Lajos Bokros (above left) talks to senior report Benjamin Novak about the sad state of Hungarian democracy in 2014 shortly after united opposition alliance signs “contract for the future”
Thank you for taking the time to meet with me Mr Bokros. There was a big announcement today by Hungary’s opposition alliance. Tell us what today’s press conference was all about.
This was a big occasion for us too and also for the left-wing coalition which is jointly fielding candidates for Hungary’s April 6 parliamentary elections. We, MOMA and the opposition alliance, have decided to sign a memorandum of understanding. We’re calling it a “constitutional agreement” and it lists four points the left must agree to if they want our party’s endorsement for this next election.
The first point is to restore the rule of law and constitutional democracy, restore the freedom of the constitutional court, bring back a system of checks and balances, and the strengthening and separation of the judiciary.
The second is about a new election law. We want to see a much better electoral system, whereby small parties like us can compete on an equal footing with the large ones. The present system is distorted in the sense that only large parties can win in the “first past the post system”. There’s no way for small parties to get in the parliament. By the way, this reflects the willingness of large parties to establish what is a called a “two-party” system, rather than a multi-party system which has a history in Hungary.
The third point is about economic policy. If the left-wing coalition wins the election, we want to see them refrain from populism. We want them to conduct an economic policy which can be characterized as professional, stable, predictable, and honest. Such an economic policy would restore the confidence and trust of investors and entrepreneurs – not only for Hungarians, but also for those from abroad.
The last point is very delicate but very important these days. It is to make every effort to clean up the public political space in terms of fighting against corruption and crony capitalism.
Some would argue that the problem with these four points is that the points suggest there is no rule of law in Hungary, that there is no confidence in the Hungarian economy, that elections are not free and fair –
This is exactly what Fidesz says. But we don’t think that the present situation is characterized by the prevalence of the rule of law. This has become a distorted democracy, we no longer have freedom of the press, there is no independent judiciary, and there is no level playing field for small and large parties to compete on in clean and fair elections. Last but not least, we don’t think that the present economic policy generates too much to confidence for investors, savers, and entrepreneurs, domestic and foreign alike.
The opposition coalition is comprised of the Hungarian Socialist Party, the Democratic Coalition, the Hungarian Liberal Party, and Egyutt-PM. Did they just not agree with you about these things until now?
I don’t exactly know why they were hesitating for so long before finally realizing it is in their own interest to publicly stand up for this principles. That is to say, to accept the unilateral and generous support of a center-right conservative party which doesn’t want to compete with them in the election anyway. You have to ask them why it took so long. But today we have to celebrate and be happy that finally they realized their own interest, and even more importantly the interest of the whole country. We made a several campaign approaches towards these parties before. We made a video message in December in which we claimed that the upcoming Hungarian elections are going to be a “referendum” –
You were the first to use that term.
Well, Gordon Bajnai claims that he was the one to first use it, but it doesn’t matter who used it first. We don’t hold a copyright on it. So –
(lauging) Just give it to him…
(laughing) Yes, exactly. He can use it as much as he’d like. I don’t care. It’s a good slogan because what’s at stake today is not just another change of government after 24 years of market economy and relatively well-developed parliamentary democracy. What’s at stake now is really about the restoration of the rule of law, the restoration of press freedom, the restoration of basic human and civil rights, and the restoration of the checks and balances which are so important in limiting the interference of the state into the economy, the life of the citizen, society, cultural, religion, and all areas of existence.
In this respect we feel the big question now for the Hungarian electorate is decide whether they want the country pushed further towards the East, further away from the well-established track record of Western civilization and society, or whether they want to break this unfortunate and negative trend and go back to square one, if I may put it that way, by restarting a kind of convergence towards Western values and western welfare.
As an American, I find it interesting to see to how campaigning in Hungary looks in streets and how it looks in the media. It’s very different from how it’s done in the United States.
One of the important elements to keep in mind about campaigning in Hungary is that, unlike in the United States, public media plays an enormous role. The demographic that public media touches in Hungary is a voting demographic. They are more likely to vote, they are more likely to actively state their political positions than those who do not get their news from public media. The reason I’m bringing this up is because media censorship is an issue in Hungary. NGOs in Hungary and around the world, think tanks, watchdog groups, and foreign governments all agree – there is no shortage of sources we can cite here – that media censorship has gotten out of control in Hungary.
