Mr. Speaker, Honourable Members,
My greetings to you at this, the inaugural sitting of this session of the Hungarian National Assembly. In accordance with our constitutional tradition, I shall report to you on the decisions taken by the Government since the last session.
As you know, in recent months the dramatic increase in energy prices has led to Europe suffering major changes which have come in the form of shocks. The world economy is threatened with recession, while the European economy is threatened with collapse. The events around us now will shape our lives even more than usual.
Honourable House,
There is a war. The war is being fought between Ukraine and Russia in our eastern neighbourhood. Yet, step by step, ever more of the world is suffering the effects of this war. The war between Ukraine and Russia would be a local war – were it not for Western economic sanctions, which have transformed it into a global economic war. Therefore, we are today facing both a local military war and a global economic war. The first question is this: how long will this war last? In the spring there were still many who hoped for a short war of just a few weeks or months. Today it is clear to everyone that we must be prepared to face a protracted war. Ukraine is being assisted with weapons and money by America and the European Union, while Russia’s reserves – in both men and weapons – are limitless. We must therefore be prepared for this war to continue here in our neighbourhood both this year and next year. Ukraine is Hungary’s neighbour. Perhaps this is why Hungary’s position differs from the position of the majority in the West. Today the West stands on the side of war, while Hungary stands on the side of peace. Instead of continuing and deepening the war, we demand an immediate ceasefire and peace talks. In this economic war, which has spread around the globe, each country has its own interests. For Hungary, the most important considerations are security and the defence of economic and national sovereignty. This is why in our budget we have created a defence fund. In addition to the normal budgetary resources, we must spend on developing our army, defending our borders and strengthening our national security services. We are withdrawing soldiers from the defence of our southern borders, and we have created the border hunter units to take their place. We are strengthening the national security services to be able to defend sovereignty in all areas. There are and will be external attempts to exert influence. A war of disinformation is also in progress. These are the things against which we must defend the country.
Honourable House,
People are alarmed by the war, but today families are most directly affected by the war’s economic consequences, first and foremost inflation and rising prices – and not just in our country, but throughout the whole of Europe and the Anglo-Saxon world. In developed countries inflation is soaring at a rate not seen for forty years. In some eurozone countries inflation is already over 20 per cent. Alongside Hungary, the Estonians, Latvians, Lithuanians, Czechs, Bulgarians, Poles, Romanians, Slovenes, Slovaks, Croats, Greeks and Spaniards are all struggling with inflation which is higher than the EU average. All this affects Central European countries at a rate which is far above the average. Our region has the highest inflation and central banks have embarked upon aggressive cycles of interest rate hikes. Countries’ risk premiums have risen significantly, budget deficits everywhere are growing and government debt is increasing. The rate of price rises in our country has also reached levels not seen for decades. This is not the first time, as we have seen quite a few economic crises: I saw one under the Antall government, with 35 per cent inflation; I saw one under the Horn government, with inflation above 28 per cent; and then as Prime Minister I saw the Russian and Far East financial crises of 1999. And even younger people may remember the headache worldwide and in Hungary caused by the 2008 financial crisis. Those miseries were caused by the banking system, extreme debt and foreign currency loans – and, on top of all that, at that time the government in office here was debilitated and disintegrating. Two years ago we again experienced an economic downturn, this time caused by the pandemic. Back then, the pandemic caused the closure of workplaces, and the need to close borders presented a major threat to an open, export-oriented economy like Hungary. Now, in 2022, the economic woes are caused by the response to the Russo-Ukrainian war: wartime sanctions and energy prices increasing by multiples. Rising energy prices are driving up inflation in every country. These brutally high energy prices have not been triggered by economic processes: the dramatic increase in energy prices has clearly been caused by sanctions. Thus the drastic increase in energy prices is not the result of economics, but politics – and more specifically political decisions made in Brussels. In April 2022, two months into the war, the price of natural gas was around 100 euros. Before the Hungarian general election in April, the European position – led by Germany – was that sanctions should be rationally based: we must not destroy European economies, so sanctions could not include energy. This was a sensible position, because it is always sensible to impose sanctions in those economic sectors where we are stronger than the party we want to sanction. And in the field of energy we in Europe are dwarves and Russia is a giant. This is the first time that I have seen a dwarf imposing sanctions on a giant.
