Zsolt Törőcsik: It’s been an eventful week for Hungarian economic policy, with the debate on next year’s draft budget starting in Parliament, and representatives of workers, employers and the Government signing a three-year wage agreement on Monday that will allow the minimum wage to rise by 40 per cent by 2027. I welcome Prime Minister Viktor Orbán to the studio. Good morning.
Good morning.
Before we talk about that, let’s turn to a topical issue that’s due to take place this weekend, because there are parliamentary elections in Romania, and a very uncertain, very intense situation has developed after the first round of the presidential election last Sunday. In this situation, what’s at stake in this weekend’s election, from a Hungarian point of view, from the point of view of Hungarians?
Indeed, Hungarians are voting this weekend – not in Hungary but in Romania. There’s a very large Hungarian community there. Unexpected events have taken place for which the stakes are high. I think they’re also instructive, perhaps. All the stops are being pulled out, because the people are directly electing the President and Members of Parliament: last week saw the first round of the presidential election, this Sunday there’s the parliamentary election, and then there’s the second round of the presidential election. From this, what’s important for us is that there’s very little realistic chance of the Hungarian candidate winning the presidential election in Romania, although President Hunor Kelemen of the RMDSZ [Democratic Alliance of Hungarians in Romania] has put up a fantastic fight. I’ve tried to follow the political debates, which were, of course, conducted in Romanian, and I saw that we can be proud of the President of the RMDSZ. In this very difficult political and cultural situation, in which he’s had to compete with Romanian candidates for the Romanian presidential position, he’s done a good job in every respect, worthily representing not only the Hungarians of Transylvania, but also the Hungarians as a whole. So we’re also able to produce such a politician outside the borders of Hungary. I think this is a source of pride. We’ve had similar experiences in the past; perhaps we pay less attention to such things, but in the previous decade we had an absolutely excellent presidential candidate in Felvidék. And so I think we can be proud of our Hungarians beyond the border. The question now is whether they’re proud of themselves. Because if they are, and I hope they are, then in the election on Sunday, the parliamentary elections ahead of us, they must resolve to have parliamentary representation for Hungarians living in Romania. If not enough people turn out, there will be no parliamentary representation. And we’ve learned that without parliamentary representation it’s impossible to defend the interests of the Hungarian communities living in the whole Carpathian Basin. Therefore the Hungarians living in Transylvania are facing a crucial, fateful election, and I encourage them to vote in the elections and to ensure their own parliamentary representation in Romania. This will make our work – and my work – easier, and if they’re adequately represented in the Romanian Parliament it will be easier for us to help them from here in Hungary. Aside from the Hungarian aspects, an extremely interesting thing happened in the presidential election, which the Constitutional Court is now dealing with: the official list of results in the first round hasn’t even been finalised. The phenomenon I’m talking about is the electorate coming face to face with modern technology. This is about what electronic devices – TikTok and goodness knows what platforms – can or cannot be used, what regulations are in place, how this affects people, if at all, and if so, whether it provides a legal basis for their decisions to be reviewed. So it draws attention to an extremely high-stakes, unresolved problem that sooner or later will also arise in Hungary. So we’re grateful to the Romanians for testing this for us as a quasi-laboratory. Later we can look at the lessons from this debate to see whether we have anything to do to prevent similar problems here in Hungary.
And in this respect the next two Sundays will certainly be challenging.
Let’s keep our fingers crossed.
And they’ll produce events to be analysed. But what’s certain is that earlier this week Hungary reached a wage agreement, which means that next year there will be a 9 per cent increase in the minimum wage. What impact will this have on people? When and how will it affect other wages? Because, as we tend to say, the increase in the minimum wage is the basis for the increase in other wages.