Yes, I agree. I totally agree. When it comes to an election like this, this is a one-party system. One party effectively controls the media that touches the voting populace. It is the most widely accessible media. If opposition parties are being covered in this widely-accessible media, they are being portrayed with a strong bias or, frankly, they aren’t even being covered at all. But even when they are being portrayed with bias the opposition almost have to compete get that negative coverage.
How does Hungary’s media environment affect your ability to campaign?
Negatively, undoubtedly. We have to acknowledge that there is no longer a level playing field in this respect in Hungary. Especially for new small parties like ours. We’re having a hard time getting face-time and voice-time not only in public television area, but also in private television area, except for ATV.
Please allow me to interrupt. ATV is a privately-owned television station. I’ll say my opinion just in case anyone reading this hasn’t ever watched it. I wouldn’t call ATV an opposition television station because they really do give more opportunities for everyone to get their point across than say… I don’t really know any other television station that presents politics issues in a way where they’re really inviting everyone to take part.
You are absolutely right, it is much more balanced than any other media outlet. That’s probably the best way to characterize them. They try to be balanced, and they tried to be as balanced as possible. They also offer air-time to government figures as well, not only opposition leaders. But since opposition political figures have little opportunities to get into other channels, their appearance on ATV is noteworthy. In a way, ATV may be perceived as an an opposition media outlet, but that can only be said when comparing ATV to the others which are propaganda media outlets for the government.
No, no, that’s a very important observation because if we have such a distorted media landscape one may easily get this view that we have one channel in the hands of the opposition while it is not necessarily true. The reason I celebrate ATV is not just because we have access to them, but also because it is a quality place. The worst thing I experience these days in the Hungarian public media is that is very low quality from a professional point of view. It is simply unwatchable if you know want I mean. Simply put, other than ATV, the others just serve as a very primitive propaganda outlet for the government. Hungarian public media doesn’t even try to be balanced, dig deeper into the issues, or try to help the public understand or make sense of things regarding the different areas of economic and social life. That’s the problem. It is just so bad in terms of professional quality, it doesn’t even serve the purpose of getting reliable information out to the people. I’m sorry to say that, but it is what it is.
You don’t have to apologize, you didn’t offend me. I work for the Budapest Beacon. What you’ve just said is a very widely held opinion by people who want to get hard news. But what is “hard news”?
When I first started watching Hungarian public media, I realized something I hadn’t noticed in my everyday life. Hungarian public media brought something to my attention that I had never realized on my own: We are at war. Hungary is at war. The European Union wants to invade Hungary. Beaurocrats in Brussels want to pull Hungarians out of their homes, seize their stuff, and they just want to conquer the Hungarians. If I didn’t have Hungarian public media in my life to tell me about the atrocious things happening in Brussels, I wouldn’t know that Prime Minister Orban is in Brussels telling those guys to back off, telling them to stay away from Hungary. I’ve learned that the European Union does nothing for Hungary. The EU just wants to take over. If I didn’t know that the EU was trying to do, I could never fully appreciate Fidesz’s protection from Brussels.
I think the best way to address this issue is to say there should be an expectation on behalf of the public for Hungarian media outlets to respect the facts. I can accept any kind of commentary, but I cannot accept the distortion of facts. Whenever the Hungarian propaganda-type of government-controlled media tries to cover EU affairs they do not respect the facts. That’s my basic problem, not the commentary. They may not like the EU, they may want to fight against it, they may consider EU interests to be against Hungary’s national interests. But the facts must be respected.
There are many other parties and media outlets in many other EU member states which do the same, but at least they respect the facts. You can have a well-informed debate, you can have a well structured discussion on whether something is in the interest of a member country or not. But here in this country the public media outlets are so bad in terms of professional quality that they are simply incapable of even respecting facts.
We’re sitting here in your office at CEU, and you want to talk “facts”? What qualifies you to say that the public media news reporting on what’s happening at the various levels of European Union is biased and not-objective?
I have a very good example. Consider when the European Parliament voted for the Tavares report last year on July 4th. The report was a very balanced, very objective, and very good professional assessment of how constitutional affairs have been conducted in Hungary over the past couple of years. The Hungarian media was portraying this vote, where the Tavares Report was won, as a kind of a left-wing, clandestine movement against Hungary. They never said a word about the fact that a good part of the European People’s Party voted for the report!
