Zsolt Törőcsik: Last week in Kötcse Viktor Orbán outlined the five points of economic neutrality. According to the Prime Minister, the formation of opposing economic blocs isn’t good, and for the Hungarian economy to be successful it needs to be neutral in terms of financing, investment, markets, technology and energy. Among other things, I’ll be asking Prime Minister Viktor Orbán how this can be achieved. Good morning.
Greetings to your listeners. Good morning.
We’re seeing the world moving towards the formation of opposing blocs, and in many cases the sides are not only not cooperating, but are even referring to one another as a risk, a national security risk – and even regarding raw materials and technology coming from another bloc as a risk. In such an environment, how can one remain economically neutral?
It’s true that we’ve got out of the habit of using the term. Although the word “neutrality” has been used quite often in Hungarian politics over the last hundred years, with people thinking of neutrality mostly when they wanted to keep their distance from something bad, we rarely associated it with the economy. It seems to be more a military or political term. But now something is happening in the world economy that justifies applying it to the economy, and this strange combination of words – “economic neutrality” – is worth introducing and getting used to. In order to be able to make plans for the future, one needs to understand what’s happening, and then it may turn out that economic neutrality or something else is needed. Although international politics in general hasn’t been uneventful, the most exciting international event of the past week – let’s say the most interesting development from an intellectual point of view – has been that the former President of the European Central Bank and former Prime Minister of Italy has produced a major study at the request of the European Union. We’re talking about hundreds of pages. He was asked to assess the state of the European economy, and to outline proposals. And what emerges from this report by Prime Minister Draghi is that there’s a big problem. In Europe today what we’re suffering from is a huge loss of competitiveness, what in plain language we might call decline; and we’ll be in big trouble if we continue to do what we’ve been doing up to now. He says that we have challengers, that in terms of competitiveness and economic performance the United States and China are pulling away from us, and that Europe’s falling far behind them. This is how I’d briefly summarise his study. The race to compete with the United States is well-known, and it’s not surprising. But something that Draghi also believes to undoubtedly be a reality is what we here in Hungary call a world system change: the fact that for the first time in five hundred years the leading Western power is being challenged not from within the West but from outside it. So this world system change – the rise of Asia and the challenge of competing with it – is a real, current, daily fact that politicians need to take into account. And he describes the advantages that the Asians have and how they’re moving ahead of us. There are two ways to respond to such a situation, and this is also what he says. Either you say “Well, we’ll enter this competition, and if our opponent lifts 120 kilos and we can only lift 80, then maybe we’ll train and we’ll lift 120 as well. The other is to say that we won’t compete but we’ll disqualify our opponent, saying that it’s not permitted to lift 120 but only 80, because that’s all we’re able to manage. And then we form blocs, we close our borders, and we say that you cannot come in here with your cheaper products and your more efficient technologies, and we’ll be fine like that. So we form blocs without competition. The question now is which of the two possible routes is in our interest. The EU is, by the way, tending towards bloc formation, with news coming in every day that it’s introducing a protective tariff, that it’s penalising, that it’s sanctioning, and so on. But the truth is that for Hungary bloc formation would be a tragedy – just as the socialist economy was a tragedy when the world economy was split into Soviet and American world economies. Because if such a split occurs, we’ll be on the edge of it, we’ll be marginalised, we’ll become insignificant players in the world economy, we’ll lose opportunities, we’ll be blocked into a dead end. So the Government’s position – and this is my personal conviction – is that Hungary must compete; and that it’s good for Hungary if the world economy is united, if we don’t reject, marginalise or exclude the challengers, but understand them, understand what makes them better than us, and start competing with them, and we also improve our performance. This is what Draghi’s report says. It’s a rigorous document. I regret the fact that it hardly appears in the Hungarian public square, but as time goes by the intellectual content of Hungarian politics is shrinking, because things are somehow moving towards the politics of scandal – not only in Hungary but also internationally – and such in-depth analyses are less able to capture the political imagination of the public. Too bad! This report deserved it. Well, in this situation I think we need neutrality. We mustn’t allow ourselves to be locked into either one hemisphere or the other, East or West, but we must maintain our relations, trade, openness, cooperation and competition with both the East and the West. This is unusual, because for the past thirty years we’ve mostly been talking about how to take our place in the Western world – EU membership, NATO membership and so on – and neutrality has been left out of Hungarian public discourse. But the time has come to revive it, to reheat it, to introduce it and to use it in economic terms, and to say that Hungary can’t afford to look at the economy through the lens of politics. We must look at the economy according to the logic of the economy, and we must look only at what’s in the interests of the Hungarian people. This is the first commandment. And today economic neutrality is what best serves the people’s interests, which is why I spoke about it.
