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May 24, 2017

Prime Minister Viktor Orbán’s speech at the Annual General Meeting of the Management of Daimler AG

18 May 2017, Budapest

Good morning Ladies and Gentlemen.

May I just welcome all of you wholeheartedly here in Budapest. The regulation is that the Prime Minister first must speak Hungarian. Sorry for that. Then, if I understand correctly, there is a second part of our meeting, which is a kind of question and answer section. If you’ll allow me, that part of our meeting could be directed in English. But now, let me turn to the Hungarian language.

Ladies and Gentlemen, Dear Eckart,

Thank you for the privilege of being here. This is an honour for me. Although this is not a workers’ meeting, from a Hungarian point of view it is important to underline that in your project in Hungary, here your capital and technological expertise came into favourable contact with the qualifications, hard work and commitment of Hungarian workers. And I believe that if your project in Kecskemét were not as successful as it is – if our workers had not been able to deliver the results and standards which meet your expectations – this meeting would not be taking place in Budapest today. So a considerable amount of the credit for this meeting goes to the Hungarian workers at the Kecskemét factory, and I would like to take this opportunity to offer them our thanks and respect for this.

Ladies and Gentlemen,

I think you made the right decision when you chose Budapest. This is a fashionable place, and it also has some excitement to offer. When one opens the pages of the international press and reads about Hungary, it’s difficult to decide whether it’s some black sheep or an outstanding economic success. This generates a kind of intellectual excitement around Hungary, and so we are happy that you came here to see with your own eyes what is going on here. Indeed Budapest is a special place. It is home to those who live here – the people of Budapest – and is also both the capital of a nation with a very specific culture, the Hungarian nation, and the centre of a region extending beyond Hungary’s borders: the Carpathian Basin. It fulfils these three functions simultaneously, being at once homely, nationally important, and – through its role as a regional centre – international.

Ladies and Gentlemen,

In Hungary Mercedes is a thing of romance. Mercedes is not simply a car, Mercedes is something else. When we were children, until some thirty years ago, you could only ever see a Mercedes by Lake Balaton – with West German number plates. They were all from West Germany – that country still existed then – and they symbolised freedom. When one was young, the sight of a Mercedes by Lake Balaton sent a message which made it synonymous with the West, freedom and prosperity. If thirty years ago we’d been told that the most distinguished representatives of Mercedes would be meeting in Budapest because Mercedes vehicles would be manufactured in Hungary, if we’d been told that you’d be able to own a Mercedes by simply walking into a dealership and buying one, we would have thought that the person predicting this vision of the future must be a complete idiot, or have a screw loose.

Ladies and Gentlemen,

Much has changed in the world since then – but not enough for Mercedes to lose its special status. The truth is that for many Hungarians Mercedes is still the Western car. This is because to this day it radiates strength, dynamism and self-confidence: the very things which we Europeans also need. I would like to remind you that we are also emotionally attached to the present Mercedes factory. Mercedes built its Kecskemét factory at the time of the financial crisis, when investments were a scarce commodity in Europe. When choosing locations for investment every company would reconsider the matter ten times over. When the financial crisis broke, Hungarians were hit very hard: we collapsed financially before the Greeks did. No one remembers this today, but the first country to collapse financially was not Greece, but Hungary, which only managed to survive with bailouts from the troika. So in fact in 2008 and 2009 we were worse off than Greece, but in this extremely difficult situation Mercedes decided that Hungary would be the best location for its factory. And during this extremely difficult period, for us Hungarians this decision was not just a financial one, but symbolically it meant that Mercedes had faith in Hungary’s future, it believed that we had a future – perhaps even more faith in that fact that we than we had ourselves. Therefore the Mercedes-Benz Kecskemét project is not just one factory among many, but a symbol of faith in Hungary. For this reason this factory is particularly precious for us.

Ladies and Gentlemen,

I sincerely hope that you have never regretted your investment. The figures are looking pretty good. The investment sum of 1.3 billion euros has been worth it. As far as we are aware, the Kecskemét factory is one of the firm’s best. I would also like to thank my friend, Mr. Klaeden, for the faith he has shown in Hungary throughout. We Hungarians are proud of this factory and its performance. You have clearly invited me here to tell you what future I envisage for Mercedes in Hungary and Europe, and therefore – if you will allow me – I will first tell you what we are able to offer Mercedes at this point in time. In the second half of my speech I would like to say a few words about how we should change the European Union in order to become or remain competitive in the world economy.

