“(President-elect Donald Trump) invited me to Washington, and I told him that I haven’t been there in a long time because they treated me like a “black sheep.” He laughed and said they did the same to him. I think Donald Trump will be the kind of president who is not ideologically confined. He’s an open man who is more interested in success, productivity and results than political theory. This is good for us because the facts are on our side. The economic relations have been good until now, but it was the ideologies that posed problems.” – Viktor Orbán
Translation of interview with Hungarian Prime Minister Viktor Orbán published in vg.hu on November 24th, 2016.
Every party signed the wage agreement. Did you expect such a quick resolution to these meetings?
It always made sense to me to have an agreement like this. But no one could know the extent to which party politics seeped into advocacy. Was the decision made for commonsense economic reasons or to satisfy political interests? The good news is that commonsense is not lost in the life of Hungary’s economic players. Despite politics here, party political leanings there, and turbulent European relations, I see they can stand on two feet. Furthermore, everyone knew this was the most we could pull out of this situation. It is clear that advocacy groups see things from a historical perspective, or at least they remember what this was like in 2010. Back then, everyone would have laughed if they were told there would be an agreement like this in six years. Back then, the collapse of the economy was what dominated the agenda. This foundation of this agreement is that the Hungarians were able to perform more, higher quality work. Aside from this, the people realized they don’t always have to look for shortcuts, and it is better to choose the work-based life than to live on welfare. Six years ago, the workers thought it was easier to live from shortcuts, welfare, and family subsidies than it was to live from work. We had to transition from that into the work-based world. The most important message of this agreement is that it is worthwhile to work in Hungary.
Can we say that we are closing the gap with European wages?
I never considered European wages to be the standard. The experts and several of my politician acquaintances keep trying to measure Hungarian wages against those of Europe. I think this does not explain much. Of course, they think it is important because they think this is the reason why Hungarians go abroad to work, but this is only partially true. People will come and go because Hungary is part of the European labor market. In 1989, when I was 26, I received a laughable scholarship to go with my one child to study and work in England. You can’t hold the youth back, and you shouldn’t even have to. Those who are brave enough should be allowed to go, we must support them in this, let them see the world. But it is important that they have a country they can return to. I do not believe that the difference in wages is the basis for this decision. There are a lot of things that you cannot put a price on. For example, Hungary’s public security, GMO-free agriculture, we don’t have large groups of migrants, and that’s just a few things. In a few years when the health-care investments are made, and when the bicycle lanes and other recreational investments are made, our homeland will be among those with the highest quality of life. I will only consider my work and the work of my government to be successful when I see we have made the middle class successful, and when we have opened doors to those at the bottom of society which allow them to pass into the middle class.
Does this agreement mean that we will lose the competitive advantage we had with our low-paid workers?
It is a commonly held opinion that Hungary’s competitive advantage comes from its cheap labor. I do not think this is true. The reason why Hungary did not have higher salaries is because there was no economic growth or improvements to productivity. Competitive wages require competitive companies, otherwise the companies will close their doors. It is not simply a historical fact, it is also an economic fact, that Hungary is a thousand-year-old state whose forms of governance were always in the mainstream of the Western world, except during the communist times. We are in the heart of Europe, that is, we are not only the crossroads for military campaigns but also trade routes. This is what the government must work with when undertaking infrastructural investments. But if we are talking about our competitiveness, it isn’t only important what happens at the workplace. We have a cultured country and there are plenty of things to do outside of work. One of the most important things about our competitiveness is that we are able to offer our economic players cheaper energy than the rest of Western Europe. This is why I am a committed believer in the Paks project that will continue to secure cheap energy. We must also anticipate that our entire region will improve. The V4’s role in the European Union is improving. This way, it isn’t only the changes on the surface that are our goals, but also growth, expansion, and investments. Hungarian business find natural markets in our region, and that is why it is important that we focus on economic diplomacy.
Should we be worried that pensioners were left out of the agreement? Will there be a new system for calculating pensions?
We agreed with the pensioners that we would keep the real value of their pensions. We have kept our promise, but have even increased the real value of their pensions. Of course, we are aware that being elderly is difficult. It will take several years of debate – which has already begun with experts – to figure out a new system. At this time, we can put no more stress on the pension system. What we can do is decrease the cost of living, and in this the decrease of sales tax can play a large role. Aside from this, thanks to the wage agreement, I now have the opportunity to propose raising pensions next year from 0.9 to 1.6 percent. We will see whether there is any other kind of support we can offer.
Small business owners are worried they will not be able to increase revenues to cover the increase in wages. What will happen with them?
I think they are in for a little surprise here because it will become obvious that many businesses were not able to surpass the HUF 500 million threshold because they wanted to pay the lower tax rate. I’m not being critical because tax optimization is present everywhere in the world, but tricks like this will not be necessary with the flat tax. Companies employing one or two people may experience significant improvements.
Is there room to decrease the personal income tax?
It has been my desire for a long time to bring that down below ten percent to nine percent. I would consider it a great moment in my life if we could accomplish this. I asked the finance minister to make it happen. What he told me, and unfortunately I have to agree with him, is that “we can’t do absolutely everything.” We cannot decrease the corporate tax rate, payroll taxes, and personal income taxes, while also raising minimum wage and pensions. We have the intention, but the execution will depend on our progress over the next few years.
After signing the wage agreement, you said it would be necessary to sign another agreement. What were you referring to?
We are on the verge of a new era, together with the whole world. The manufacturing world we have now will not be the same in five years. The trade-skills training we offer now will not be enough in the future. A global competition has started to determine who can transform their economy and society the fastest to meet the challenges of the digital era. The increase in salaries that is taking place now lays the foundation for a starting point, but this is not the answer to our question. So, I would like to calm everyone’s excitement because, while we can call this agreement historical, what makes it interesting is that a right-wing government was able to do it. But I repeat: this is only the starting point to Hungary finding solutions to meeting the challenges of today.
Will Hungary’s position change because there will be a new president in America next year?
I now know more than what is discernible from media reports. I spoke on the phone with the new American president, and I can declare that our position has greatly improved. Donald Trump made it clear that he holds Hungary in high esteem. I got the impression he knows that Hungary is a brave and freedom-fighting nation which has produced great economic accomplishments over the past six years. He invited me to Washington, and I told him that I haven’t been there in a long time because they treated me like a “black sheep.” He laughed and said they did the same to him. I think Donald Trump will be the kind of president who is not ideologically confined. He’s an open man who is more interested in success, productivity and results than political theory. This is good for us because the facts are on our side. The economic relations have been good until now, but it was the ideologies that posed problems.