“We Hungarians are working towards an economy that will provide jobs for all people in this country.” These are the words of Prime Minister Viktor Orbán, and they sound very similar to the thesis of full employment by his old master, Helmut Kohl.
The prime minister sees the productive relationship with the German economy as a pledge for the new Hungarian economic miracle. On the occasion of German Chancellor Angela Merkel’s visit to Budapest last week, the leading Fidesz politicians paid tribute to the Germans in their greeting speeches. However, at the beginning of 2015 the German economy in Hungary is in an insecure position unseen for years.
After Fidesz led by Orbán practically won everything there was to win in the super year of elections, 2014, when people were hoping that political stability could finally come and there would be peace, in the end everything happened in a different way: The new measures of the third Orbán government always found and are finding new victims almost every week.
Without intending to be exhaustive, the moves that stuck the most in our minds were the attempt to introduce the Internet tax, which was considered to be the most brazen by society, while the dramatically raised extra tax aimed at “unruly” TV channel RTL Klub was the most outrageous from a political point of view.
The retail chains were blessed with a “fee” eating up their profits. If they cannot deal with the situation within two years, the brief respite will run out and the business will be terminated. All the top managers, even if they are working in a branch that has been left alone for the moment, should pay attention when Orbán makes an announcement.
Thumbscrews on a whim
The announcement of illiberal democracy scared the Americans last summer and it clearly even disturbed Mrs Merkel, who was so determined to keep the peace. The message stating that Orbán does not like competition has only reached the managers of utility companies so far. They have their hands full at present, since they do want to invoice a couple million clients in March as well.
The difficulty is that the government decided in autumn that the billing systems have to be re-audited by all the providers in the country. All that done by one single auditor. With a deadline that is impossible to keep, of course. Just like in the case of the electronic freight control system EKÁER, which will only go live in March instead of January after all the violent protests…
The violent protests of those companies on which the economic wonder of the Orbán-country wants to rely. The automotive industry as well, which has already generated an income of EUR 18 billion last year and is carrying out one fifth of Hungarian exports. This branch employs 120,000 Hungarians at present, who are clearly earning more than the Hungarian average wage of EUR 500 net in a month and have jobs that are untouched by the financial crisis.
Of course, Viktor Orbán knows very well that even the employees working beside the mounting lines of Audi and Mercedes are only bringing home a quarter of the wages of their colleagues working in the German factories. Still, he expressed his optimism at the start of mass production of the new series of CLA Shooting Brake, which will be manufactured exclusively in Kecskemét for the global market, according to which Hungarians should be able to buy Mercedes models in a couple of years, not only build them.
May Orbán’s wish come true, but for now it seems it will be only a wish in the near future. The public employment programs will not get us there, since they are paying less than the minimum wage to hundreds of thousands of people and they lead to cut-throat competition in the segment with the lowest wages on the labour market.
The unemployment rate may actually be pushed as low as 7%, the lowest in decades, but mainly thanks to the trick of forcing unemployed and people living on social benefits to work on the streets. The government is focusing on the “healthy” workplaces on the market when judging the situation of the labour market, and they are trying to accomplish that there are more and more created.
There is nothing going wrong with this, since with the most liberal labour code in the EU Orbán still manages to lure new investors into the country. However, the base for them is continuously running out: where the “young capitalists” in Hungary can fit in, foreign capital is not wanted. The government does not want any Western bank chains, retailers and utility providers around. Companies from the manufacturing industry and certain service branches are welcome, on the other hand.
So the government is following a strategy to make Hungary the stronghold of industry in Europe, with dumping wages, spiced up with a devalued forint.
Smart people prefer to leave
Will the price be expensive at the end? The multinationals think that it’s worth taking the risk. The general conditions for a site are close to perfect, and they will somehow (if necessary, behind closed doors) deal with the moods of the almighty government head. When even a strategic alliance does not help, they accept things such as EKÁER, or they switch to the highest gear. Or they can show some teeth to Orbán, as the Bertelsmann group did with the advertising tax for media companies. They each depend on the other, after all.
However, the most qualified workers, new graduates and Hungarians in the best years of their working age seem to think differently. Orbán cannot stop the brain drain with his strategy described above. When someone can earn hard foreign currency, he will not settle for the weak forint, not even mentioning that intelligent people do not like it when politicians are telling them how to live (keyword: prohibition of shopping on Sunday).
Hungary has been lagging behind its competitors, the Czech Republic, Poland and Slovakia, since the crisis in terms of creating value. The government must really start to pay attention not to govern Hungary out of Central Europe.