Spotlight on Geopolitics

Hungary bucks austerity trend

In 1956 the Hungarians rose in revolt against the excesses of Soviet communism. During the 1980’s, the Hungarian society was already making the transition to what we now call the post-Soviet era and its communist politicians opened the country’s borders to East German refugees fleeing to the West . These days, Viktor Orban and his Fidesz Party have rallied the Hungarian public opinion against the excesses of a global economy gone astray, introducing additional taxes on global players operating in Hungary.

The so-called “crisis taxes” were introduced in order to narrow Hungary’s budget deficit. The novelty of these extra taxes, which will raise 520 billion Ft (or 2.67 billion dollars), lies in the fact that they are levied exclusively on banks, energy companies, the telecom and the retail sectors. Thus the telecom tax is expected to bring an extra 61 billion Ft, the energy sector to contribute with 70 billion Ft, whilst the retail sector to kick in 30 billion Ft. Introduced for a limited period of three years, the new taxes will help the Hungarian government avoid IMF / EU bailouts or the imposition of unpopular austerity measures, now very much in vogue in most European Union countries.

When communism fell, Hungary found itself without home-grown tycoons or, to use a Marxist cliché, a “capitalist class”. The void was filled by global companies, which during the 1990s acquired large chunks of the Hungarian economy via privatisations. After years of upsetting state authorities with their peculiar ways of syphoning off profits abroad and minimising their tax bill (by methods which I have described in my Asian crisis ebook), they are now called upon by the Orban government to give something back. Companies like Vodafone (telecommunications), Tesco (retail), Gaz de France or E-On (energy) and the banks will thus pay the bulk of the new “crisis taxes”. Needless to mention, Orban’s crisis policy enjoys huge public support.

To be sure, this is an unheard-of – even if fully justified – approach to raising the extra money needed to close the country’s deficit gap. Unlike the European conservative group of parties, of which Fidesz is a member, the Hungarians have decided that this time around it should be the rich global companies, and not the poor, that have to foot the bill for the damage caused by the financial and economic crisis. Why, even socialist governments in power in some EU countries – notably Greece or Spain – were strong-armed into adopting neoliberal austerity measures, which have sent their economies into the red, generated widespread unemployment and affected the incomes of millions.

During a recent state visit to Malta, Orban has declared that the measures undertaken by his government have brought back “national self-confidence” and that the 7 percent budget deficit inherited from his socialist predecessors will be cut to 3.8 percent next year. He has also told his Maltese host that an economic recovery happening only on paper, that does not reduce unemployment, is not worth having.

In many ways, Orban’s approach in dealing with the ill effects of the economic crisis is as revolutionary as the Imre Nagy – led uprising against the Soviets. Fortunately, Hungary is now a member of a different union, and Brussels is unlikely to send the tanks rolling into Budapest, although a speculative attack on the forint cannot be ruled out. Whilst neighbouring countries like Romania are unnecessarily subjecting their citizens to austerity measures which have been judged by experts as both unwise and much too savage, Orban and his team are cushioning the Hungarian nation against economic destitution. However salutary though, Orban’s novel way of solving his country’s budget woes is going to be lost on Bucharest politicians, who over the past three decades have developed the unhealthy habit of vampirizing their own conationals. (sources: The Economist, The Malta Independent, Magyar Hirlap, The Budapest Sun)

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