As regards the present, last year you sold three million vehicles, your sales revenues amounted to 153 billion euros, you provided jobs for almost three hundred thousand people – for 282,000 – and spent 7.6 billion euros on research. We salute you on these numbers. In Hungary this means that you have provided a livelihood for more than three thousand people, and you have provided – and continue to provide – the lion’s share of training for engineers of the future. You support the Hungarian government’s policies on the introduction of dual training, you cooperate with secondary schools, and you take part in the training of specialists. In 2016 you increased the proportion of Hungarian suppliers you deal with to thirty per cent – and we wish to thank you for this. This means that Hungarian suppliers received orders from you worth one billion euros. You have also built a kindergarten. This is a major gesture in a country like Hungary, which takes demographic policy seriously. You take part in sports sponsorship, for which we also express our gratitude. And in Kecskemét the atmosphere across the whole city speaks of the feeeling that the city can always rely on you, should the need arise.

Your performance is a major contribution to the performance of the Hungarian economy, which is once again on the rise. This week’s news is that economic growth in the first quarter was 4.1 per cent. This took analysts by surprise. I am not satisfied with this, however, Honourable Finance Minister. I believe that the Hungarian economy will need even higher growth. In 2010 our plan was to rescue the country from its state of financial collapse, and we had to stabilise the financial situation. By 2012 we had accomplished this. Between 2012 and 2016 the task was to raise growth to a range of between one and three per cent; and now, in 2017, the plan is to raise growth to a range of between three and five per cent, to keep it there for a few years, and to take yet another step forward from there. So in fact this 4.1 per cent is not bad, and compared with the growth indicators of the other EU Member States it looks pretty good. It is confirmation of the fact that the economic reforms implemented over the past seven years are working. With regard to its core elements, Hungary is pursuing a type of economic policy which is different to that which is customary in the European Union. Perhaps we could talk about this more at length later. Now I would like to say a few words about what we are able to offer you in the next few years.

The first thing is political stability. Political stability is a precondition for every kind of security: if there is no stability, there is no secure environment – either in the legal, economic policy or physical senses. Only stable governments are able to provide security for a country. If you look at the political changes in the various countries in Europe, the proposition that Hungary is one of Europe’s most politically stable countries doesn’t seem too boastful. And, as far as I can see, this situation will continue for quite a while.

The second thing we can offer you is strict and sensible fiscal policy, which provides the foundations for stability of the economy. Last year the budget deficit stood at 1.7 per cent, and this year it will also remain at well below three per cent. This is a good result. If we wanted to – if we really wanted to, and if we were to completely disregard growth considerations – we could even produce a balanced budget, or even bring it into positive territory. But we must keep a delicate balance between controlling the budget deficit and government spending aimed at promoting development and economic growth. So we must simultaneously support development and keep the budget deficit under control. The mix which has developed – the chemical compound we now have – appears to be viable for many years to come. In addition, as I was able to tell your executives here before, in Hungary it is also customary for us to have the following year’s budget prepared by 1 July. So if anyone wants to know what the Hungarian budget will contain in 2018, they can access that information on 15 June 2017, which is when Parliament will have adopted next year’s budget. This is important in terms of planning.

The third thing we can offer you is an education system which takes your needs into consideration. This is a dual training system, and we are now pushing the Hungarian economy in that direction. It is not easy, we have to overcome some old habits, we must give up the illusion that there will be a time when everyone wears white coats and works in laboratories, and manual labour has been done away with. A dream like that recurs in politicians’ speeches, but the concept of dual training goes against that illusion. Dual training is based on the fact that we have to work: in real-world places and in factories; we have to control machines, from time to time, we even have to perform manual labour, and we have to understand the ins and outs of a job, rather than just push three or four buttons. Dual training is a traditional approach to work. Against the background of technological development it is very difficult to be both modern and also preserve the good traditions of conventional vocational training. In the modern world it is very difficult to find this combination, but I believe that the Hungarian economy is heading in the right direction.

