Zsolt Törőcsik: Yesterday saw the publication of the government decree on the fixed 3 % loan programme, the aim of which is to help people purchase their first home, and which will start in one month, on 1 September. I’ll be asking Prime Minister Viktor Orbán about the scheme’s other objectives. Good morning.
Good morning. I welcome your listeners.
Especially since the COVID crisis, we’ve seen young people across Europe experiencing uncertainty about the future – or frustration, perhaps. In this situation, what message does this support programme send to them?
There is trouble in the world, undoubtedly since COVID. This is like when coffee is stirred and the grounds float around somehow; one can’t see what will emerge, and there’s this uncertainty in the world. Then we’re saddled with the Ukrainian–Russian war, and now the US president has started a series of, let’s say, trade wars. So there’s a lot going on in the world. A technological transition has begun, robots have arrived, artificial intelligence is here, and many things that previously seemed stable are now being called into question. So in this environment everyone has to find their way. We older people find it easier to find our way because we have less time ahead of us, and we don’t have to make very long-term plans. We also have experience, we’re already on our feet, and we have livelihoods. But for young people this uncertain environment makes it even more difficult to know whether they can drop anchor anywhere at all, or whether they’ll be left adrift in the world – and for who knows how long. I think that in times like these, a young person will be helped by anything they can tie their life to, that they can commit to, make plans for, enabling them to put together a life plan for a few years. So I think this is a serious challenge. I see that young people are struggling with this, and we’re trying to help them find the right answers for their lives. There’s the issue of housing, of creating a home. People like me – and I speak on behalf of those over sixty – are fully aware of the fact that one of the most important anchors in life is the home where one’s family lives. We want to help with this. In Europe there are two concepts. One concept is that you earn enough money, and then you rent a place for yourself: a home isn’t something you should strive to own – the important thing is to have somewhere to live. Hungarians think differently. There are a few other countries that are like ours, but in the Hungarian mind, one’s own home is one’s castle, it is freedom and it is security: “I won’t be a destitute vagabond.” I think there are few languages in the world where a single word summing up “destitute vagabond” has the same meaning as it does in Hungarian; so this is important to Hungarians. If I have a house, then I belong somewhere, I have a place to start a family, a place to bring my wife home to, to provide security for my children. And through this I’m also part of a national community, as an owner. I’m not a nobody, and I’m not a destitute vagabond. I think that this feeling is important. And it gives opportunities to young people who feel that they already have a rough idea of where and how they want to live their lives. The slogan of this program is “Get started!” So it’s an opportunity, an offer: consider it and take advantage of it.
The main details were already known. It’s a 3 % loan, and there’s an upper limit for the price of the house or apartment. Based on this, we now know the detailed rules. In your experience, how much interest is there in this opportunity?
I don’t want to bore you or the audience with the details of our work, but one would think that a fixed 3 % home loan is a simple programme that can be summarised in three sentences. Yes, but the devil is in the details – especially when the devil is called a bank, and, after all, we’re talking about a loan. So there are so many details here that it took months for the experts to think through each one, comb through them, discuss them, and consult with bankers, real estate developers, and representatives of the construction industry. So I feel that this is a matter of thorough preparatory work. I announced this in February, by the way, but it slipped under the radar at the time. In my annual “State of the Nation” speech in February I said that in 2025 we wanted to achieve a breakthrough in home creation and housing. We’ve been working on this ever since. There’s a benefit to this. Obviously the work is painstaking, and we’ve also been doing our work amid continuous interest. So this isn’t something new, people have known about it for weeks and months, they’ve been talking about it, there’s been data, they’ve been doing their calculations, the real estate market has also moved, and so on. There’s been a lot of debate, and in the end, after listening to dozens of experts, the position that prevailed was that there should be a price limit. Because if there’s no price limit, no upper price per square metre, for how much a square metre costs, then if this isn’t included when people take out such loans, it could push housing prices sky-high. But that won’t be the case, because this is a type of loan whereby anyone who buys an apartment with it, who creates a home with it, can only spend a certain amount per square metre on that home. So this won’t boost the price of luxury and large residences, but rather create opportunities for the middle class and those who don’t yet belong to the middle class, but are below or near that level because they haven’t yet entered the home ownership market. So to my mind this is also a programme for catching up. It’s a programme for nation building, for catching up, and – above all – helping young people to settle down. There’s a lot of interest. And since we’re talking about housing, about homes, there’s the construction industry. This not only has costs, because the loans are cheaper than market loans, and someone has to pay for it: the budget pays for it, so the state pays for it. But in return the state gets a surging real estate investment boom, housing construction is simulated, which will increase the strength of the economy: revenue will come from it, taxes will come from it, contributions will come from it, a great many jobs will be created, and the state will also receive revenue. So overall this is not only a well-founded programme, but also an economically sound one.