Honourable Members,
In April we were right to think that, despite the war, economic conditions would be predictable – albeit with higher energy price levels. But in June 2022 economic and trade sanctions were adopted in Brussels, which included sanctions on oil supplies. In addition, sanctions on gas purchases were put on the agenda, so that starting from June 2022 the price of gas doubled in one month and then tripled the next month. As you may know, the Brussels rules link the price of electricity to the price of gas. So the same thing has happened in the electricity market. In Europe in April 2022 the market price of electricity was 100 euros, while today it is between 400 and 600 euros. Meanwhile US natural gas and electricity prices are a fraction of those in Europe. Let us be straightforward about this: today the countries of Europe are paying a sanction-induced premium for oil, natural gas and electricity! The increase in energy prices also has an impact on food prices. Grain prices are being driven up by the increase in production costs. Fertiliser prices have tripled in six months. Here in Hungary, a 100 per cent increase in energy prices will trigger immediate general inflation of between 3 and 5 per cent. In other words, a three- to four-fold increase in energy prices today means immediate price increases of 15–20 per cent. This is what we are living with today. Let us be frank: if sanctions were lifted, then prices would immediately halve and inflation would also at least halve. Without sanctions, the European economy would regain strength and be able to avoid the threat of recession.
Honourable House,
This was not what the Brussels bureaucrats promised when these sanctions were forced on Europe in Brussels at the beginning of the summer. They promised that these sanctions would hurt Russia, not the people of Europe. Since then it has become clear that the sanctions that have been imposed are also causing enormous harm to Europe. In fact, since the outbreak of war – so over the past six months – Russia has earned 158 billion euros from increased energy exports: more in six months than Russia’s total annual export revenue in 2021. Moreover, half of this money – 85 billion euros – has been paid out by the countries of the European Union. It is safe to say that the sanctions have made the people of Europe poorer, and Russia has not been brought to its knees. This weapon has backfired, and with the sanctions Europe has shot itself in the foot. In Brussels in June, the bureaucrats also promised that sanctions would bring an end to the war. We still see no end to the war, and energy bills have skyrocketed. European businesses cannot afford the sanction-induced energy prices, or can only afford them with great difficulty. We are waiting for an answer from Brussels, the whole of Europe is waiting for an answer to the question of how long we are going to keep doing this. If this goes on, the whole of Europe will be finished. It is time to talk frankly about this with our American friends. Before it is too late. In Europe ever more people are angry. We, too, are angry. The bureaucrats in Brussels must understand that one must not gamble with the fate of entire national economies and millions of people. That is irresponsible! And to respond to high energy bills by telling us to send them to Moscow is insulting, offensive insolence. It is no surprise if people who are angry and feel cheated by governments that support sanctions replace those governments one after another. Glory to Italy! Avanti ragazzi! [Onward, youth!] But of course that doesn’t apply to tonight [the UEFA international between Hungary and Italy] …
Honourable Members,
Hungary has always had reservations about economic sanctions. We have openly expressed our concerns in all European forums, even when we were the sole dissenting voice. Our arguments were ignored and the sanctions were forced on all the countries of Europe. In Brussels it is fashionable to be smarter than everyone else and for those there to know better about everything. When they run out of arguments, or the facts do not support them, they accuse those who oppose them – such as us – of violating European values. Intellectually this is not very inspiring. Moreover, the European treaties put democracy at the top of the list of European values. And let us frankly point out that these sanctions were not introduced in a democratic way. The sanctions were decided on by Brussels bureaucrats and European elites. Nobody asked the European people for their opinion. But the European people are the ones who are paying the price of the sanctions! I am personally convinced that before sanctions become an irrevocable and long-term part of economic life, we also need to find out what people think. This is why we in Hungary will be the first in Europe to ask people’s opinions on sanctions. We have already done this in relation to migration, to the COVID pandemic and to gender ideology. We have succeeded in creating national unity and in doing so we have created a shared basis for crisis management. We are now launching a national consultation in which Hungarians can give their opinions: do they agree with the sanctions, and do they support or oppose the introduction of new sanctions? I ask all Hungarians to voice their opinion. Let them speak out, because sanctions affect and will affect the life of every Hungarian family.