But how can we avoid looking through the lens of politics when in the implementation of the connectivity strategy, for example, we see Chinese investments being subjected to political attacks – either from within Hungary or the European Union?
We need to gather allies, to work together with like-minded countries. For example, yesterday or the day before the Spanish prime minister was in China. He came home and said very clearly that the European Commission’s current policy of trying to assist the European economy by using protective tariffs is a mistake. And in recent months I’ve been in talks with the heads of all the major European car manufacturers. The Hungarian automotive industry, vehicle manufacturing, is a key issue, with hundreds of thousands of families reliant on these factories for their incomes. It’s important that they’re maintained. I’ve discussed the future with their leaders. And I asked their views on the punitive European tariff on Chinese electric cars, which is supposed to protect domestic manufacturers. Well, they’re the domestic manufacturers, the European manufacturers, and they said that they’re the ones who are most adamantly against it. “Thank you very much”, they say: they don’t want to be protected; they want to compete. But the Commission isn’t listening to them, and is still thinking in terms of protective tariffs. What I want to say is that there are many major European players in politics and in the economy who think the same way as Hungary. We need to cooperate with them and create a weight and a force that can change Brussels’ policy, which needs to change. Now I’m going to open a sidebar by saying that yesterday – or the day before yesterday – we were again condemned in the European Court of Justice after the Commission took us there for defending families against unjustified price increases. We’ve imposed price freezes on some products, we’re on the side of the people, and now we’re being condemned, being told that this is wrong because we should let the multinationals set the prices they want. These are bad ideas, these are economic errors by the European Commission. So we shouldn’t start from the premise that something is smarter than us because it comes from Brussels. No, they’re wrong, and they must be made to change.
In order to make plans we also need to look at the current state of the Hungarian economy. In recent years we’ve talked a lot about high inflation, which has caused real wages to fall over a period; and consumption is still struggling to take off. People are cautious, even though inflation is falling and real wages are rising. In this situation, what are the prospects for the Hungarian economy?
First of all, I see that there’s a lively debate or exchange of views in Hungary about the state of the economy and its prospects. As is usual in a debate, grass, trees, flowers, crickets and beetles appear, and one hears both intelligent opinions and nonsense. I also hear a lot of bad things about the Hungarian economy. I think this is due partly to a lack of knowledge, and partly to political distortion. Because if you look at the facts, the Hungarian economy has already come through a very difficult period and is on the verge of an upswing, a recovery. There’s the question of growth, for example, which is one of the most important indicators. Hungarian economic growth is above the European Union average. So in terms of growth we’re in a good position. Inflation is now about to fall below 3 per cent, or we’re pushing it back down below that, which is also good. People also tend to talk about investment in a negative way, but I look at the figures, and for what it’s worth the Hungarian investment rate is better than the European Union average: the EU average is 20 per cent, and ours is 23 per cent. According to the current state of mathematics, 23 is more than 20. The same is true for consumption. I also hear a debate on this, asking about what’s happening with consumption now. I’m not sure everyone’s looking at this in the right way when they talk about this, because I think that whether or not people consume is a matter for them to decide, not for economists. When you have money, you can do one of two things: save or consume. There are advantages to both. It’s not for us, it’s not for politicians, it’s not for economists to decide what people should do with their money. Those who are more cautious will save, those who are braver will consume. But either way, we have consumption of around 4 per cent, so people are spending more. To spend more, there are two prerequisites. The first is that you have something to spend, you have money. There are above-inflation wage increases in Hungary of 9–10 per cent. I think these are among the strongest in Europe. So you have to have money to spend. Two: you need to have the will. I look at the tourism figures, we’re at the end of the summer. The figures are breaking historical records. Never before have so many Hungarians been on holiday as this year – either at home or abroad. So the number of Hungarians who have been able to go abroad on holiday has never been higher than this year. All I want to say is that these are all figures that give us cause for optimism. And if I look at the European Union forecasts – and Brussels can’t be accused of heaping praise on Hungary, we can’t say that about them – they also say that next year Hungary will be the third best country in the European Union in terms of economic growth. Of course I’m not satisfied with this, because we want to be number one, but third place out of twenty-seven isn’t so bad either. So what I want to say is that, analysing all the data on the Hungarian economy, which we did at the last government meeting, we can say that Hungary is on the verge of an economic recovery: it stands at the gateway to an upswing, and it’s over the worst. The question is this: Is there any threat to this encouraging outlook? Do we have an enemy? Yes! There’s one thing that can cancel out our plans and calculations. This is the war. For if the war deepens and spreads, it will overturn all economic calculations based on the present situation, and will not lift us up, but will bring us down. So we have one enemy, and that’s the war.