This week you also announced that a special housing programme, a form of support worth one million forints per year, will be launched for public service employees. How does this relate to the fixed 3 % loan program, and why are public service employees the ones who will be able to take advantage of this opportunity?
First of all, perhaps not everyone knows this, but a similar opportunity exists in the private sector. When at the beginning of the year we announced our breakthrough plan on the home creation front, we established a set of rules whereby private employers can provide their employees with support worth 150,000 forints per month under favourable tax conditions for home creation, housing, and accommodation – not only for purchases, but also for rentals. Not many people have taken advantage of it, though. I thought it would be a more dynamic programme, but it seems that there’s less demand for it, and not many people took advantage of it. So there was something similar on the market. But the state couldn’t implement it because we didn’t have that kind of money – there simply wasn’t that kind of amount in the budget. This is why we’ve come up with another scheme that applies to public service employees. You can get one million forints a year, one million forints net, and you can use it to pay off your mortgage or as a down payment if you buy a home. That’s the rule. I think this is a great benefit for public service employees, and a great opportunity. We’re struggling with the fact that there are professions – especially in Budapest and Pest County – for which it’s difficult to find professionals due to high real estate prices, and also to place professionals brought in from the countryside. We’re suffering from this problem in the police force, for example, and in healthcare, too, with nurses. I discussed this with the Secretary of State just yesterday. So in general it would be good if a larger proportion of public service employees owned their own homes. Here I’d like to digress, if I may, because we don’t talk enough about public service employees. It’s a term we tend to gloss over, but it’s worth pausing to consider why we call them what we do, namely public servants. In other countries they’re referred to as distinct professional groups with a sense of vocation, which itself makes sense. In my opinion, a public servant is someone who lives on money, of course, because we all do; yet the primary goal of their work isn’t money, but serving other people. After all, a doctor doesn’t operate on themselves, but on someone else. A nurse doesn’t help themselves, but someone else. The same is true for teachers. I do my job for someone else. And I do work that has to be done, because otherwise what we call society wouldn’t function. So their work is indispensable. Of course it should be paid properly, but at the same time its purpose is still to help other people make progress in their lives. The same is true for police officers, soldiers, and so on. So now we’re opening up the opportunity for police officers, soldiers, doctors, healthcare workers, teachers, civil servants and everyone who falls into this category to receive up to a further one million forints per year. And I think this goes beyond money: perhaps we haven’t talked much about this so far, but it’s about returning the respect that public service workers deserve, because they work for us, and it’s important that we reciprocate this, and that the state also does so, expressing its respect and appreciation.
In addition to home creation, more benefits will come into effect in the coming days on the family support front. The current salary will reflect the increase in family tax benefits and the tax exemption of CSED (infant support benefit) and GYED (child support benefit). What does the Government calculate the impact of these measures on families’ financial flexibility will be?