The fourth thing we can offer you is our fiscal system, which is a very special thing. I spent two years of my life defending the Hungarian fiscal system against Brussels, which tried to force on us the approach of “hanging everything on the same peg”. Luckily we did not heed their advice, otherwise we would look like Greece today. Today there is a difference between Greece and Hungary, because the Greeks did what the troika told them to do, while we did the opposite of what the troika told us to do. Time has proven that every country has its own specific features, and these features must not be entirely disregarded. The fiscal regime, the economy of a country, must be based on its own specificities, which include its work culture, its civilisation, its historical traditions, and a great many other things beyond the particular figures. Clearly we cannot create a successful European economy here the way the Chinese do in their own country, because the success of the Chinese economy requires Chinese people, and in Europe there are not yet enough of us to operate a similar economic strategy. So we must build our own economic strategy based on the cultural reality of the European people. Admitting that each country’s cultural identity offers some kind of guideline for the economic policy to be pursued is still seen as an unorthodox idea, but in my view it is perfectly natural. So the Hungarian fiscal system is adjusted to the character of the Hungarian people. I shall tell you a few peculiarities. For instance, we only pay people unemployment benefit for three months, and no longer; if someone still doesn’t have a job after three months, we can offer them public employment. The essence of the Hungarian fiscal regime lies in the principle that if you want money, you have to work for it. If the market is unable to offer you a job, we’ll organise something for you with the local governments and employment centres – but you have to do some work. The Hungarian character is such that we very easily get used to getting money without work, so in Hungary it’s important to make clear that no one is entitled to money without work. Unless we make this clear our fiscal system will fall apart. Similarly, there is no inheritance tax in Hungary. There was communism here for forty years, family assets were confiscated, and there was nothing left. People are very strongly motivated to ensure that they can pass on what they have worked for to their children. This is a positive driver in the Hungarian economy, because there is a shortage of capital and assets. An inheritance tax would constrain this motivation, and this would also affect performance. So the fact that today there is no inheritance tax releases a flow of working energy making up for a historical deficit of forty years. We also have, for instance, a flat-rate tax system. This is a very difficult matter. We believed that the economic crisis was not just a source of problems, but also a great opportunity for reform, because at times like this people are prepared to try solutions which they would tend to reject in a prosperous economy. And as the Hungarian economy was collapsing in 2009, I could propose to Hungarian voters that we should try a flat-rate tax, telling them they should believe it would mobilise higher performance in Hungary. And as there was a crisis and no better alternative, the Hungarian people were ready to take part in this experiment. We tried it, and look at the result: Hungary’s flat-rate tax is working wonders. This accounts for a large percentage of our economic results: the economy has become “whiter”, the black economy has shrunk dramatically, and everyone feels that – although the world is not as fair a place as we would like it to be – it is certain that if someone works they will make progress in life. They may not be in their dream job, and they may not be earning as much as they would like, but they have somewhere to work; and if they work more, they will earn more and save more. We refer to this mentality, this entire fiscal system as the “workfare society”. Instead of the welfare society – a term used in the West – we talk about a workfare society, and our measures also point in that direction.

Ladies and Gentlemen,

So the fourth thing we can offer you now is a predictable fiscal regime which promotes and supports work, investment and performance.

And the fifth thing we can offer you today is our continuing effort to transform Hungary into one of Central Europe’s automotive industry hubs. We have a specific industry policy which is particularly favourable for the automotive industry. The Government has so-called “strategic agreements” with 25 large international corporations, and through these we are seeking to involve you in the development of Hungary’s automotive industry policy. We have three large vehicle industry centres, production centres, each of which works well. One is dominated by the Japanese, another by the Americans, and the third by the Germans. Our goal is to turn Hungary into an automotive industry centre not only for assembly, but also for the design, development and testing of the cars of the future. Hungary is therefore providing focused support for vehicle industry developments. In 2015 – and this is from statistical data I have at my disposal at present – there were 37 automotive industry research facilities in Hungary, where 2,265 people were employed, most of them engineers. And during the European Union’s current 2014–2020 seven-year budgetary cycle, we are going to use 800 billion forints – some three billion euros – to fund the operation and development of vehicle industry research centres. And tomorrow will be a special day in the history of the Hungarian automotive industry, because in one of our provincial towns, in Zalaegerszeg, we are laying the foundation stone for a test track where it will also be possible to test the autonomous cars of the future. In the next few years this will be Europe’s most modern test track.