Why is that significant?
It is significant because the media then creates a distorted mindset for the people. They basically lie to people. The shadow rapporteur for the EPP voted for the Tavares Report. The most important person who was entrusted with the nitty-gritty of this report from of the European People’s Party. A good part of CDU-CSU, which Fidesz considers to be their friends and ally, also voted for the Tavares Report. A good part of my faction voted for this report, the European Conservatives and Reformists. We sit to the right of the EPP in the European Parliament. Hungary’s public media didn’t say one thing about this.
George Schopflin told me that the Tavares Report wasn’t worth the paper it was written on. He said that Europe’s left can’t stand that a center-right party won two-thirds in a national election. He believes this is all a left-wing conspiracy against the Fidesz.
Fidesz is a member of the EPP! That’s why I wanted to describe in eloquent terms why the very fact that Hungary’s public media would have reported correctly about how Fidesz’s so-called friends voted on the Tavares Report it would have proven that it was not a left-wing conspiracy against the duly democratically Fidesz government, or an international conspiracy of left-wing communists and leftists, rather that there is a genuine concern within the European People’s Party regarding the deterioration of democracy in this country – and Schopflin knows that! Schopflin should also know that there is not one single factual mistake in the Tavares Report.
Schopflin says a lot of things and for legal reasons I won’t be able to publish much of what he said to me. It’s hard for me to take anyone seriously who tells me that the state of public education in Hungary is outstanding, that hospitals are performing better than ever before. I find that very hard to believe. It’s hard for me to take someone who says that kind of stuff serious.
That’s why I am saying when I’m talking about the distortion of facts. I have no problem with anyone who has different judgements, assessments, or evaluates something differently through whatever ideology, but the facts must be respected.
It seems there’s an issue regarding the exchange of facts between the EU and Hungary and vice versa –
There is an even deeper problem. We don’t speak the language. It’s newspeak, if you remember George Orwell’s 1984. The language used at the European Parliament is different from ours. The language used by public media in Hungary is “newspeak”. They don’t understand the normal European professional and political language which has evolved in a way that does respect the facts.
For example, “Magyarorszag jobban teljesít”, “Hungary performs better”. Fidesz considers this to be an understandable, self-respecting, truth. It’s a misnomer. There’s no one single area where Hungary is performing better, even compared to four years ago. Not performing better in economic policy, not performing better in microeconomic development, not in the enterprise sector, nothing, zero, not in social life, not in terms of jobs, not in poverty, not in education, not culture, not in healthcare. We do not speak the same language, that’s the problem. They believe in their language, without being disturbed by the facts. That’s the problem.
So, there’s a problem with what’s being reported on by Hungarian public media regarding what is actually happening in the European Parliament?
My humble view is that we shouldn’t spend too much of our precious time discussing the media because the media is narrow, it is distorted, it is miserable, it is unprofessional, and it is dishonest in many areas. Hungary’s public media doesn’t play its well-established constitutional role in conveying good information, good quality reporting to the people on the one hand, and on other hand allowing different views and opinions in a pluralistic manner for the elite at least to argue and win over certain groups of society for their own views in particular issues. So if the media doesn’t play the first role, how can it play the second? There is no way to do that because it is a contradiction in itself.
For me the real question why the whole of society is in such a miserable state, within that of course falls the media. The media is better understood by getting a picture of this authoritarian rule which Orban prefers to implement. He follows the Putin model in this respect. He likes what is called in Russia a “directed-democracy” whereby the role of the media is nothing else but to convey the messages of the government which seek to keep the people in the dark.
So that’s a closed issue then?
Yes, I think there are bigger and broader issues underlying the fact that Hungarian society has less of an interest in European affairs, and within that the interlinkages between Hungarian affairs and European affairs.
We can see for example why the there are diverging views on issues like nuclear energy in many Western European countries. You can have good informed, intelligent debate and still have respect for differing opinions. In Germany public opinion would be against nuclear energy. In France it’s different, the majority of people are in favor of nuclear energy. You can’t say that it’s just because the nuclear industry in France distorts the viewpoints of the ordinary French citizens. The French media is pluralistic enough, wide enough, broad enough, and sophisticated enough to allow any kind of views. French people would read English papers or German papers if that wasn’t the case.
