will be harder than expectedVéleményvezér believes.

The moderate conservative blogger thinks that major players take Hungary’s agreement with the EU-IMF for granted. This gives time to the Hungarian government to sell the story to its voters.

“The EU is highly unlikely to finance a budget which would repeatedly and predictably miss its targets” – writes Véleményvezér, and adds that future talks will force the government to back down on several issues. These retreats will entail a political price at home.

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