The Hungarian minimum wage system is perhaps unique in Europe in that it’s two-tiered, as opposed to the logical thinking that would suggest that if there’s a minimum wage, there’s just one, because that’s the minimum. But that’s not the case here – we’re Hungarians, so we have two minimum wages: there’s a minimum wage, and there’s a so-called “guaranteed wage minimum” – or in plain language a minimum wage for skilled workers. The average of the two gives us roughly where the minimum wage level in Hungary stands in European comparison. In fact we’re in an increasingly good position! Now, of course, wages have to be agreed between employers and employees. So those who give the money – the businesses – and those who receive the money – the employees – have to agree on what the businesses can bear and how business owners and employees will share the profits generated by businesses. Here the government has a mediating role. So we’re helping to bring about the agreement, and we make no secret of the fact that we’re happy to see higher wages in Hungary. In fact, one of the aims, one of the purposes of our governance is to ensure that people live as well as possible; and for that we need higher wages and more money. This is why we’re always in favour of raising the minimum wage. But we understand that the point of view of businesses is that if the minimum wage goes above a certain level and the Government doesn’t help them, they won’t be able to pay it, they’ll go bankrupt, and in fact there will be no minimum wage increase, but a reduction in wages, because people will have to be made redundant. This is a logical argument from them. So these aspects have to be reconciled. The Hungarian government has a yardstick, a guiding principle. We want the average wage in Hungary to reach one million forints. Our experience is that an increase in the minimum wage pushes up all other wages. So with this agreement, the Hungarian government can have an impact not only on the minimum wage, on the increase in the income of the lowest earners, but also on wages above that, because it pushes them upwards – and not by a small amount. We’ve concluded a three-year agreement: we’re talking about 2025, 2026 and 2027. These three years together will give us a 40 per cent increase, which is unprecedented not only in the history of Hungary. If we weren’t in such a tired early morning mood, but in the afternoon, when it’s possible to swim a world record, I’d say that this is an agreement of historic importance or historic scale. Now in the early morning I’ll just say that this has never happened before, and I think there’s been such a wage increase only once in Europe. So we can be proud that businesses and employees have been able to agree on such a large wage increase – which of course required the Government, which is helping businesses to pay for it through complicated tax breaks. If this continues – and why shouldn’t it? – in Hungary we’ll reach an average wage of one million forints. This is our goal – about which, of course, everyone is incredulous. So when we announced this I heard a chorus of doubters; but I think this is no different from the doubts that we were faced with ten or more years ago, when in 2010 I announced that we were going to create one million jobs. I was told that such a thing was impossible, but today in Hungary there are 4.7 million people working, instead of 3.7 million back then. So I think that Hungary can achieve an average wage of one million forints – it can do that.
A key question, as you’ve mentioned, is what a business can afford in terms of wage increases. A survey by the Hungarian Chamber of Commerce and Industry shows that 85 per cent of companies think that they can cover this cost. At the same time, when you signed the agreement you warned that if the Hungarian economy performs at the same rate as last year and the year before, you won’t be able to produce the increase. What will it take to increase the rate?
One has to ask whether it’s a good thing to want to increase wages. From 1 January the Government is also quite substantially raising the wages of many groups of public employees – not all of them and not as much as they should be, but already other groups are seeing substantial raises. We’ll eventually ensure everyone gets rises, but the question is always how to afford it. Here too, the question is this: How will businesses pay? My contention is that it will be difficult for them to produce this high wage increase without improvement in efficiency and productivity. So capacity for the classic solution – that businesses will pay workers higher wages and pocket less profit – has been exhausted. Today Hungarian companies are paying the wage levels they can afford. If they want to pay more than that, and we want them to pay more than that, we need to improve efficiency. This is where we can help, and this is why last week I discussed with the Chamber of Commerce and Industry – which represents employers – that we’ll accept the Chamber’s proposals. They want less administration, tax cuts, better vocational training and programmes to improve efficiency, such as increasing the level of digitalisation in businesses. They also want the Sándor Demján Programme, in which small and medium-sized enterprises receive capital grants, and this development will help them earn more money, which they can use to pay higher wages. So the simple answer to the question of where the money will come from is this simple answer: from economic growth. And to achieve economic growth, companies have to do more and do better. This is partly the job of the workers, and partly the job of the managers: to organise work better and to research the market more intelligently. So this is the classic task of management. If the quality of management doesn’t improve, then many firms will find these higher wages difficult – or impossible – to pay. But it’s not the job of government to preach to company directors about how to do business. This is the job of the Chamber of Commerce and Industry. I see that it has new leadership, whom I congratulate; and the new leadership is aware of this, will give this help to businesses, and won’t hesitate to come knocking on the door of the Government to make requests and suggestions.
In addition to economic policy, monetary policy will also cross a boundary next year, as György Matolcsy’s mandate as governor of the Hungarian National Bank [MNB] expires in March, and the law requires the Prime Minister to nominate the next MNB governor. What criteria will you use for this, and who will you nominate for the post?
