Zsolt Törőcsik: The Government has introduced a so-called “margin freeze”. According to this, from Monday the maximum margin that retail chains will be allowed to charge on thirty specified products will be 10 per cent. I welcome Prime Minister Viktor Orbán to the studio. Good morning.
Good morning.
For several weeks now we’ve been talking about the fact that if the shops don’t voluntarily reduce their prices, then some kind of intervention may be introduced. Why has the Government’s patience run out now?
The fact is that we’re seeing a number of economic events that should have caused prices to fall. So now, thanks to the efforts of President Trump, the Ukrainian–Russian war is nearing peace, and signs of this are appearing in the economy. For example, there’s the Hungarian forint, which has been repeatedly dipping below the level of 400 against the euro. This means that food imports should be cheaper than when the forint was weaker. Or I see that in the world energy market the price of gas has started to fall. This is good, because then the reductions in household energy bills paid for by the Government will cost less. And the price of oil has also come down. I can see the signs of this at petrol stations, but I don’t see it in prices: if the price of energy is falling, it should be reflected in prices, but precisely the opposite is happening. So this is definitely not right. And we’ve discussed this with the retailers. They did propose a price cut, but it was so minimal that it was far below what the Government expected and what people could have felt. And so there was no choice but to intervene – even though one doesn’t like to take such extraordinary measures. But it’s not just me, and it’s not just us. I’ve looked at what’s happening in Europe, and I can tell you that the solution that we Hungarians have now chosen is also being chosen by a number of other European countries – or by four of them. And what we have in reserve is that, if this doesn’t lead to results or to sufficient results, there will be an even harsher form of intervention. And one or two countries in Europe are also using this.
It’s an interesting question, isn’t it, that in the past the price freeze has been the Government’s tool in these situations. Why have you now decided, as a first step, to cap the profit margin?
It’s a complicated issue, but I’ll try to keep it simple. When you talk about a food item that you see on the shelves of a supermarket, there are three actors behind it: there’s the farmer who produces it, then there’s the food processor who processes it, and then there’s the retailer who sells it. The farmer sells milk for 200 forints, and in the shop it’s sold at 550–600 forints. When you apply a price freeze, the retailer is able to pass on the effect of the price reduction to the processor or the buyer: to reduce the price paid to the producer, the Hungarian farmer. When one regulates profit margins, one is saying that no matter how much you bought the goods for, Dear Retailer, the amount you can add to the price you purchase at can be no more than 10 per cent. This includes your costs and this includes your profit. Thank you and good day! And so you can’t pass this on, you can’t push it back onto the producers. And so farmers – Hungarian farmers – won’t be worse off. This is why many European countries prefer to focus on margins. But if there’s no alternative, if a price level has to be regulated, if a price cap – a regulated price – has to be introduced, it can be passed on downwards by traders. But it’s a stronger guarantee for keeping prices down. Now we’re only in the middle phase.
Compared to previous measures, the scope of the profit margin freeze is broader, covering thirty products and product categories. What was the basis on which this range was selected?
The Ministry for National Economy has reviewed the entire range of products and has included thirty foodstuffs that are considered essential. One can always argue about this, but I think it’s realistic. So the reality is that generally these thirty products are the ones that pensioners and families buy most of.
The first round of this measure will be in force from Monday, and will remain in force at least until the end of May. What impact will shoppers feel in the shops, and when will they feel it?
I can already see the effects: I see a lot of price reductions. This 10 per cent margin freeze, the maximum profit level, will come into effect on Monday; and from then on I think this will be even more obvious. We’re Hungarians, and of course the retailers will think of something, this or that, and we’ll respond to it. I don’t want to bore the listeners with the details, but – once again – we’re Hungarians: everyone has an idea on how to respond to a government move, and the Government also has an idea what we’ll do. But let’s not get ahead of ourselves just yet.
Yes, because the critics have already pointed out that in that case it could even increase inflation – because the shops will make their profits on other products. So would the Government have a response if this were to happen?
Of course: that would be impossible if we extended it to all foodstuffs.
Of course it’s also important for inflation to be beaten down in order to maintain the value of the various family allowances. In relation to these, by the way, you announced a new element at last week’s economic opening event of 2025: full personal income tax exemption for mothers under 30. How does this move fit in with the tax-cutting measures announced earlier?