If I may refer back to the beginning of the year, this is another area in which we announced a breakthrough – but now February is long gone. And if you launch a change in the tax system like this on 1 July, it will only begin to have an impact in early August. So it’s been five or six months since the announcement. But this is nothing less than a tax revolution. It’s a family-friendly tax revolution. There’s nothing like it anywhere else in the world; not in general – and certainly not now, when there are austerity measures everywhere in the Western world. So Hungary stands out from the crowd. We’re not imposing austerity measures in this turbulent economic and global war situation, but are opening up opportunities for young people and families. This is a real family-friendly tax revolution: we’re making CSED and GYED tax-free, which could mean up to an extra million forints in income over two years for those who are in this situation; and now in two steps we’re also doubling the tax credit for families with children. Until now I haven’t talked about this much because, as the Hungarians say, promises are cheap – and I’ll believe it when I see it, which is another Hungarian saying. And now, on 1 August – or in the first week of August – everyone will receive a higher salary as a result of the increased family tax credit. Now there is something to talk about, now you can believe it, because you can see it, my dear friend: if you have two children, your net income will increase by exactly 20,000 forints; if you have three children, it will increase by 50,000 – or even more. And the same will happen to families on 1 January, when we’ll increase the tax credit by another 50 % for those with one, two, and three children. And after that, it’s perhaps believable that from October mothers with three children – regardless of the age of their children – will be exempt from income tax for the rest of their lives. And this will also happen to those with two children from 1 January. So now we’re living through the first days of a tax revolution that will take place over six months.
How much funding will this require, in the international environment that you’ve just mentioned, which isn’t very easy? And we see EU economic growth and Hungarian economic growth, which is more like stagnation. How can the resources for these measures be generated?
We need to manage our finances well. It’s not that complicated. Of course it would be better if we had more money, because then we could do more things at once. But a country needs to have goals – at least, that’s how we’ve been governing since the national government came to power in Hungary. We may have our doubts about whether the previous left-wing government was like that, but I don’t think governing is about being able to live and feel good that we’re still alive today with no bigger problems than there were yesterday. So in my opinion that’s a poor goal for a community or nation that prides itself on its achievements. So we need to want something, we need to have a goal, our work needs to have meaning – not the work of the Government, but the work of ten million people. We need to be heading somewhere, and we just want to move forward – including on the economy, but not only that, and also on other issues of national pride. It’s the Government’s task to help people set goals for themselves. To do this, the Government itself must set goals. At least, I’ve started every term, every government term, by making it clear what goals we were setting for ourselves and that we wanted to achieve them. That’s what this is really about. And if you have goals, then the budget and economic management must be subordinated to those goals. I believe that family-friendly governance is currently the most important issue. This includes creating homes and supporting working people and those raising children. This is also what the family-friendly tax revolution is about.
Let’s talk a little more about the challenges we face in our environment, because this week a customs agreement was reached between the European Union and the United States, under which Washington will impose a 15 % tariff on EU products. In recent days you’ve said several times that this is a disadvantageous agreement; but at the same time we see that President Trump is imposing a 50 % tariff on countries with which he hasn’t reached an agreement, and from today Europe would have faced a 30 % burden anyway. Compared to this, we could even say that Europe has done well. Why do you still think this isn’t a good agreement?
This is the argument I’ve rejected all my life. Kádár and his followers also argued that “If we’re not in power, the Russians will invade.” So this isn’t the way to go. We mustn’t be, or mustn’t get into a situation like the cat in that American novel – maybe in Huckleberry Finn, if I remember correctly: they grab the poor cat by the tail, Huckleberry Finn swings it round over his head, and the cat is happy when it finally stops. So that’s a meagre expectation from life, and we mustn’t fall for the trick that it could have been worse. Let’s think about it differently. There are the British. Let’s look at the facts. The British have left the European Union. This is a country of 60-something, almost 70 million people. The European Union has more than 400 million people. Let’s look at the agreement the British have concluded with the Americans. It’s much better than ours. They have 70 million people, which means they have less power, while we have more than 400 million, and we’ve concluded a worse agreement. Professionally speaking there’s nothing to discuss – and I say this as Prime Minister. So if a country with less power than me makes a better deal than me, who is bigger, then professionally I’ve failed. This is the situation with European leaders.
What would have been needed to make a better deal?