Mr. Speaker, Honourable Members,
As long as the sanctions are in place and the energy crisis continues, Hungary’s most important task is to guarantee secure energy supplies. As far as our strength allows – but perhaps rather beyond that – we must protect Hungarian families and jobs in the face of sanction-induced energy prices. I hereby inform Parliament that the Government is able to secure Hungary’s energy supply. In fact we have already secured it with the decisions we took this summer. There is enough natural gas, there is electricity, and there is oil. We have filled our gas storage facilities, and we have agreed with the Russians on new supplies, which are arriving in our country on a continuous basis. With the gas we have stored we have made provision for 41 per cent of Hungary’s annual consumption. We have also resolved the issue of our oil supply. We have successfully fought to be exempt from the general oil embargo on Russia – not only for ourselves but also for the Czechs and the Slovaks. It is a pity that they were nowhere to be seen in the tumult of the battle in Brussels. And we did not receive any thanks either. Never mind. You are welcome!
Honourable House,
We have our own electricity generation capacity, enabling us to meet 65 per cent of domestic demand; and so we have greater influence over the price of electricity. We are, however, dependent on imports for 85 per cent of our natural gas, and so we have no real influence over the price of that. We therefore need to reduce our domestic consumption of natural gas. This is what must be done by the state, by state-owned companies and state institutions, and this is what must also be done by families and businesses. I can inform the House that, in addition to the exemption from the Brussels oil sanctions and the gas price cap, during the summer the following decisions were taken. Natural gas currently accounts for 35 per cent of Hungary’s energy consumption. We will reduce this to 31 per cent by the end of 2023 and below 30 per cent by 2025. We have arranged to increase domestic gas production from 1.5 billion cubic metres per year to 2 billion cubic metres per year. We have ordered the restart of the Mátra Power Plant. We will extend the lifetime of the Paks Nuclear Power Plant and finally start construction of Paks II. The role of the nuclear power plant – which currently provides half of domestic electricity generation and meets 36 per cent of domestic demand – is beyond question. I call on the left-wing parties to stop blocking the development of the Hungarian nuclear industry. In fact, I call on the Left to support the extension of the operating life of Paks I and the construction of Paks II.
Honourable Members,
The Government continues to protect Hungarian families. This year families were able to keep a total of 1,127 billion forints in the form of tax relief and income tax refunds. We have paid the thirteenth month’s pension, we are paying an inflation-linked pension supplement, and at the end of the year we will also pay a pension premium. The tax exemption for people under 25 is in force and will remain so. We have extended the petrol price cap and the food price cap. The interest rate freeze, which expires on 1 January, will also be extended until the middle of next year. I can inform the House that, in relation to energy prices, the Hungarian government is the biggest provider of assistance in the whole European Union. We will maintain the reductions in household utility bills up to the level of average consumption, saving every Hungarian family an average of 181,000 forints per month. In addition, the price that has to be paid for electricity by households consuming at a rate above the national average is in fact half the actual market price. We are also able to do this because our domestic production of electricity is a significant proportion of the whole.
My Friends, Honourable Members,
By European comparison, this means that in Germany their energy subsidy is 20 per cent of a family’s monthly income and in Austria it is 6 per cent; meanwhile in Hungary it is 30 per cent. Put another way, the Hungarian subsidy is 36 per cent of the average wage, compared with 13 per cent in Germany and 5 per cent in Austria. We are generating the money needed to protect families by imposing a windfall tax on some sectors of the economy: on banks, energy companies, telecommunications firms and large retail chains. The money raised will be enough for this year’s price subsidies, and we also have high hopes for 2023. To reduce natural gas consumption, we have announced a programme of discounts on firewood and lignite. So in summary, we are helping families with six things: reductions in household utility bills, a firewood programme, a lignite programme, a petrol price freeze, a food price freeze and an interest rate freeze. The Government’s attitude, Honourable Members, is that helping families comes first, but Hungarian businesses come right behind them as a priority. To counter high energy prices we will need all the strength, leadership and talent of entrepreneurs. The Government will help in three ways. We have announced a programme of more than 200 billion forints for productive and energy-intensive small and medium-sized enterprises. We will have a programme to save factories and, if necessary, a new action plan to protect jobs.