Herein lies problem. The Hungarian general public does not read anything other than Hungarian papers, they don’t watch anything other than Hungarian television. So when the government realized they can control Hungarian public media to a great extent, they used and abused this backwardness of Hungarian society: Hungarian public media which is by definition isolated.
There are huge language barriers.
There are many other things, not just the language barriers. There’s also the very arrogant attitude that, “We are the best! We know better! We don’t need information from abroad because we already know what the best thing is for Hungary! A Magyar emberek mindent jobban tudnak!” (Hungarians always know better!)” The public media constantly lauds this rhetoric.
És jobban teljesítenek! (And they are performing better!)
Igy van! (That’s right!)
How many languages do you speak?
Five fluently, five less fluently. (laughing) I read many types of media. But this isn’t a requirement for everyone, so don’t misconstrue this!
I’m from the United States. For the most part, you can get around speaking English only. I grew up in an rather ethnic part of California. I was surrounded by different languages ever since I was child. But I think there is a greater need for the knowledge of multiple languages in Europe because there’s a cluster of different countries where the people speak different languages. In the case of the Hungarian language, it’s such a unique and beautiful language, but at the same time it’s differs greatly from the languages of its neighboring countries. One would imagine that learning a second a language is incredibly important for Hungarians.
You’re right, it’s very important.
Let’s talk about your political party MOMA, Movement for a Modern Hungary. Why is MOMA Hungary’s only center-right party? I am using the term “center-right” in the context used in the West.
It’s difficult to say. I would like to see more parties which would embrace market capitalism and open society, but unfortunately this kind of isolation like the kind we’ve been talking about, has also extended to the area of ideology. As a consequence, “center-right” does not have the same meaning it does in the west – especially not in the British sense whereby the conservative center-right liberal way of thinking have clearly defined beliefs. First, rule of law and democracy; second, market capitalism and an open society; and thirdly, a small state and the importance of individuals as bulwarks against an overarching state.
These are three most important elements of conservative liberal thinking in the west which cannot be shaken because they are accepted as pillars. However, this is not the case in Hungary. The present government describes itself as a “center-right conservative” government, yet it accepts none of these three pillars. That’s why we have no choice but to call them a “neo-communist bunch”, because their manner of denying these things taken together represent nothing else but Stalinist ideology. If you don’t like the rule of law, don’t like individual independent citizens, don’t like the market economy, and don’t like open society, but you want overarching and overpowering state, you want to get rid of foreign investors, you want the state to take the place of all domestic entrepreneurs – this is communism and Stalin. This is NOT conservatism.
We have to acknowledge and be cognisant of the fact in Hungary words like “conservativism” mean something very different. We have a hard enough time explaining to our followers and the Hungarian public that we are the true genuine conservative party. Unfortunately, Hungarian society does not use these terms in the same context as they are used elsewhere. For example, the Hungarian public believes that if the “left” is made up of Gyurcsany, Bajnai, and Mesterhazy, and choose to blame them for much of what has transpired over the last eight years, they believe it follows then that all the others represent the “right”. This misconception is widely held by the Hungarian public.
But you’re in an interesting position because a lot of people blame you for hard times in Hungary. They say that the Bokros Package was the most awful thing that could ever happen–
(laughing) Yes, exactly! I agree with them!
(laughing) Many economists, business leaders, and even political figures admit that the Bokros Package was probably the best thing to happen for Hungary’s economy in the 1990’s. It’s pretty widely accepted that the Bokros Package was responsible for putting Hungary into a good position for entering the new millenium. But somehow Hungary has returned to the point where the state’s financial condition is a mess.
This is perfect example of what we have been talking about, this “double-talk”. It reflects very clearly that we do not use the same language for describing facts, which was made absolutely clear from the press conference held earlier today. The facts of the Bokros Package are the following: there was no recession and there was growth from 1996-2001.
What kind of growth?
Export-led growth. Investment-fueled growth.
