Hungary needs a precautionary agreement with the International Monetary Fund, Prime Minister Viktor Orbán told Parliament in his opening address on Monday. “If they offer us one with acceptable conditions, then it is worth considering the price at which we should accept it, rather than standing naked in the economic storms expected to hit the global economy in the spring,” he said.
He accused the opposition Socialist Party of handing Hungary’s 2008 bail-out to the banks and said the IMF is seeking the same conditions of austerity now. “We can do better than you did,” Orbán told the Socialists.
The leader of the main opposition party, Attila Mesterházy, challenged Orbán to make public documents relating to conditions supposedly laid down by the IMF in return for a second bail-out, which has been the subject of ten months of negotiation, posturing and legislative wrangling.
PM ‘unfriends’ IMF on facebook
In his weekly radio broadcast three days earlier, the prime minister had treated as fact a report in the pro-government daily Magyar Nemzet that claimed the IMF wanted to see cuts to pensions, family support, transport subsidies, council spending and red tape, along with privatisations, a property tax and subsidies instead of levies for banks. “We now know what they want… the list is long, it can be read in the press,” the PM said.
“If these demands are real… then I would say that the government cannot sign a deal with the IMF under these conditions,” Mesterházy said. “But if there are no such demands, then, Mr. Prime Minister, you have lied shamelessly to the Hungarian people.”
Fidesz used last bailout too
The previous administration had used EUR 7 billion of the 2008 credit line to reduce Hungary’s borrowing costs and placed the same amount again in the central bank’s currency reserves, Mesterházy said. The remaining EUR 6 billion was only drawn on by Orbán’s government when it wanted to purchase a stake in the national energy firm MOL, he said.
Magyar Nemzet published on 6 September a list of draconian austerity measures purportedly demanded by the Washington-based lender and circulated at a meeting of the ruling Fidesz party.
Orbán followed up with a video posted on Facebook in which he stated that his government would not accept such conditions. He even “unfriended” the IMF on the social networking site.
Several commentators perceived the “leak” as a calculated move to prepare voters for eventual compromises on the part of a government that has made much of its “battle” for financial independence.
IMF says report untrue
This interpretation of events was given credence when the European Commission and the IMF denied that any such list of demands had been handed over in Budapest. The report in Magyar Nemzet contained “significant inaccuracies”, the IMF’s representative in Hungary, Iryna Ivaschenko, told state news agency MTI last Friday.
Meanwhile, a spokesman for the European Commission told reporters in Brussels that the Commission, the IMF and the European Central Bank had left behind a joint “non-paper” during negotiations in July, and was awaiting Hungary’s response. The non-paper outlined “the kind of possible action we would like to see in a possible programme for financial assistance”, Bailly said.
Neither the IMF nor the Commission revealed specifics about what they expected from Hungary in return for the EUR 15 billion credit line it is seeking. Hungary’s government bonds have been rated as “junk” since November, effectively pricing the country out of the international credit market.
With large loans coming to maturity over the next year or two, Orbán’s cabinet needs an IMF standby arrangement even if, as it maintains, the purpose is only to reassure investors and bring down the cost of borrowing on the open market.