We’re building a family life-path model. We believe – and time will tell if we get this right – that the key to having and raising children is whether or not mothers feel secure. Of course, mothers will feel most secure if they can rely on their husbands. So here, where the number of children is low and there are also problems with parenting, it’s not first and foremost the mothers who need to be focused on, but mothers. It’s always good when men embark on this kind of self-evaluation. So the best thing, of course, would be if mothers could rely on healthy, vigorous, working and well-paid men. But they’re either there or they aren’t. And since the number of divorces is high, and the number of mothers raising their children alone is also high, I see that there’s fear in the minds of mothers in relation to what will happen if they don’t find such a man, or if they end up being on their own. Then suddenly all the problems of child-rearing and the financial burden of child-rearing will fall on them. This is why they work while bringing up children. I think this is heroic, because if someone has several children and sees what his wife does up close, and sees the problems and difficulties and effort that go with that, and sees her working four – or even eight – hours a day, then that’s something to be applauded. So if mothers are alone and work, and there’s child-rearing and then the state takes taxes from them, then their financial resources are bound to be meagre, to be weak. So we’re working on something I personally see as the key issue: how we can help mothers feel safe and secure in having children and devoting their lives – or at least part of their lives – to raising these children and to raising them as decent human beings, making them decent human beings, and offering them the joy of family life. This is what I want to help with, and this is what the Government is working on. Now this is a life-path. What it means today is that a young person who is over 18 and working – whether a young man or woman – will pay no income tax until the age of 25. If this is a woman who has a child, she won’t pay any income tax until she’s 30. If she has two children, she won’t pay any income tax from then until the end of her life. This is a very large amount for public finances to cover, so we’ve already introduced some elements of this and we’re introducing other elements in succession. For example, from 1 January there will be personal income tax exemption for mothers under the age of 40 with two children, then the following year for those aged between 40 and 50, then for those aged between 50 and 60, and so on. And because this is about mothers, on top of all this there’s also a family tax credit scheme: if a child is under 18, the father can deduct the tax credit from his tax and contributions, depending on the number of children. So there’s another financial help there. I think it’s hard to do more for families than this, and no one else in the world is doing so. So what we’re talking about here is unique, a world sensation, a Hungaricum, with nothing like it anywhere else in the world. This isn’t how people usually think. In Western civilisation governments think that income tax is an individual matter, a personal matter: you have earnings, and you’re taxed on them. But for the fifteen years I’ve been at the wheelhouse, the attitude of Hungarian economic policy has been that this isn’t the reality. This is because people don’t live alone: the vast majority of people live in families. This is why we’ve tried to make family status – the fact of living in a family – the basis of the tax system. And this is how we’ve worked so hard to get to the point at which we can now put in place the final stone, take the last and undoubtedly biggest step: lifelong tax exemption for mothers. And with this an economic system is being created in Hungary that can’t be found anywhere else in the world: a family-oriented economic system.
How does the Government expect these measures, these tax cuts, to change the situation of families?
Everyone has all kinds of hopes for such a move. I’m always one of the cautious bulls. I believe that what’s fair and just – perhaps equitable is the better word – is that when someone commits to having a child it’s not only for their own joy. That’s undoubtedly the most important thing; but for our community, for our national community, a key issue is also whether or not we exist, whether or not we’re disappearing. So although it’s their personal issue, it’s a commitment that’s important not only to them, but to all of us. Now, those who do make the commitment shouldn’t be in a worse financial situation than those who don’t, those who don’t have children. The difference between the two is something that I’m trying to reduce. This is so that we can say, “You’re having a child, but it won’t make your financial situation worse.” We’re far from that, by the way. The situation is much better than it was earlier, but we’re not there yet. It will take a few more years, and then, when the whole family life-path model is in place, we’ll be very close to being able to say that those who have children are financially no worse off in the short term than those who don’t have them. In the longer term there’s no doubt in my mind, but it’s a question of life philosophy: those who have children will be better off, because what they lose in the short term they’ll immediately gain back in their hearts; and if they manage to bring up a decent child, and they usually do, because after all most Hungarians are decent people, then they’ll look after their mothers and fathers when they’re older. So there’s no question that in the long term living in a family not only makes you happier, but it’s also more financially advantageous. But it will take many years for a family to get to this point, and that’s when we need the family life-path model that the Government is offering now. By the way, the good life won’t be compulsory, and anyone who takes part in it does so of their own free will.