Time is ticking away on this. A change of central bank governor can’t be done overnight: it’s a process that requires thorough preparation. The fact is that the law doesn’t allow the Governor to stay for more than two terms – which is a pity, because György Matolcsy has done a very good job, an excellent job. We’re talking about an impulsive personality, who’s issued continual prompts to the Hungarian government. I’m very grateful to him for his work, for the way in which he’s proposed ever more innovations and pushed us in government. And he’s also produced heroic deeds. Let’s not forget that György Matolcsy has performed heroic deeds, and one of them is known to all of us: the issue of foreign currency borrowers. Without György Matolcsy, hundreds of thousands of families would have been financially ruined. He was the one who, by proposing the right decisions to the Government at the right moment, finally rescued foreign currency borrowers from the trap into which hundreds of thousands of families in Central Europe had fallen. So now we’re saying goodbye to a central bank governor who, morning after morning, has made history. But now we need a new governor. Well, in terms of economists Hungary isn’t badly off. If you look at any gathering of economists, you’ll see a lot of people there, and there are economics journals that have authors; but here, of course, it’s not just theoretical skills and knowledge that are needed. The National Bank is a very important anchor in Hungarian economic policy, because that’s where the value of our money is preserved. It’s also where our gold and foreign exchange reserves are kept – but that’s less important now. Because it’s where they have the power, the knowledge and the decision-making capacity to protect the value of the forint, and where they have to fight inflation. Everywhere in modern economies – not just in Hungary – the central bank plays a key role, as essentially the guarantor of stability. So, from among the many good economists, I’ve tried to find the one who’s the most experienced, the most relaxed, the calmest, who’s battle-hardened, who can see through bluster, who isn’t afraid, and who can stand his ground in any difficult situation. This requires experience – and not only is intellectual ability important, but also knowledge, and experience in economic policy. In and around the Government today there are certainly two such people: we have the Minister of Economy and the Minister of Finance. Incidentally, our Minister for Energy, who used to work in the financial field, also came into the reckoning. So this was the real choice, as I didn’t want to choose from among theoretical economists – because, as I said, practice is important here: reliability, predictability. And in the end I chose the most predictable and calm person among them, and he is the Finance Minister Mihály Varga, with whom I’ve been negotiating for weeks on this issue, on how he sees the possibility of this. He finally accepted the nomination, and I’m grateful to him for that. He’s been a Member of Parliament since 1990 and he’s risen up through the ranks of parliamentary economic policy: he was State Secretary for Economic and Financial Affairs, so he knew economic policy from the middle management level, let’s say, and then he was a minister for many years, as he still is. So I can safely say that Mihály Varga is Hungary’s most experienced economic politician and economist. So in the end I rejected the temptation to ask the former Deputy Governor of the Central Bank – who’s now Minister for Economic Affairs – to return to the National Bank, and we decided to go with Finance Minister Mihály Varga, for the sake of calmness and predictability. I’m grateful to him for accepting this. I’ve submitted the proposal to Parliament, because in such cases the parliamentary committee – the Committee on Economic Affairs – has to hear the candidate.
Is it already apparent how his departure from the Government will – or could – reshape the structure of the Government?
Yes, because if you turn one tuning peg, you have to know that several other pegs in the instrument have to be adjusted accordingly. This is what I’m working on. From 1 January, we’ll undoubtedly be working in a different system of economic governance. I’ll be happy to talk to you about the details of this in due course, in December.
In this studio we’ve often talked about the fact that the economic goals – the economic objectives set by the Government – can only be achieved if next year is a year of peace. But since our conversation last week both the British and the French have allowed the Ukrainians to use their weapons on Russian territory, and the French foreign minister has again raised the idea of sending Western troops to Ukraine. What do you see now? What’s the goal of the warring parties in the period up until Donald Trump’s inauguration?
We’re in a very difficult situation, and also a strange situation, because we’ve never been so close to peace, and yet we’ve never been in a war situation as dangerous as the one we’re in now. Both are true at the same time. But not all news can be accurately verified. There have been two pieces of news that are shocking and that draw attention to our responsibility – to the responsibility of European politicians. The first is that the Russians have launched this missile, the existence of which we didn’t know about until now, and which is capable – it’s an intercontinental ballistic missile – of delivering nuclear warheads. I don’t want to bore anyone with technical parameters now, but I’ve looked at the parameters of such a nuclear warhead, and I wouldn’t wish it on anyone – even if such a thing were dropped thousands of kilometres away, because it has such destructive power. And it turns out that the Russians can deliver them. So if these are used, the war will really become a world war, and it will also have a nuclear dimension. So this demonstration of weaponry has got us all thinking; and I very much hope that it will not only instil caution in us, but also in Western Europeans. The second piece of news, which is also difficult to verify, is that Westerners have now also died in Ukraine – and not civilians, but soldiers. So according to Russian reports, American and French soldiers were killed there in air strikes by the Russians on Ukrainian territory. This means that there are Western soldiers there. And I go back to what we said at the beginning, that of course at the beginning people just say: “We support the war”; then we’ll send weapons; then if we’re sending weapons, someone has to get them up and running, someone has to start operating them; and then you need experts and advisers; and sooner or later soldiers will turn up too. So we’re in a very dangerous situation, because in Ukraine today it’s possible for those being killed to include personnel with Western European or American military status. This is what’s happened. We pray for them, of course, and it’s a great loss for everyone; but it shows the danger of escalation, of escalation of the war. So it’s no longer just a question of Ukrainians and Russians dying in Ukraine, but now Westerners are also dying. This is an extremely dangerous moment. This is why what happened yesterday in the European Parliament was dispiriting, because it’s clear that the European Parliament and many European heads of government want to continue the war – and even increase its intensity. They passed a resolution saying that it’s true that a pro-peace president won in America, but there’s still a pro-war administration, a pro-war government, and there’s still time to support the Ukrainians even more strongly. Yesterday the Americans also made a decision: the administration that lost the election decided to send huge sums of money to Ukraine. And the European Parliament passed a resolution demanding that the war should continue. So at the moment, the Trump effect – Donald Trump winning the US election – isn’t being felt in this war situation. This is a big problem. We have to survive this month and a half or two months. We’re working intensively on diplomacy for a ceasefire and peace.