Ladies and Gentlemen,

So much for the present. If you will allow me, now I would also like to say a few words about the future in a European context. Hungary is a member of the European Union – and an unshakeable member at that. We have been a member throughout the past decade, and we will stay one for a very long time, so Hungary’s fate is intertwined with the development of the European Union. In our view the European Union’s previously unquestioned competitiveness is at risk. We take the view that the European Union is continuously losing its former importance – both in terms of its economic performance and demography. We face the threat of being reduced from the level of a global player to that of a regional one. In terms of foreign policy this is already the case. Here in the neighbourhood of Europe there is a conflict – between Ukraine and Russia – and Europe is not playing a part in its resolution. Here we have the Balkans, where in the past few years a sea of conflicts has developed. We can see that the influence of the Americans, the Russians and the Turks is increasing in the Balkans, while that of the European Union is declining. The European Union is now unable to exert control of any kind over the important developments taking place in its own immediate vicinity – or is certainly unable to do so the way it did a few years ago. I’ve just come back from China. If one looks to the future, and takes another look at Europe from that perspective, it seems particularly urgent that we should reform Europe so that it can regain its competitiveness. For this, one of the most important preconditions is for wide acceptance in Europe that the 2008 and 2009 financial crisis was not a cyclical crisis, but a structural one. There is no agreement on this in Europe, however. Some European leaders believe that cyclical crises are concomitant with the modern market economy: there have been problems in the European Union before, indicators fall, the economy responds and adapts, and the figures will improve again. They say that there is no need for structural reforms, because the system is able to re-incentivise itself. In my view this was true for forty years, but it is no longer the case. What we are suffering from now is not just a cyclical crisis. Quite simply, other, emerging parts of the world are more competitive than we are; and this is therefore a competitiveness crisis, a structural crisis, and our response should also be determined by that fact. I am convinced that while this current paradigm shift in the world economy is under way we should not be responding to a simple cyclical crisis, but should be addressing the shift at a European level. The first thing we should admit is that the European economy comprises national economies; in other words, if the Member States are not successful, the European Union itself cannot be successful as a whole. It is therefore particularly foolish for others to pillory Hungary when our country has the highest or second highest growth in Europe, when we have the largest fall in unemployment, when beyond question all European financial regulations are being complied with and when government debt is in decline. While it is itself suffering in terms of competitiveness, the European Union, instead of acknowledging and supporting its most successful countries – the other is Poland – continuously bombards them with criticism. There is, however, no successful European economy without successful Member State economies. Today there are a few resources available for European competitiveness: we have a successful Germany, we have a successful Visegrád Four, and a successful Central Europe. What we now need are a successful France and a successful Italy. These are the two missing elements. It is also important to finalise our separation from the British with a good result, and the aim of the Brexit negotiations should be attainment of a win-win situation. Let the British benefit, and let us benefit, too. Today, however, the atmosphere of these talks resembles more of a lose-lose situation than a win-win situation. Instead of striving for a separation in which we can both be happier, we are trying to determine who the loser will be. So we need a Brexit process which seeks a win-win situation, a reformed France, and an Italy which has strong political leadership once again.

Ladies and Gentlemen,

In the period ahead the United States, China, India and Indonesia are all economies which will expand by between five and seven per cent. Even the United States – which is a more complex piece of political machinery than the Asian countries – is clearly making efforts to regain competitiveness. It has switched to a patriotic economic policy, and wants to build a strong and powerful US economy. By contrast, the Member States of the European Union have on the whole managed to increase by an average of only 1.1 per cent annually, while the countries of the eurozone have increased by just 0.85 per cent. I am talking about the average over ten years. Additionally, in politics growth of one per cent is in effect unnoticeable. We are in the strange situation that, if we ask ourselves the question of where we want to live, there is no doubt – at least, for us Europeans there is no doubt – that Europe is still the best place in the world. So the present is bright; but the future casts a shadow over the present. Europe will not remain the best place in the world if our political leaders fail to understand this, and only look at the present rather than deduce what should be done by looking at the challenges of the future. Even the latest analysis I read, which was issued by the European Commission, says that if things continue like this, even in the years ahead the European Union’s average economic growth will be no more than between one and two per cent. This means that we will fall behind our major rivals, and Europe – as I said – will be relegated from a global player to a regional one.