Yes, exactly. I have to be blamed for having sold all the public utility companies in this country, which then, as a consequence of privatization, attracted several billions of dollars of investment into those businesses thereafter. It just so happens that the rejuvenation of the whole public utility sector started at the same time. This is something the current government does not want to remember. I want to make it clear that the Bokros Package wasn’t only about macroeconomic stabilization, it was also about structural reforms and privatisation.
In December 1995 we sold all gas and power utility companies to foreign-direct investors. We got a huge amount of revenue as a consequence which we then used to repay public debt – which means that public debt came down. So the Bokros Package wasn’t only about growth, it was also about restoring financial equilibrium – which is very difficult to do at the same time.
How high was Hungary’s public debt?
Public debt was over 80 percent of GDP in 1995 and came down to 53 percent by 2001 as a consequence of the stabilization. That’s a fact. One that’s important to remember.
Based on this fact, people say that the Bokros Package was an awful thing. It’s very important to remember that back then Fidesz was attacking me from the left. They said that my policy was a conservative right-wing policy which ruined the country. Now they’ve changed their position. They keep saying still that it was a very bad policy, but they’ve put themselves in a bad situation because since then they have started calling themselves “center-right conservatives”. They do what they can to avoid discussing the “facts” of the Bokros Package because there is a very clear contradiction in their argument.
Hungary’s economy is a mess. It would be interesting to see you as Finance Minister again a decade later.
Two decades later! (laughing)
(laughing) Excuse me! I meant two decades later.
(laughing) How could you wish something so bad upon the Hungarian people! (laughing)
(laughing) Look, this is one of the reasons why I enjoy interviewing you. You have a certain frankness with respect to your approach when discussing these issues. None of the serious economists I know engage in the practice of “sugar-coating”. They are very blunt. Math is math.
That’s right, facts are facts, and we must always respect the facts.
Let’s talk about the election. MOMA’s been put into a situation where it’s forced to join this leftist opposition alliance –
Supporting the opposition alliance from the outside, not joining.
MOMA will be supporting this opposition alliance from the outside, not joining them.
It’s a very important that you be precise on that.
The opposition alliance parties can safely be called the “left”, or the leftish kind of parties.
At today’s press conference Attila Mesterhazy announced that party leaders from opposition alliance have accepted your conditions. This means the opposition parties have agreed to the terms you’ve demanded should they want your support – from the outside. So they want your support – from the outside.
Attila Mesterhazy didn’t seem too happy. It’s an interesting situation where a bunch people who in another time wouldn’t have been able to sit down with each other at the same table, but who are now coming together. They haven’t necessarily come together on a unified platform or specific set of ideals, rather they’ve come together as a group of differing political ideologies to team up against a power they all feel is responsible for destroying any democratic progress made by Hungary’s since the fall of communism.
There was no jovial celebration after the press conference today. Even Mesterhazy appeared to be visibly upset. This was a somber press conference, it was like being at a funeral.
I’m serious. I’m sure someone has video of the press conference. It was eery.
A reporter from a pro-government radio station asked Mesterhazy a question about the Bokros Package.
Yes, yes, the Lanchid Radio guy.
Tell me what you thought about that.
I think Attila Mesterhazy was very kind to me in this respect because he defended the Bokros Package, especially as a legacy of the socialists. Make no mistake, the Bokros Package happened at a time when there was socialist-free-democrat government. Again, we have to respect the facts. The fact about that government back then is that it was a center-left government which had no choice but to implement a center-right, or outright right policy, ala Mrs. Thatcher, which was about pushing back the frontiers of that state and cutting back on government expenses. It what was about privatisation, and it was about cutting the hard edges of a premature welfare state in Hungary which was absolutely unsupported by economic fundamentals.
So you know, you can easily criticize the Bokros Package from a leftish point of view if you feel that there was a better alternative to restoring financial equilibrium without jeopardizing growth. Unfortunately, the fact is that there was no other alternative. Every other alternative would have led to bankruptcy, state collapse. We avoided that. That is why now even Mesterhazy, maybe he doesn’t like me or the Bokros Package, has no choice but to defend the stabilization of 1995 because it was really successful in terms of restoring growth, restoring international competitiveness, cutting back on public debt, and saving on the country from collapse. That’s all.
He had a funny look on his face…
(laughing) I wasn’t looking at him at that moment.
…when he admitted that he approved of the Bokros Package. It was a very interesting experience to see that. He’s now in a situation where he had to defend something that his party fought against tooth-and-nail.
