The good macro-economic indicators are not only the result of unorthodox economic policies, says Péter Heim. The chairman of the pro-government Századvég economic research group believes that the reduction of overheads cannot be continued, and in the meantime criticises the new concept of a non-profit utility provider, considered to be the new weapon of Prime Minister Viktor Orbán.
Did you anticipate the two-thirds majority?
Fidesz did not do as well as I expected. There were some pollsters who foretold a lists result of over 50%. I do not want to be a killjoy but we should really think about why those few hundred thousand votes are missing.
Why would that be?
People do not like warfare that lasts for a long time. A part of them tired of it and they desire peace. This is why the last manifestation of the prime minister is so rejoicing; it had a more conciliatory tone towards the European Union and made it clear that he imagines the future of the country as a member. Fidesz will have to draw a lesson from the Budapest results: the party has to make terms with the Budapest intelligentsia. I explain the crescendo of Jobbik with the younger generation turning away from Fidesz; the government did not pay much attention to them in the past cycle. They could get hold of them too by organising European programs. However, it must be realised that the youth of the intelligentsia wants to live in the West, not in the East. Although I do not think they are alienated from their country permanently, their signals must be taken seriously.
But why did the left-wing fail?
Even if somebody was really discontented with the Orbán government, he would have found it hard to vote for such a chaotic company in complete discordance. Jobbik is not only popular among younger people but also among those parts of society that are falling behind; exactly where MSZP had strong support before. The opposition could easily get back those who turned away from them if they followed a strictly left-wing political strategy. I do not think that this can be justified: I believe that only conservative economical policies can take a country forward. In the meantime I consider it dangerous that the need for popular views increased in society. If the left-wing attempts to regain its voters from Jobbik, for example, they have to open to the lower section of the middle class and the poor. However, this will only work by making promises.
What do you think, will the unorthodox economical policies of the government continue? After all, we can already see the results.
The good macro-economical indicators are not the results of only the unorthodox economical politics. The Hungarian economy is going through a period of restoration. Essentially, we have been in recession for the past seven years: the population and the banks all tried to dismantle their loans and to better their financial position. Although I think that the substance in loans compared to salaries will decrease until summer 2015, we can already see that there is more money in people’s pockets. Not in everyone’s pockets of course because prosperity starts from the upper layers of society and not from the poor. It is a long process for it to leak down. I know it is not a habit to praise Gordon Bajnai but we have to remember his virtues apart from his errors; if he had not abolished the payment of the 13th-month pension, the finances of the state would still work in an unsustainable way.
This was not Bajnai’s idea. The International Monetary Fund asked for it in return for the loan.
It was still him who did it. Economists have been urging the abolition of income without any accomplishments. Luckily, the measures of the second Orbán government aimed for developing both inner and outer balance. The cabinet also did a lot to cut back from the great outer debt, which is still the greatest reason for Hungary’s vulnerability. One of the most important components to improve balance was to stand up against multinational corporations, and the introduction of an economical policy that will keep salaries in the country. The government also took a drastic step on the labour market. It was of course not a politically grateful task because the unemployed now have to look for a job after receiving aid for three months, and the government
attempted to push back into the labour market those who received a disability pension. However, these were all conditions for Hungary’s economical renewal.
If the economical philosophy of the government remains, with the reduction of debts and the improvement of outer balance, will the confrontational tone also remain?
If the cake to distribute will grow, everybody will calm down a little. And if the salary that can be spent grows, there will not be a need for entering so much conflict. Fearing that the support of Jobbik will grow, Fidesz will keep on with the combative rhetoric but this is harmful for the country because it will generate fear and scare away foreign investors. Often we can reach our goals with cunning regulation strategies sooner than with raw power, or strong communicational warfare. Concerning outer balance: it cannot really be improved further. The payment scale surplus of the country is around three billion euros. About four billion euros a year will flow into our country in the form of subsidy from the EU in the upcoming four years, this way the dept position of Hungary will improve with 28 billion euros in four years. This is spectacular improvement.
The evolution of budget deficit is also spectacular. Seventy per cent of the planned deficit for the year happened in the first three months, more than 700 billion forints. The opposition is calling for austerity already.
I do not see reasons for austerity, the evolution of budget deficit is ordinary. It is possible that a magnitude of 50 or 100 billion forints will have to be blocked, the processions can be held in hand with inner corrections. The budget deficit will be under 3% this year and as I see it the government aims for 2% next year.
In what fields will the government have to introduce reforms?
The base of the country must be intellectual stocks, we will not get anywhere without strengthening this. The decrease of Hungary to its neighbours will continue until we realise that investing in intellectual resources is crucial. As we spend disproportionately much on supporting the economical sector, we could take money away from there and redistribute it to education and healthcare. The base of the success of Singapore, Finland and even the United States of America comes from the competitive educational system. We should achieve that we have outstanding schools and universities again. There is no need to maintain thousands of universities. There should be a dozen but they should be paid for fairly: sources should definitely not be taken away from them.
What do you think: what would a non-profit utilities provider be good for? Does the reduction of overhead still have space?
We already went to the wall with the reduction of overheads, it cannot be continued. The public gas prices in the country have decreased in international comparison and with this the price of electricity too. But if there is no benefit on the providing, it will be harmful for the providing. As a conservative economist I do not believe that any sector should be turned into non-profit. Profit is a very important aspect for every economical corporation. If a company achieves profit in a decent competition, it should be embraced and urge it to turn it into investments. Profitability can of course be regulated, so that monopoly profit does not occur. If the government decides to create a non-profit energy sector, so be it. I still believe in the role and power of the private sector. A non-profit energy sector is more like a left-wing idea, therefore I am not happy about it.
The base interest is at a historical low and the forint is permanently weak. To what extent is this combination lucky?
I think we have already reached the deepest point of the interest decrease period. The long-distance inflation is around 2.5%, so practically there is no real interest on deposits placed in the bank of issue. We would need some, however, to motivate savings. In the case of the economy, I do not think it is healthy to have a level of interest permanently under 3% and I do not consider the weak forint currency good. Now the ideal rate would be around 300 and 315 forint/euro. The monetary council of the National Bank of issue risks with the reduction of interest that if the optimal mood changes in the international stock markets, the forint could become drastically weaker, and it can reach a 320-330 level. The maintenance of the growth loan program depends on how stiff the forint remains.
What would you do with foreign-currency loans?
I would support the trisection of expenditures because every character is responsible for the situation. This is acceptable both ethically and economically: the bank system, the private sector and the government should all bear the expenses in connection with the foreign-currency loans. It would be important to solve the issue of these loans because the debtors have illusions about it, and this has an effect on the quality of the loans in the bank system. It is good for nobody if we just protract solving this issue.
Tamás Deutsch, famous for his harsh claims as a European Parliament representative of Fidesz,
reacted to Péter Heim’s words on his own Facebook page.
“We already went to the wall with the reduction of overhead” – says Péter Heim very smartly.
“We went”. This soft royal we, implanted in technocratic superiority is so compelling.
“We went”. Hey, Peti, if you have five minutes between two oh so important Századvég research, please, do tell me with who you went to what wall in the reduction of overhead? You know, my dear Péter, I have been in the area for a long-long time, and I have never seen you around.”