So we need a strong and safe Europe that is full of self-confidence, and which is as reliable, safe and fast as a Mercedes. I am convinced that this would be in the best interests of Mercedes as well, because although it is a global firm, it is very hard to imagine a globally operating business being able to maintain long-term competitiveness while its motherland at home is not able to. The individual competitiveness and high performance of the European Union Member States is also a precondition for the success of the international companies which originate there. I am therefore convinced that from your company’s viewpoint also, great importance should be attached to the outcome of this debate on the future of the European Union: whether or not we should reform it, and whether we should regard what has happened in the past ten years as a cyclical crisis or should instead implement structural reforms. The importance for you is just as great as it is for the Member States, such as Hungary. If we ask what we should do in order to regain our competitiveness, I believe that there are four things.

First of all, we should allow every Member State of the European Union to pursue its own economic policy, against the background of certain common rules; and therefore we should not transfer ever more economic regulatory powers from the level of Member States to the level of the European Union as a whole. An effort is being made to do this: sometimes it is called the Social Pillar, at other times, the Energy Union; I believe these processes should be reconsidered and slowed down. The Member States must be allowed to create their own national economic policies. Clearly, in this regard those outside the eurozone have more room for manoeuvre than eurozone members.

The second thing we need is to correctly understand the new industrial revolution. There is general agreement – and it is not hard to understand – that we need the “Industrie 4.0” initiated by the Germans, which is effectively a new industrial revolution. On this we agree. What is lacking is the realisation that this master plan can only work, this industrial revolution can only gain momentum, if we add two things to it. One of these is low taxes, while the other is affordable energy. There will be no successful industrial revolution with high taxes and expensive energy. Europe today needs tax cuts and cheap energy to accompany its industrial revolution. This also means that we must link ourselves to regions which have reserves of cheap energy, rather than sever ourselves from those regions.

The third thing we must do is spend even more money on innovation. I am convinced that the area in which Europe has a competitive advantage is research and development. As with football, which is my original line of business, it is important to decide whether we should primarily develop our strengths or improve performance in our weaker areas. A shrewd coach always places the main emphasis on further improving a player’s strongest skills, because on the pitch that will provide a true competitive advantage. It is the same in politics, and in the economy. This means that we must spend even more money on innovation. In relative terms, compared with its size, Hungary spends an enormous amount on innovation: this year we are spending two billion euros on it.

And the fourth thing we need to do is enter into new types of cooperation schemes with the world’s emerging regions. We must not retreat into a bunker, we must not turn the European Union into a trade policy bunker. We must enter into new types of agreement with the Chinese, the Indians and the Russians, and we must take part in the development of new trade routes. We must form part of the new global trend of connectivity, so that we can exploit the strength and energy that can be gained from these relations.

Ladies and Gentlemen,

The Central European countries – the Czechs, Poles, Slovaks and Hungarians, and I could also mention the Romanians, but that is a rather more complex world – are successful today, with growth rates of between three and five per cent, because this region of the world gave a different response to the world economic crisis than that given by the Western half of Europe. This leads us to a single conclusion: unlike the situation in the past, when we could only learn from the West, the European Union would be well advised to study the Central European successes and integrate whatever it can into the programmes of the Western economies that need reform.

Ladies and Gentlemen,

I sincerely hope that what I’ve just spoken about in a long-term theoretical manner will be confirmed at a microeconomic level by your corporation’s Hungarian unit, its Hungarian factory. I’m convinced that what I’ve said just now is fully in line with what you are experiencing at the Mercedes Kecskemét factory. I am convinced that while, of course, the microeconomic and macroeconomic worlds are different, there must be some harmony between the two. It is not possible for macroeconomic indicators to be poor, while the microeconomic ones are good, or vice versa. There is no such thing. I am convinced that microeconomic and macroeconomic success must occur at the same time. For us, your investment here confirms this.

Finally I would like to thank you once again for the opportunity to be here with you, and I would like to reassure you that Daimler can continue to rely on Hungary, can continue to rely on the Government, and can continue to rely personally on my assistance in the future – as it has done in the past.

Thank you for your attention.