18^th of March, 2010

CEU Business School organised a conference titled “Hungary in the mirror” with the aim of facing the real Hungarian and global economic situation. At the event held in the middle of March public opinion leaders and experts tried to answer the question: To what extend does the current crisis question our perception of the world, and what are the ways out of it?

Over 100 people attended the conference, including ambassadors, public figures and representatives of the business community.

Don’t expect state measures solve the crisis

László Urbán, the Hungarian future deputy director of the European Bank of Reconstruction and Development took a different approach in identifying the causes of the crisis from the usual approach of blaming weak financial market regulation. He pointed out that credit grew in the United States as a result of government pressure; the state influence of the past decades forced the banks to expand mortgage lending towards less creditworthy masses. This process combined with the growth of the American economy artificially stimulated by low interest rates led to bubbles. According to Urban, the monetary policy responded well; recapitalisation of banks was the only possible solution. According to the future Hungarian deputy director of EBRD, the overemphasised role of the state and overregulation raises further questions, since it is clear that the crisis was deeper where state solvency was endangered by high indebtedness. In his opinion, the best the government can do is to stabilise the budget and the state debts.

According to János Martonyi, former Minister of Foreign Affairs, it is fashionable to say today that Europe’s economic, demographic and commercial significance as well as its political weight is decreasing. However, it is a relative decrease; the developing world is trying to close the development gap of several centuries, which is why Europe might seem slow. The EU is still the biggest player in global trade, representing itself in a unified and consistent way in course of multilateral negotiations. “The integration’s model is altering and adjusting to the world, but its essence remains the same”, says the former Foreign Minister. Martonyi believes that Europe benefits from the crisis, even though it caused tragedies for many at a personal level. It was a wake up call: “we need closer economic policy coordination than ever before!” From this aspect, he has strong hopes for the position and work of Herman Van Rompuy, the first permanent President of the European Council.

Finance Minister Péter Oszkó started his presentation by emphasising that he did not intend “to give the impression that a crisis management government has solved the crisis”. In his opinion, the crisis meant such a huge slap to Hungary’s face that short term political interests had to be put to one side, and unpopular steps, such as the restructuring of the pension system, the introduction of the family support system, as well as the discontinuation of the so-called “election budget”, which had been in practice since 1994. “In the course of restructuring the state budget, we are now carrying out the corrections also unavoidable by other countries of the regions. Consequently, we can benefit from the growth that follows the crisis, since we are doing our homework now while the others will have to start the economic boom with these unavoidable measures”. According to the Finance Minister, the results of the policies aimed at reducing state debts and controlling domestic consumption can already be observed in this year’s financial data. He believes that the right direction is to make labour cheaper, so redundancies will not be the only possible solution for enterprises. “Precise state intervention is vital for dealing with the structural problems of the labour market”. In the question and answer session, Mr. Oszkó said that the next government will have to face a difficult situation, too; although the crisis will not impose such a huge burden on the economy as is the case now, this fact might lead to reduced awareness of the crisis, and the public having unrealistic expectations from the politicians.

According to István Gyarmati, director of the International Centre for Democratic Transition, security risks are multiplied by the fact that western politics as well as economic and cultural globalisation expects the developing countries to follow a development path that took the western world centuries. During the soviet era, the world used to be much simpler from many aspects: everyone wanted democracy. Nowadays various alternative systems coexist, among which western capitalism is only one possible option, and for many, not the most desirable one. By this, the security policy expert did not only refer to Islamic countries, but also to China with its incredible growth potential.

According to constitutional law expert, Péter Tölgyessy, Fidesz will undoubtedly win the majority of the seats obtained by individual candidates. However, the question is, what the scale of their victory will be. Various studies show a clear chance for a two thirds Fidesz majority, but “Hungarian voters have one hundred years of experience in hiding their opinions”. The political analyst believes that the biggest mistake the socialist government made in the past eight years was to always choose power over renewal. He thinks that “the next government will face extremely difficult decisions, and it is yet unclear whether they will make these decisions”. “3 million voters want them to do everything differently from the Bajnai government, which is a huge burden to carry”, said Tölgyessy.

Pál Tamás, the head of the Institute of Sociology in the Hungarian Academy of Sciences claims that Hungarian intellectuals are responsible for the situation unprecedented in the Central-Eastern European region, that Hungarians treat public life as war. The Hungarian ideological gap is much deeper than it is observed in the west, or even in the other Visegrád countries; the intellectual conflict was as deep as this during the age of religious wars in the 17^th century. But while traditional civil war can be ended by the elimination of the conflict of interests, the same is not true for religious war, as the sociologist points out. He believes that it is a warning sign that half of the Hungarian population more or less agrees (and one third completely agrees) that Hungary does not need more than one party. This opinion is more dominant among Fidesz and Jobbik voters. 73% of the population mostly (and almost 50% completely) agrees that Hungary needs one leader, who is able to govern with a firm hand. From this aspect there is hardly any difference between MSZP, Fidesz or Jobbik voters.