Yes. But it was easy for him to defend because the question was so stupid. It was just a question that the poor guy was obliged to ask because of the station he works for… (laughing)
Let’s get back to election. MOMA will not be running any candidates in Hungary’s April 6 parliamentary election. However, MOMA will be taking part in the European Parliament elections, right?
Yes. We will have a list of candidates. Probably up to ten people. Not because we believe all ten will gain a seat in the European Parliament, but because we want to show the Hungarian people that we have very serious supporters. Also, it’s very important for our candidates to get some media recognition. Depending on the outcome of the EP elections, some of our candidates might run in Hungary’s upcoming municipal elections. The EP elections would provide them a nice opportunity to gain momentum and it could really help them. I will make every effort to use my name recognition so that other people get better coverage in the Hungarian and international press.
If MOMA wanted to put forward a list for the Hungarian elections, what would it have to do to make that happen? How is the current system any different from what Hungary used to have?
It’s quite different now. We have a distorted electoral system. It’s a one-round, first-past-the-post system without any limit for voting to be valid. This means that if an election takes place in an electoral district where only three people vote, if two of the three people vote for the same candidate the election is done and the result is final. End of story. That candidate will get into parliament. There is no threshold or limit, which is important in the sense that it would magnify the winners position even more than the previous system. Moreover, even those candidates from a winning list will transfer so-called “list votes” to magnify the position in the national list. So, even if a party gets one-quarter of the votes it can still get a four-fifths majority in the parliament. As a consequence, it is almost 100% excluded that small parties, especially those established in recent years, would get into a position to make a difference. At the same time, this electoral system was created with the intention that as many parties as possible would run. All this just so that the democratic opposition vote would be divided and as a consequence Fidesz can win even with a very small relative majority. The whole electoral finance system completely plays into this as well.
MOMA raises this concern often. You guys have talked quite a bit about party financing, how money is being used by political parties, the transparency of the money’s use, etc. What’s the story? What are the rules?
There are two issues. One is that the well-known public rules do not correspond with the informal rules. This means that you have a disconnect between what is written in the law and what is happening on the ground.
The ruling party finances their activities through the market, if you will. The most important channel for that is public procurement. We all know that a certain finite group of people is winning public procurement bids in Hungary. These people finance the ruling party directly and indirectly. Otherwise, it would be impossible to put up so many political advertisements everywhere all the time – that costs a lot of money.
The second important thing is that Fidesz deliberately changed the rules of party and campaign finance in such a way that even small parties have a hard time to resist the temptation to run. If you field a candidate in every constituency, all 106 constituencies, every candidate you field gets HUF 1 million PLUS your party will get HUF 600 million.
But you have to run candidates in all 106 electoral districts.
Yes, but that’s easy because you don’t have to win. All you have to do is field a candidate in each of those districts and you’re automatically entitled to HUF 600 million as a party, plus HUF 1 million for each candidate. A lot of small parties have been established and function as business-like parties which run only because of this money. This money is enough for them to survive for 4 years, even if they don’t get into parliament. There is a proliferation of these business-parties and they are a direct consequence of this distorted party finance. Fidesz wanted to boost, promote, and subsidize small parties in order to divide the opposition vote. This is a deliberate distortion. So, these two things are reasonably clear. Of course, the big question is whether the Hungarian electorate will still feel that the present government is conducting a good enough economic policy, social policy, and foreign policy. They have done everything to ensure they will win with a small relative majority. Even then, there is a strong risk that Fidesz will resort to cheating or fraud – which cannot be excluded either.
I spoke to Szabolcs Kerek-Barczy a few weeks ago, and asked him whether he agreed with a statement you had made earlier regarding your hopes that the OSCE would monitor Hungary’s upcoming elections. What needs to be monitored here?
Other than the the OSCE there’s not much we can hope for, and we cannot invite the European Union. They will only come monitor elections if they are invited by the government. This is yet another negative characteristic of the distorted electoral system. The best would be if the election monitors would sit at the National Election Committee, and at the same time opposition parties would field electoral observers for each and every electoral constituency. These are two important things.
