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Making peace with banks?

November 7th, 2011

Commentators in the Hungarian media notice a turn in the government’s economic policy, and urge a compromise with financial institutions.

A columnist in komment.hu (an Op-Ed site of origo.hu, one of the biggest news-sites in Hungary) warns that the Greek example shows what can happen to Hungary if things go wrong. Dániel Antal suggests that since Hungary is not a Euro-zone member, a 20 percent devaluation of the Forint hurts indebted households and companies, but not the world economy.

“If we go any further than that, we will find ourselves face to face with the same IMF, EU, Berlin, Paris and Beijing, that the Greeks are facing. And then they would tell us to implement structural reforms and to sell the railways and motorway system.

The government’s biggest economic achievement is mistrust in the country’s solvency – Endre Aczél writes in Népszabadság, recalling the recent failure to auction government bonds.

The cabinet fumbles around in the pockets of banks, companies and the people, which hinders consumption and makes the record 27 percent VAT ineffective – warns the left wing columnist, who believes that at the end of the day “the government will go back to the IMF in Washington on its hands and knees.”

Orbán and Matolcsy are retreating in the war on banks – suggests Zsolt Zsebesi in Népszava, referring to a meeting between the two sides this week. This still doesn’t make the country a normal market economy, as the government only brought itself to the table after the banks had blackmailed it, by practically halting credit.

Viktor Orbán staked his political future on economic growth, and launched his war on the EU and the IMF to achieve it – the left wing commentator contends. The bankers let the government know that they are ready to finance small and medium enterprises, if the cabinet is ready to soften the extra taxes on banks. “The question is: will the government learn and give up its pointless wars or will it only use the money to regain strength,” – Népszava’s columnist speculates.

The problem is not the government’s decision to fight public debt, nor even its conflict with the IMF and the banks, but the fact that these measures have further weakened the country’s financial standing, suggests Csaba Szajlai in Magyar Hírlap. For the time being the growth potential of the Hungarian economy is gone, he warns. “So we should not put all the blame on the crisis of the Euro zone.”

“Instead of fighting them, we need negotiations and compromise with international financial institutions,” – concludes the right wing daily’s chief business commentator.

In Heti Válasz, editor-in-chief Gábor Borókai, who has repeatedly defended the government’s controversial “unorthodox” economic policy, now cautions that Hungary should not go too far in confronting mainstream institutions.

The government has not challenged banks and pundits in vain, he suggests, as it has managed to slash Hungary’s debt ratio. Much of that achievement, however, was cancelled out by the depreciation of the Hungarian national currency. “Now the question is, what we can do to counter the market,” – Borókai remarks. “And whether we have the slightest chance of winning, if we go into it without allies on our side.”

Magyar Nemzet, meanwhile, criticises the government’s plan to abolish the simplified business tax (EVA). In the main pro-government daily, Matild Torkos reminds decision makers of the popularity of this single lump sum tax amongst small scale enterprises, and suggests that if it ends up abolishing EVA, Fidesz might say goodbye to tens of thousands voters.

Torkos ends her editorial on a bitter note, fearing that former EVA taxpayers may eventually pay less in taxes than in the past: “It seems that instead of extending simplified taxation, the government is working hard to extend tax optimization.”

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