We’ll talk about that in a moment, but you and several ministers have said that we need wage dynamics in the Hungarian economy to ensure that this growth is even higher. And there’s already talk of a bigger increase in the minimum wage and the guaranteed minimum wage. How much room for manoeuvre is there? Because obviously it doesn’t just depend on the Government, but also on businesses, who will have to pay.
It depends on the Government least of all. So talk about wages has to be conducted with care. Of course everyone wants to earn more – you, me, your listeners, everyone. So in principle a wage increase is a desirable thing. At the same time, if wage increases aren’t done sensibly, it’s easy for the good news to be followed by a hangover and a headache, because it will turn out that businesses won’t be able to produce enough to pay that wage – and then you’ll be laid off. Or else they’ll cut back on development and then next year they won’t raise wages at all. Therefore, since wages are such a complicated economic issue, it’s best that they’re decided by those who make the money for them. And this is precisely the Hungarian practice. There are a number of Western European countries that are thinking along similar lines. So the best thing is for the workers who earn and the employers who pay to agree every year on what the wage increase should be. Sometimes they can agree, and sometimes they can’t. It’s good when they agree. And in recent years the Government has managed to get them to agree every time. That’s what we’re urging now, and it’s what I’m urging now – that they should agree. It’s best if they agree not just for one year, but for two or three years in advance. I see a good chance of that now, and their negotiations are going well. The only thing the Government needs to do is put its stamp of approval on their agreement and then announce it. The Government’s decision is simply to announce it. But negotiations take place between them. And then we can be sure that they’ll pay all the wage increases that are possible, and there won’t be any wage increases that will come back later to bite workers. So that’s the best solution. Anyone who promises to give a pay rise without being able to or without consulting the people concerned doesn’t know what they’re talking about. Even if it sounds good to us to have a 100 per cent pay rise, everyone would be happy about it, but everyone knows that it’s not reasonable or realistic. So I’m glad that they’ve been able to agree major wage increases this year too, and that there’s a chance that this agreement will be reached for the next two or three years. The room for manoeuvre isn’t small, so I expect a major wage increase. As I see it, following the negotiations we can sustain significant wage increases in Hungary over the next two or three years. This is part of the pre-recovery situation I’m talking about.
And in this respect you’ve said that a lot depends on the question of war and peace. The last time you were here, after the peace mission, you said that if there’s no peace mission, the war will continue to escalate, expand and intensify. Your prediction has been borne out by the news and by events, but in the meantime it seems that German chancellor Olaf Scholz also has a peace plan now. How much further from – or closer to – peace are we now than we were two months ago? How do you see the situation?
The world has never been in trouble, because the normal-minded part of the world has always been pro-peace. So now if I don’t count the Western countries and look at the world map, almost all the countries I see are pro-peace – including the big ones, from China to India and Brazil. And there are peace plans on the table. We had to launch our peace mission in order to get Europe to start thinking about the possibility of peace. This is because the European leaders siding with Ukraine have dug themselves into this war as if it were their war, as if they were fighting it too, as if it were a question of whether or not we would be the ones losing; but we aren’t at war with the Russians – it’s the Ukrainians who are at war with the Russians. And this entrenched, fixed position of European leaders has resulted in a pro-war Europe. We have to get out of this. The way out of this is to start talking seriously about climbing out of the trenches and realising that this isn’t our war. We should also take the position that it’s in everyone’s interest for there to be a ceasefire and peace negotiations, because there’s clearly no solution to this war on the battlefield. If there’s no solution on the battlefield, then there’s no need to call for a continuation of the war, but instead to seek an agreement – regardless of who had what original objective. This is the situation now. Now, our peace mission has triggered this idea, because we’ve stirred up a huge debate in Europe. At first hearing a listener might only note that there’s a debate, but it’s worth bearing in mind that without this peace mission such a debate wouldn’t have started at all, and everyone would still be only talking about war. But once the dialogue, the discourse, the debate on peace started, more and more countries have said that they’d like to join the peace camp. There’s the German chancellor, for example, who’s already said things that three weeks ago would have seen him flayed alive by the German media. So the situation is changing. And I have further plans related to the peace mission up my sleeve. We’ll have some unexpected initiatives in the upcoming period, and every single one of them will bring us one step closer to peace.
Speaking of the German chancellor and his pivot on the war, this week there was another important and interesting German decision: from Monday, Berlin will reintroduce border controls on all German borders for six months. This is part of its fight against migration, but it will also restrict the free movement of EU citizens. You reacted to this German move by saying, “Welcome to the club!” What impact could this move have? Let’s first talk about the Schengen Area.