There is a third area where no one will be able to be able to see anything, that is the votes cast Hungarians living abroad. For example, Hungarians living in Romania and Slovakia who do not have a permanent residence address will be able to vote by mail. There is absolutely no way to determine whether the vote being made by such people is truly coming from the same person and from their real address. That’s a big issue because according to the government estimates, the number of voters affected by this is now in the hundreds of thousands. What’s more, countries like Slovakia also have distorted legislation which do not allow their citizens to hold dual-citizenship. As a result, Slovakian citizens holding Hungarian citizenship too must register with a false address to vote in the upcoming election in order to avoid any investigation made by Slovak authorities which would determine whether there are any dual citizens in their country voting in Hungary’s election.
Has this issue even been talked about in the international community?
No, because Fidesz feels that it is a horrendous infringement on the rights of Hungarians living in Slovakia, while at the same time Fidesz is benefiting most from it. It’s double-talk once again. Before the vote it cannot be proved that it is a distortion. It can only be proven ex post.
That’s frightening idea.
There’s a very high risk of fraud here.
That’s why we, Movement for a Modern Hungary, said that we don’t want to take away the opportunity of Hungarians citizens living in neighboring countries to vote, but we would change the electoral system in such a way where they could represent their own constituency and they would vote for their own people rather than voting for Hungarian party lists, which deliberately distorts and destroys the voting preferences of those who live, work, and pay taxes here.
This is a heavy topic. Let’s move to Takarekbank. Last year the Fidesz government nationalized Takarekbank.
The government told everyone that Takarekbank was in a bad situation. They said Takarekbank may have lost its capital, that it didn’t meet solvency capital requirements, and that there was a need to increase its capital.
Was the solvency capital requirement we’re discussing now set by the EU?
Was Takarekbank not conforming to the EU’s solvency capital requirements?
There was no issue because it was not true, there were no issues with Takarekbank’s ability to meet solvency capital requirements. Takarekbank is a conservative business by nature, it’s made up of savings cooperatives. The small savings cooperatives weren’t engaged in the very risky business responsible for overwhelming the Hungarian banking sector. The practice of providing retail customers with what is known as ‘foreign currency denominated mortgage lending’ wasn’t something that Hungary’s savings cooperatives were engaged in. Takarekbank, the banking cooperative whose shareholders are comprised of Hungary’s small savings cooperatives, did not even engage in this practice.
Bigger commercial banks like OTP, the largest Hungarian bank, and some of the foreign-owned larger commercial banks, such as CIB, Erste Bank, and Raiffeisen were involved in that. These were the ones very active in offering foreign currency denominated mortgage loans to retail customers. As a consequence, many customers were unable to refinance or service their debt when Hungary’s currency devalued against the denominated foreign currency. These banks incurred huge losses as a result of the accumulation of a large number of non-performing loans.
So, this is the story. It is the exact opposite of what the situation was with Takarekbank. It was the most solid, strongest, and best capitalized what I would call “head institution” of the otherwise smaller savings cooperatives. The government cheated them by saying that Takarekbank needs an additional injection of capital. At the very beginning shareholders didn’t realize the government’s endgame which was to sell off Takarekbank to the cronies of the present government.
The government then designed a new syndicate agreement behind the shareholders in such a way that it took over management. It was tantamount to nationalization. You can nationalize a bank by raising capital, such as in the case of CitiBank. A bank can become a state-owned bank not just through expropriating existing shareholders, but also through injecting additional money to bring it up to the internationally required prudential level.
One of the unfortunate elements of the Takarekbank story is that what may have been a good gesture on behalf of the government, assuming their intentions were as noble as they claimed, played out over the course of 18 months in way where shareholders were forced by a hastily adopted law to accept without question the governments attempt to takeover their business. This move resulted in the nationalization of an entire industry, not just Takarekbank, and we’re now learning that the government will be selling Takarekbank off to an unnamed buyer who we have every reason to believe was involved in the privatization of the savings cooperative sector and its largest banking cooperative.
Reports indicate government-appointed individual for this enormous transformation of the sector is directly involved as a buyer in the sale of Takarekbank. This means that we have a situation where the government uses financial trickery and an unorthodox law to nationalize a business, the government then appoints an individual to take over management of the business and its entire sector. This individual then structures a sale of the business in such a way that dramatically limits potential bidders from making bids. The bidding ends with only bid having been made, and, if reports are true, the CEO of the company behind the only bid is the very person appointed by the government to nationalize the bank.