For a negotiation two things are needed. Now, I don’t want to act like a know-it-all, and it wouldn’t be appropriate for me to distribute wisdom from Budapest, but maybe I have enough experience behind me to say this: a good deal requires two things. First, and very importantly: timing. When do you start negotiating? Do you make the first move, or do you wait? Do you take the initiative, or do you defend? You have to decide that. So timing. The second is the content of the offer – what you’re trying to agree on, what you’re willing to do. And of course it’s good to have more than one offer, because there’s an offer, a counteroffer, a further offer, and so on. So it’s good if you know how to play chess or a strategic card game like Ulti and can think several steps ahead, make an ambitious bid and deliver on it – which is roughly similar to the process of concluding a good international agreement. Well, the EU made mistakes on several points. The first one was on timing. As soon as the American president took office, he should have been taken more seriously. Instead, he was ridiculed. So Brussels didn’t take him seriously, they insulted him. They thought it was just an accident and made all kinds of nasty comments about the new US president, who isn’t one to forget such things. This isn’t a good negotiating tactic. Secondly, they didn’t take seriously the fact that the US president was really going to reorganise the global economy. They thought that a loud-mouthed American entrepreneur wouldn’t do even half of what he’d promised. What’s happening? He’s implementing, point by point, the promises he made to his voters. He’s a man of action. And part of this is that he’ll reform America’s unfavourable customs system. Now, if you don’t believe this and just laugh it off – “hahaha” – then you could be in trouble. That’s what the EU did. Since February I’ve been saying that we should take the initiative. Let’s be the ones to make a proposal. Let’s move to full free trade. Or we could select certain sectors and make special agreements. But let’s not wait around like a frozen rabbit or some creature mesmerised by a snake, just waiting to be struck down. Let’s take the initiative, show our vitality, and make proposals. There’s been nothing like that. Now, as far as content is concerned, it’s important to only agree on things that you can comply with and that are your responsibility. So if you enter into an agreement that concerns your neighbour’s property, even though it has nothing to do with you, it will cause problems. And that’s the situation now, because the President of the Commission made an agreement on matters that have nothing to do with her. So, for example, part of the agreement is that we Europeans will buy many times more energy from some energy source in the United States. But Brussels has never bought a single cubic metre of gas. Well, she doesn’t have a country – there are Member States here! The Member States buy energy. I didn’t authorise her to make agreements on my behalf. I don’t know if others have authorised her. I don’t think so. Or she made an agreement that we’d invest 600 billion euros in the United States, while Europe is short of capital. We need to bring money in, not send it out. I didn’t authorise this, and I don’t believe that the other prime ministers did either. So the President of the Commission made commitments to America that aren’t within her remit. Her remit covers tariffs. And, if I understand correctly, the secret clause on arms deliveries to Ukraine isn’t within her remit either. Because if I understand correctly, behind all this is the fact that the Americans will give weapons to the Ukrainians, and we Europeans will pay for them. No one asked me about this. There’s no European decision that this is what we want. So what I’m saying is that something very serious has happened – much more serious than we think. It’s not just that we’ve signed a bad agreement. Every European product that goes to America incurs a 15 % tariff, while products from America incur nothing. What kind of agreement is that? But it’s not just that we signed a bad agreement – we also committed to things that we clearly cannot deliver on. This means that we haven’t settled the tariff disputes, but we’ve lost the first battle. And there will be more battles ahead, because the American president must be taken seriously. He’ll say, “Guys, where’s the 600 billion dollars you promised?” He’ll say this in six months or a year from now. “Oh, you don’t have it? Well, then we’ll have to renegotiate the tariffs. Where are the arms purchases, or where are the energy purchases that I agreed on with you? You’re not fulfilling them? Well, then we’ll have to reopen the whole thing.” We’ll lose again and we are losing again. So, allow me to say, a little immodestly, that in professional terms everything in this agreement that could have been ruined has been ruined.
The Ukrainian thread is interesting, because the Commissioner for Trade spoke about it, defending this agreement by saying that it also concerns Ukraine and other geopolitical difficulties. What does this refer to? And anyway, what does Ukraine have to do with customs duties and trade?