You mentioned that this will take up a large amount of the current budget. In the meantime, we see that the German economy continues to weaken, industrial production in Hungary fell in January compared to the previous year, and at the same time almost all elements of the 21-point economic policy action plan have been launched and the Government has announced new stimulus measures. How can these programmes offset the negative trends?
We see 2025 as the year of breakthrough, and we’re basing our strategy on peace, so we’ve taken the view that after the changes in the US it won’t only be Hungary that’s on the side of peace, but the Americans will also be too. And, let’s face it, the weight of peace will be greater, and therefore the world will move towards peace. This will have positive economic effects. This is what we’ve calculated in our budgetary policy and in our economic plans, and this is what will create the possibility of an economic breakthrough. Now, when we’re in such a breakthrough, there are simultaneously both positive and negative developments, because there are still bad things from a long time ago, before the breakthrough year. But good things have already appeared, which are coming in because of the new measures. For me the essence of this, the summing-up, is that good news and good signs are arriving all the time, which are replacing the bad news left over from the war, as we’ve announced economic programmes – such as the aforementioned family life-path model for small and medium-sized enterprises in the economy, the programme to build 100 factories, or the programme to widen access to housing and home ownership. The ratio is changing gradually, day by day. And in the end the bad things left over from the war will disappear, and the good news, good conditions, good opportunities generated by our economic programme will dominate economic life. This is my vision of 2025.
Last week, after the EU summit, you announced that the Government will launch an advisory referendum on Ukraine’s accession to the EU. Yesterday [Minister of the Prime Minister’s Office] Gergely Gulyás said that everyone will receive a ballot paper with a question on it. Can you tell us what the question will be, and what people who answer the question will need to do with this ballot paper?
The Government has decided on the technical details, but the sentence itself, the single question, hasn’t been formulated – that task has been given to the appropriate minister. Everyone has seen national consultations, and this will be the same; the difference is that this time we’re not asking people’s views on ten or so questions, but on a single question. It will be as easy as pie.
Some of the critics of the referendum argue that Ukraine won’t be a member of the European Union any time in the next few decades anyway, so this vote is unjustified. What’s your view on the determination of the Brussels leadership to see Ukraine become a member of the EU – even within a few years?
In the European Parliament yesterday – or the day before yesterday – the President of the European Commission said that this must happen during her term in office: by 2029, 2030. So let’s be in no doubt that the position in Brussels today – the official position – is that Ukraine must be admitted as quickly as possible. And by this they mean within a year or two. And let’s not forget that, in the meantime, another decision has been taken – because all the other Member States, unlike Hungary, are in favour of continuing the war. So there’s still a pro-war majority in Brussels. Now there’s a pro-peace majority in the Western world because of the Americans; but there’s still a pro-war majority in Brussels. And the offer is very simple: the European leaders have decided that Ukraine should continue to fight in return for fast-track membership. But this will ruin us! I’m thinking of the whole European Union, but that’s less important to me as a Hungarian: I’m interested in what will happen to the Hungarians, and what will happen is that it will destroy the Hungarians. So we need to talk seriously about this. Brussels is a long way from Ukraine, but Hungary is just a hop, skip and a jump away – because we’re talking about a neighbouring country. So in our case the consequences are more obvious, more direct and rapid. We mustn’t allow a few eggheads in Brussels to decide on paper, from their desks, whether or not Ukraine can become a member of the EU. We – the real, down-to-earth Hungarian people – must decide on this issue. And we have the right to do so, because, according to the Treaty on the European Union, no one can be a member of the EU without the support of all the Member States. So on this Hungary will have a decisive say.
Since last week’s announcement, by the way, there have been many reports in the Hungarian press relating to Ukrainian membership, including on financial, security and agricultural issues. What do you think the Hungarians should consider when they answer the question of whether or not Ukraine should become a member of the EU?
Hungarians are a colourful breed. Many different things can be thought by even just one person, let alone several. So, as it’s a very complex issue, I’d advise everyone to approach it according to their own way of thinking. So there are obvious economic issues. There are labour market issues, and there’s the issue of the future of health care. Then there are public security issues, border security issues, and all sorts of military issues. Obviously the economic aspects are the closest to most people. With full responsibility I can say that Ukraine’s membership of the European Union would devastate the Hungarian economy.