What we have in front of us is a case where a warrantless nationalization was followed by privatization, and the same person is involved in both sides of the transaction. There is no shortage of “acting in good faith”, “fiduciary duty”, and “conflict of interest” things we could discuss in this mess. What is the position of the center-right party regarding a matter like this?
You mean the MOMA position?
What is the MOMA position on this?
The MOMA position is the exact same as my position on matters of expropriation, which I made very clear well before MOMA was ever created. It is the same position I had when during the expropriation of the second pillar of Hungary’s pension system. You may remember that in 2011 when the government decided to nationalize the compulsory private pension funds they said that their intention was to “save” the future pension savings of more than one million people. It’s important to note that this reform to establish private pension funds in Hungary started in 1998. It already had a history of 15 years. It wasn’t perfect, but it worked quite well in the sense that for the first time in their lives people realized that they cannot rely exclusively on the government for old age income support, that it was important in a market economy to take care of yourself.
People had just begun to learn that you must save a part of your income and salary now, so that you have a higher pension when get in your old age. So it was an extremely, extremely important reform – and Hungary was one of the first, if not the first, to implement this reform. Then it was implemented in the Baltic States, in Poland, Slovakia, Romania, Bulgaria, and many other former Soviet countries as well. Hungary, in the first decade of transition, with this reform was one the pioneers of good structure reforms in the sense of creating not only just the facade of market capitalism, but also changing everyday behavior of the people.
You know the worst legacy of Janos Kadar, the worst legacy of communism is the distorted mindset that “the state will take care of me”. The state cannot take care of you. You have your own responsibility and that is to take care of yourself and your family. That’s the most important message a center-right party like MOMA can put out there because we don’t feel that it is up to the state to take over all of these responsibilities by taking away rights from the people.
I emphasize this story because Takarekbank is a similar story. Like Takarekbank, the expropriations of private pensions by Fidesz is also about the sanctity of private property. I was speaking against the nationalization of Takarekbank in the European Parliament and in many other fora in Hungary and abroad.
I was one of the few in Hungary who said that this is an absolutely negative move because it doesn’t guarantee better security for pensions in the future, on the contrary. The government took over once again, one-hundred percent reliance on the government… Moreover it is negative because it destroyed the close link between benefit and contribution at the level of the individual. That was the most important part of this reform because you have to know that another very bad legacy of communism tax avoidance and tax evasion in post-socialist countries is a proudly exercised and openly exercised national sport. So people don’t see the contradiction behind their contradictory behavior. They openly and publicly say how they can cheat the state by minimizing their contribution in terms of both pension, healthcare and social security, while at the same time they demand higher and higher services in healthcare and pensions when they retire. The only way to break this vicious circle would have been to start another pillar, not in place of the public pension system, but in addition to the public pension system. You cannot have only one for several reasons.
Takarekbank is also a very good case in point because it’s also about the destruction of private property, it’s unconstitutional in this respect, and moreover, it is also a nail into the coffin of the rule of law because if you use legislation in order to achieve sinister political purposes rather than providing equal level playing field for everybody, then you make illegal governmental moves legal. The law and whole legal profession then becomes subservient to political intentions. We return to medieval times where there is no autonomy in law or economics, no autonomy anywhere. Everything just falls under a totalitarian rule.
So, MOMA chairman Lajos Bokros, what is this election all about?
It’s about democracy or authoritarianism, it’s about market economy or command economy, it’s about deciding whether the state should encourage competition or choosing a state that creates monopolies, it’s about open society versus closed society, it’s about western alliances or the Soviet Union. It’s about our future civilization, it’s about convergence or divergence. That’s what this election is all about.
Any final thoughts, perhaps a message to the young people?
Young people should be the first to stand up because we elderly people have little to lose. We have probably accumulated much more wealth, many more assets, and some of us are not on the payroll of the government. Some of us cannot be blackmailed and can’t be pushed into submission so easily. But those who are at the beginning of their careers, those who now want to realize their potential, they have a hard choice to make. One choice is to go abroad, and unfortunately too many people have done that for lack of a better alternative. But the other alternative is to stand up and establish a very strong civil society here in this country and change this course for the better. That’s my message to the young people.