Ever since 2015, when the migrant crisis reached its peak and this invasion started, Hungary has said that the external borders must be defended. And I’ve never supported those politicians who whined about the impossibility of defending the external borders. Instead of whining, excuses and self-pity, Hungary took a deep breath, built the fence and we caught the migrants. Hungary has not become an immigrant country. Those who didn’t take a deep breath, who weren’t brave enough, who didn’t stand up for their own interests, are now immigrant countries. Whether they wanted to do so or whether they just fell into this situation isn’t a matter for me, but I can tell you that the countries of Western Europe have become immigrant countries. At the same time my conclusion is that because we’ve stood up for our own interests, we Hungarians haven’t become an immigrant country, and whatever Brussels does – even if it stands on its head – we still won’t become an immigrant country. Hungary belongs to the Hungarians. Full stop. But this is only possible if we defend our borders. In recent times border defence has become a negative term. Well, ultimately everyone was required to let the migrants in, and whoever stopped them was the bad guy – that’s how Europe deals the cards. Now Germany is waking up. Germans are starting to wake up to terrorism, crime and the social and financial burden of migrants who don’t want to work. And the Chancellor is waking up. I said “Welcome to the club” because he’s calling for the borders to be defended. There’s only one more step that the leaders of Western Europe need to take, and it’s not a particularly difficult step intellectually: if they say that the borders must be protected, then those who protect them must not be punished. That seems logical enough. And Hungary, which is defending the borders, is being punished by Brussels, with heavy financial penalties, because we’re defending the borders – while other states are urging us to defend the borders, and even closing their borders themselves. So clearly this isn’t right. It’s a mess, it’s chaos, it’s a political shambles, and such a situation has been created by the whole European Commission, the whole European legislature. This must be changed, and we must stand by those countries that have defended the borders and are defending them. For example, the Hungarians must be paid the very substantial amount of money that it’s cost us to defend our borders to date. We shouldn’t be punished, we should be recognised for what we’ve done; we shouldn’t have money taken from us, but we should be given money to be able to continue this work.
What do you think are the chances of the European Commission paying this money for border defence? Because there is indeed a Hungarian demand, and on the other side there’s a demand from Brussels, which they’ve expressed as a fine: they’d demand 80 billion euros from Hungary for migration measures that they see as violations.
It doesn’t look like we’re going to triumph tomorrow, but once we have something, we won’t let it go. So they will pay. It’s a matter of time: it may take a year, it may take three, it may take five; but they owe this money and they have to pay it.
Is the German chancellor’s pivot likely to bring about a change in migration policy at EU level?
All credit to the German chancellor, if only as a mark of respect for his office. But the Chancellor didn’t come to this conclusion on his own: he came to this conclusion because migrants stabbed some peaceful German voters in the street; and it’s because crime has increased, and they can no longer pay the costs of this bad policy. And people were outraged. So let’s be under no illusions – it’s not that the German chancellor has finally managed to correctly answer a difficult intellectual puzzle. It’s not that, but a very simple question: Do we let in the migrants or not? The wrong answer he’s given so far had to be changed; in response to popular pressure, to pressure from the people, his position had to change. The fact that the German people have finally got their own government on their side is a success for democracy. There’s only one country in the whole of Europe that started out by asking the people. Everywhere else it’s been the elites – the political leaders – who have decided whether migration is right or wrong. Well, these people are driven by ideology; they don’t live on Earth, they live under the spell of theories, in a fog. Is migration good or bad? You don’t have to think about it too much, but you have to ask people. Because those who will suffer the consequences of migration aren’t the politicians living in elegant villas, but the citizens who actually live and work in the suburbs, in the housing estates, in workplaces. They must be asked! And Hungary was the only country to say, at the very beginning, that we should hold a referendum on this. Let us decide whether or not Hungary should be an immigrant country, whether we accept that Brussels has the right to say who can reside in Hungary, or whether we reject that and defend our sovereignty. The people of Hungary have made it clear that this is out of the question. This is our position. Now even the Westerners, who were sitting backwards on the horse, are now realising that it’s simpler to do what they’re told by the people who are actually suffering the negative consequences of immigration, instead of listening to all the theorising eggheads who have shown on paper how liberal immigration policy is beneficial, while the people shake their fists. So it’s time for real, flesh-and-blood people to decide on this issue – not just in Hungary, but across Europe.
I’ve been asking Prime Minister Viktor Orbán about the state of the Hungarian economy and its prospects, about the question of war and peace, and about migration.