What’s the reason, by the way, for Brussels rushing ahead with accession? You’ve mentioned, of course, that on the other side there’s also the intention that Ukraine must fight on. But just now there was an analyst here who contrasted this with the Western Balkan countries, for example, which have been waiting for EU accession for much longer – and, as things stand, seem to be much further away from it.
Serbia could be admitted tomorrow morning, and we wouldn’t suffer any ill effects. In fact it would have enormous economic benefits – for the whole of the European Union, but especially for Hungary, because we’re a neighbouring country. North Macedonia could also be admitted tomorrow morning. Montenegro tomorrow morning. This would be of enormous economic benefit to Hungary, because our neighbours and the countries in the region would be admitted to the European Union. This would expand our economic opportunities in an extreme way. It’s no coincidence that Hungary has been at the forefront in calling for the admission of the Balkan states. But they’re a different kettle of fish: in terms of their condition, their development, their functioning, their prospects, these countries cannot be compared with war-torn Ukraine, which would only take money and bring nothing.
While the focus in Hungary has been on Ukraine’s membership of the EU, the European Parliament has adopted a resolution on supporting Ukraine with more money and more weapons – including, for example, a resolution that each Member State should spend a certain proportion of its GDP on supporting Ukraine. What do you think about this plan?
It’s insane. I think the starting point is wrong. The majority in the European Parliament who voted for this say that the future of Europe will be decided on the battlefield. But that’s not the case, because the future of Europe cannot be decided on the battlefield: there’s no solution there, and it can only be decided at the negotiating table. Therefore we must strive for peace and negotiation. They don’t see it this way, but they want war. This is also affecting Hungarian political life, because – just as in Europe – there are two kinds of Hungarian parties: there are pro-peace parties and there are pro-war parties. And this coincides exactly with the division of parties in the European Union. The traditional Hungarian Left – DK [Democratic Coalition], for example – belong to the European Socialists. They’re all pro-war, they all want the war to continue. There’s the Tisza Party, which belongs to the European People’s Party. They went in there after we left the European People’s Party because we were fed up with them, but I won’t repeat that old story. The European People’s Party is the most hawkish, most pro-war actor in the European Parliament. Everyone there – including its Hungarian member party – supports the war. So although they belong to different party groups, the two Hungarian opposition parties – DK and Tisza – are both pro-war. And we, Fidesz and KDNP – and to be fair I must also mention Our Homeland, who are on the pro-peace side in the European Parliament – are opposed to them. This is the division here at home, and this is also the division in Brussels.
Now, this document, which was adopted by the European Parliament, calls on Member States to provide more support to Ukraine. And there’s a passage in it that strongly condemns the Hungarian government for threatening to block the renewal of the EU sanctions framework. There will be another EU summit next week. What should the heads of state and government do about this parliamentary resolution?
The MEPs and the prime ministers follow the same path: so of course the prime ministers who are backed by Socialist–People’s Party coalitions at home are pro-war, and Hungary and Slovakia are anti-war. I expect a very fierce and difficult debate. Now we’re coming to the end of our time so I don’t want to digress, but there’s also the issue of European defence development, which we’ll be discussing as one of the details related to the war in Ukraine. The key question in this is where we want to get the funding from – both for Ukraine and the Ukrainian army, and for our own defence industrial development. And on this in the European Union there are two camps. One side says, “Of course, let’s do it, even if it’s a joint effort, and let’s each put in the money from our own budgets.” The other camp says, “No, let’s take out loans – great, gigantic loans together; and the whole European Union will guarantee the repayment of these loans.” The Hungarian Constitution is clear: that’s not possible! In other words, it would only be possible for Hungary to join or participate in such a long-term spiral of indebtedness – and I think that this is very dangerous – if it had the support of two thirds of the Parliament. Therefore Parliament must say something about this before the European summit on Thursday, so that I have a mandate to represent one position or the other. I’m arguing, by the way, that Hungary shouldn’t agree to the Member States of the European Union taking out collective loans, going into debt, and not only sinking our children in debt, but also our grandchildren. I don’t think that Hungary should be involved in this. Let’s take part in joint defence, in joint defence policy, let’s throw money at it for the sake of collective defence; but we certainly shouldn’t do it with collective debt.
I’ve been asking Prime Minister Viktor Orbán about topics including ways to bring down inflation, tax cuts and the prospects for Ukraine’s EU membership.