Well, nothing! So the situation is that a normal person wouldn’t do something like this: putting unrelated things together in a basket or an agreement package, with an unfavourable balance or outcome for themselves – for the Europeans. You can’t do that. You have to separate what you can win and win it, and lose what you have to lose – but as little as possible. Combining them? That will cause big trouble if you’re negotiating with a stronger party. And here we’re negotiating with a stronger party. So if we want to conclude an agreement with the Americans on Ukraine, it shouldn’t be done as a secret clause in a customs agreement, but should be separated, put on the table separately, and negotiated separately.
You mentioned it yourself, and many experts agree, that this customs agreement will have negative effects on Europe.
It’s terrible. It’s a terrible economic agreement – an economic own goal.
How can Hungary defend itself against this, or what can it do to mitigate the effects?
There was a government meeting the day before yesterday, and we were forced to deal with this issue. I’m trying to identify the adverse consequences, and experts are identifying them. Calculating these customs duties isn’t as simple as a mortal would think: it involves complex mathematical operations. But overall I can venture to say that the value of products going from Hungary to America could amount to around 11 billion dollars, directly and indirectly: what we export from here, either directly to America, or what I call indirect, incorporating it into the products of other countries, which then go on to America. Now, of course, there’s a 15 % tariff on this, which amounts to one and a half billion dollars. Companies operating in Hungary will now have to suffer this. What’s the task at hand? We must talk to them immediately! So the Government’s first decision the day before yesterday was that in various forums we must begin negotiations on countermeasures as quickly as possible. Minister Szijjártó has been authorised to negotiate with large investors who have strategic agreements with Hungary and who export a lot to America. Minister Márton Nagy has been authorised to immediately contact the Chamber of Commerce and Industry. So negotiations are now underway, and following yesterday’s cabinet meeting, we believe that we need to develop two action plans. We need to develop a jobs protection action plan to prevent international companies operating in Hungary from responding to higher tariffs by laying off employees – or if they do, we need to immediately offer people other jobs. So we need a jobs protection action plan and an industry protection action plan to prevent certain factories from closing, because it’s no longer profitable to produce in Hungary, due to high tariffs on exports to the US. So industry must also be protected, and jobs must be protected separately. We’ll have two action plans, and negotiations have begun.
We don’t have much time, but let’s talk about one more phenomenon, because this customs agreement was actually born on a golf course in Scotland, and this week an EU delegation, led by the heads of the Commission and the Council, visited China. There, according to diplomatic experts, they had to endure some particularly awkward moments. No one was waiting for them at the airport – and not even at the bus sent to pick them up. What is it that makes the great powers treat European leaders like this, or dare to do so?
Because we are what we are. We’re weak, ridiculous, loud-mouthed, we lecture others, yet we lack strength when it comes to negotiating, and we show no talent or ability. So this is the worst combination. There are four major power centres in the world, not counting India and Turkey: the Americans, China, the Russians and Europe. I look at Europe. How does it shape its foreign policy? We’re on bad terms with the Americans. We’re on bad terms – even at war – with the Russians. And we’re on bad terms with the Chinese. What kind of policy is this? The point of politics is to make friends and create opportunities. It’s not to cower in a corner like a little hamster, snapping at everyone, fighting with everyone, and humiliating ourselves. And then we have the nerve to lecture them about human rights, democracy, the rule of law, and how to behave. It’s ridiculous. So it’s not worth continuing like this. The leadership structure of the entire European Union is such that the European People’s Party, which is the strongest party in the European Parliament and to which most prime ministers belong, supports Ursula von der Leyen, who’s the President of the Commission. And this is all that they can get out of the very strong and clear parliamentary majority they have at the moment. Well, it’s very little! At times like this, you have to pack up, thank everyone for their trust so far, and go home.
I’ve been asking Prime Minister Viktor Orbán about topics including home creation and family support, and the tariffs agreement between the European Union and the United States.