Honourable Members,
If we are to avert an energy crisis, we must do exactly what has led us to success in the past: a work-based economy and support for investment. Currently around 9,400 billion forints of state investment is underway in Hungary. We will carry these projects through, without exception. Because of the uncertain economic situation, we are not launching more state investment projects, as we could not guarantee that we would be able to complete them. Now we only see resources and opportunities for the support of private investment that creates jobs, because we must put each forint where others can add two to it. We will launch the state investments that are now on hold when the economic situation in Europe becomes predictable again.
Honourable House,
The Government has also updated its medium- and long-term energy strategy in response to the sanction-induced energy prices. Based on Hungary’s circumstances, in the longer term we expect the country to remain a net importer of oil. Currently 59 per cent of our imports come from Russia, 20 per cent from Kazakhstan, 8 per cent from Iraq and another 8 per cent from Croatia. A plan is also in place for the complete transformation of our electricity system. This includes upgrading the grid, building new power plants, Paks II and extending the operational life of Paks I. This – excluding the cost of building Paks II – represents an investment of 16 billion euros, or 6,400 billion forints. Together we are talking about a total of 28.5 billion euros, or 11,400 billion forints. These huge figures show that this is the biggest development over the next ten years. We are making thirty-two major investments in total. The Hungarian energy system cannot be modernised and the Hungarian economy’s international competitiveness cannot be guaranteed without these investments. So this work must be done and shall be done. The European Union has promised the necessary financial resources. If the bureaucrats in Brussels still fail to give us the money that Hungary is entitled to, then we shall raise the necessary funds from other sources. We have started negotiations with the European Union and other international partners on this. I can inform the Honourable House that the Government has simplified and accelerated the procedures for investments in solar and geothermal heat production.
Mr. Speaker, Honourable Members,
Even in the current economic crisis, the programme for the complete renewal of the Hungarian energy system remains on the agenda. This is because the Government has decided not to abandon its national strategic goals during the next two years of crisis management. Over the next two years we shall continue to develop transport networks. We shall continue our family support programmes. The number of children born has been increasing, families have become stronger and more prosperous, but we have not yet achieved a breakthrough. Here time is literally life, and this is why we are continuing to expand the family support system. In early December we will finalise the 2023 budget, which will include new family support measures. Similarly, we cannot afford to stop the programme to build a development-based economy. Alongside the work-based economy, or rather on its foundations, we must also build a Hungarian economy based on research and development. The locomotives for this are our reorganised universities, and therefore we will also carry through – and even accelerate – our university development programme. We will do the same with our programmes for developing the defence industry and the army. And of course we will continue our policy of national unification.
Finally, Honourable House, I confirm that – despite our disputes with Brussels – Hungary continues to see its future as a member of the European Union. We Hungarians are a European nation. We are just as important a hue in the composition of the community of European nations as any other Member State. The European Union will only be strong and viable if it retains and respects all the hues within it. Those who would take away our rights envision Europe as a monochrome phalanstère. We insist on our traditions, our national characteristics and our own way of thinking – whether or not others like it. We are a proud nation, aware that we have always given more to the world than we have received from it. This is our Hungarian contribution to the great common achievement of the peoples of Europe, which our friends can count on in the future.
Honourable House,
What prospects do I see for the months ahead? Today Hungary is emerging from the economic crisis caused by the sanctions in a better condition than in 2008, when the financial crisis almost eviscerated Hungary. Since then we have created one million new jobs, we have increased the value of our exports by 50 per cent, and we are still capable of an economic growth rate above the European Union average. We have significantly reduced taxes on labour. Personal income tax has been halved since 2010 and the tax rate has been reduced from 55 per cent to 41 per cent. This is unparalleled. Hungary is stronger today than at any time since the fall of communism. The sanctions are also causing us serious damage, but I see a chance for the Government to bring Hungary out of this crisis in a stronger condition. In the coming months the Government will set a strong pace. I also assure my fellow Members of Parliament that the upcoming parliamentary sittings will bring the most out of them.
Thank you for your attention.
God above us all, Hungary before all else!