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IMF resumes negotiations with Hungary

July 9th, 2012

Commentators in right wing dailies  welcome the news that the IMF has accepted the amended National Bank Act and will now resume negotiations. Left of centre dailies criticise the delays, the prevarications and fear that the government might at any time decide to turn back and play the ”Turkish card” again.

On July 6th, the IMF announced that it approved the amendments to the Act on the Hungarian National Bank and would resume negotiations on 17th July.

Zsolt Zsebesi in Népszava thinks it is time to pop the cork. The government has finally given in and started undoing the damage that it caused to Hungary by deferring the agreement and a much needed credit-line. Hungary may again “become a normal country” that argues and negotiates instead of answering back and taking pride in its defiance; she can start behaving responsibly and providing for her citizens. Yet, he writes, the Hungarian forint fell at the news, instead of rising, and he believes the reason is that Viktor Orbán’s credibility is in doubt. Zsebesi does not believe that Orbán is finally seeking an agreement instead of prevaricating and forestalling negotiations. He ends on a sarcastic note, calling it unfortunate that the Prime Minister will not keep his alleged promise to step down if the IMF comes back.

Mihály Szalontay in Magyar Hírlap writes that the „long awaited” negotiations may not lead to quick conclusions. Although the Hungarian government is pressed to speed up the negotiations, making haste would only serve the IMF’s interests, and boost the Socialist and Liberal opposition at home, he writes. The strict recipe of the IMF has proved fruitless in many countries. Hungary has led the way by introducing measures that ran counter to IMF dictates but were later embraced by other EU countries as well. The government, which inherited a wasted country from the Socialists, has few options today, he argues. Their attempts to fund welfare spending by international loans failed for the second time since 1989. The only way ahead under these circumstances is to lighten the tax burden of employers and bring inactive people back to the labour market. “It would be suicidal” to tie our hands by accepting all terms during the negotiations but the bargaining must stop if it threatens the credibility of the government, he concludes.

In Népszabadság, Bence Kriván describes the negotiations as a process of „bizarre choreography”, starting with the announcement by Minister of the Economy György Matolcsy in November 2011 that Hungary was returning to the negotiating table. While the same „tiki-taka” style helped the Spanish national team to victory at the European Football Championships this summer, the Hungarian government has suffered a series of defeats. He recalls that in December 2011 we “sent the IMF delegation home” for an early Christmas vacation so that Parliament could pass new legislation severely limiting the independence of the Hungarian National Bank, even though Jose Manuel Barroso repeatedly asked the government to reconsider. Such arrogance angered investors, credit default swap rates and government bond rates reached unknown heights, and the forint plummeted. The next move was to bring in Tamás Fellegi as chief negotiator.  His main mandate seems to have been, with hindsight, to announce that the government is willing to go ahead and give up “the Turkish card”. When Hungary’s efforts came to nothing, the government capitulated in Brussels – although it presented this turn of events to domestic audiences as a triumph. The date for the resumption of negotiations was set, but it is doubtful whether the IMF delegation will pass over the newly devised transaction tax and fail to ask what the real financial strategy behind the new action plan really is. This is the same tiki-taka game, he contends, and wonders whether Mihály Varga, the new cabinet minister in charge of the negotiations will gain the upper hand in his argument with György Matolcsy.

In her editorial for the July 7th issue of Magyar Nemzet Zsuzsa Nagy-Vajda says it would be too early to pop the cork, but we can take pride in not capitulating in the war with the Commission, the IMF and the European Central Bank, such vastly more powerful opponents, while the only potential ally, the Hungarian National Bank (MNB) did not support the government. The result is an acceptable compromise, she writes. The government, in the bill on the National Bank passed on Friday, gave in to pressure on points in the regulation that the IMF had not found problematic under previous governments, including relations between the government and the Monetary Council. The cabinet also gave up its plans to merge the National Bank with the Financial Regulatory Authority (PSZÁF), although the IMF  had called for such a move earlier. As for the appointment of new vice-presidents and the enlargement of the Monetary Council the government did not back down but agreed to suspend its plans until the mandate of the current president, András Simor expires in July 2013. Finally, it „firmly defended” its position that the 2 million HUF cap on public service salaries should apply to András Simor and that the president and the council members should take an oath to support the Hungarian constitution. Yet the cabinet may have some surprises up its sleeve that might cause further delays, especially the extension of the transaction tax to MNB operations, while the new action plan for economic growth that the tax is meant to finance is unlikely to meet resistance.  She predicts that there is still some hard bargaining ahead.

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