Well, yes, an important question is how pro-peace diplomacy can counter these efforts over the coming term, even in opposition to the European Parliament and the European Commission – the latter taking office on Sunday, with its old-new President, and which has repeatedly stood for support for Ukraine.
On Sunday I’ll have a telephone conversation with the new President of the European Commission, and then I’ll be wiser.
Coming back to the new economic policy, there’s also a national consultation on this, and the governing parties have also gone on a nationwide tour related to the issues in the consultation. What’s the reaction to this, how are people receiving the elements of the new economic policy? What are they saying about it?
They’re waiting for it, because we’ve had a very difficult few years: war, sanctions, skyrocketing energy prices, high inflation; it’s taken its toll on everyone, on the whole of Europe, including on us Hungarians, and they’re waiting for it to end and for a new economic policy to begin. It’s the task of the Government to bring this period of war to an end and to launch a new economic policy. We Hungarians have done what we could to end this war. God has also been with us, because America will now have a pro-peace government, and therefore we’ll be able to bring the war to an end. Ending the war means peace. Peace means security, and security is good for the economy. This is the most basic relationship. The question is whether we can take advantage of the opportunities that peace offers. And Hungary isn’t being sluggish, we’re not sleeping, we’re not wasting a single moment: we’re seizing the opportunity. This is the budget that we’ve submitted. This budget, which is now being debated in the Hungarian parliament and which summarises the goals of economic policy, is based on the assumption that Donald Trump can end the war. So we have a peace budget. This peace budget gives us the opportunity for a new economic policy, which is why we have the large minimum wage increase, why we’re launching the workers’ credit scheme, why we’re launching a programme to support small and medium-sized enterprises, why we’re launching a number of new instruments to facilitate housing, and why we’re launching new instruments to support young people. These are all part of the new economic policy. I hope that Parliament will adopt it soon, and then we’ll be able to tell people more widely about the new opportunities for families in 2025.
A recent survey shows that the majority of people support measures to promote housing, for example; but the same can be said of other economic policy objectives. If there’s such support for these measures, what’s the need for a separate consultation on them?
Initially we have to implement these measures in the face of opposition from the European Union: the European Union is demanding things from Hungary that would make these measures impossible. So it’s not a question of some clever people coming up with new measures. We know exactly what the Hungarian people want, where people are feeling the pinch, and where we should help. We’re trying to create the financial means to do this, and then to provide them with family support – for example, in the form of doubling the tax allowance for families with children, or workers’ credits for young people and so on. But the economic policy that we’re pursuing is constantly being blocked and attacked by the EU. They’re constantly calling on us not to do this, not that, not this, not that: no thirteenth month’s pension, not too many wage increases. So from the EU side, from Brussels, we’re receiving economic policy demands that are explicitly contrary to the interests of the Hungarian people. Now, I want to keep them at bay and protect Hungary from these decisions by Brussels. To do this we need to fight, and to fight we need strength and support. Now we’re talking about economic policy, but we’re fighting on two other fronts besides economic policy. So, to clarify matters, we’re in opposition in Brussels, where just yesterday or the day before yesterday European parties signed a coalition agreement, which includes the Tisza Party and DK [Democratic Coalition], but not Mi Hazánk [Our Homeland] or Fidesz. They’ve signed such a document, forming a majority in the European Parliament. And it’s not only in economic policy that we’re faced with a battle: on migration, these fine parties with a majority in the European Parliament – including the Hungarians – are saying that the Migration Pact must finally be implemented. For Hungary that would be fatal. But this is also the case on gender – in which, by the way, the trial against Hungary has begun in the European Court of Justice, where they want to annul the Child Protection Act. In fact there’s an opposition party that’s announced that it would prefer to give children in child protection institutions to same-sex couples for adoption, so that in Hungary homosexual couples could adopt children. This is completely contrary to the Child Protection Act. And this is being litigated in Europe in a lawsuit against us. So we’re fighting on economic policy, migration and child protection at the same time. The purpose of the consultation is to strengthen Hungary’s position in this struggle, and to fight these battles successfully; because these are battles that not only need to be fought, but that also need to be won.
Among other things, I’ve been asking Prime Minister Viktor Orbán about topics including wage increase, the new governor of the National Bank, and the risk of escalation in the war.