Zsolt Törőcsik: Around now most people are receiving their July salaries, and for the first time families can see the reality of the increased family tax allowance and tax-free infant care and child care benefits. I’ll be asking our guest in the studio, Prime Minister Viktor Orbán, about this. Good morning.
Good morning. Everyone is indeed doing the arithmetic, and I’m also trying to keep up with events.
Yes, but before we talk about the specific measures, let’s look at the background a little, the logic behind this policy. Because Western Europe’s response to demographic and related labour market challenges, which often slow down the economy, has been immigration. Now we also have population problems here at home, and labour market symptoms have been appearing. Yet you’ve chosen a slower path towards addressing this, and your goal has been to reverse the population trend. Why?
Your question leads us far afield, because it brings us to the fundamental question of why there are fewer children. What you call demographic decline actually means, in everyday language, that people used to want more children, but now they want fewer. And what’s the reason for this? Should we try to change this? And if so, is it possible, or do we just have to accept that this is how it is? Well, there are two theories – or rather two possible explanations – as to why there are fewer children. One is that people have changed, don’t like children as much as they used to, and want to pursue a different philosophy of life: one in which children – who require a lot of care, effort, and anxiety, even lasting until the end of our lives – are replaced by a more comfortable life. There are countries where this is the case. The other is that there are all kinds of obstacles, and young people see that they’re delaying the onset of the responsible adult life that comes with having children, postponing marriage and having children – and in the end slipping past the age at which they can still have children together. So, even though there’s a desire, a dream, a plan, an instinct and a parental example that more children are better, and the more children you have the greater your happiness, there are cases where this doesn’t work out. Now, Westerners respond to this by saying, “Well, that’s just the way it is, but there are plenty of surplus people elsewhere in the world who want to set out anyway, so let’s allow them in among us: there will be more of us, we’ll make up for the fewer children we have with people who have come from abroad, little by little, and then in the end the economy’s performance won’t decline, and with more people the standard of living that we’ve achieved so far will be sustainable. We don’t like that. That’s the ultimate reason for migration. So we look at how it could have happened that certain countries have allowed such large and significant influxes of foreigners into their countries, which have ultimately changed the cultural face of Western European cities, with more foreigners in schools than their own children, the threat of terrorism, a deterioration in public safety, and all kinds of problems. If we look at why this could have happened, it’s because they thought that if they didn’t have their own children, they’d replace them, little by little, with migrants. The migrants would then start working, and the system would function economically. But the fact is that they’re not working! The main attraction of wealthy Western European countries is precisely that they have social systems that compensate for unemployment or low-paid jobs, and a foreigner arriving there can support himself with much less effort than the natives – and that alone makes him happy. But let that be the problem of Westerners, because we haven’t taken that path. We’ve said that if there are obstacles in life – especially financial obstacles – that make it difficult for young people to start a family, then let’s remove them. So let’s create a family-friendly policy in which the desired children are born; those who want children won’t be taking on financial difficulties, but will find themselves facing a bearable challenge. In fact, in my vision of the future Hungary, if you have children you’ll be even better off financially. We’re not there yet, but you’re no worse off than if you didn’t have children – or we’re approaching the point where it can be said that, in financial terms, you’ll be no worse off in the short term if you have children than if you don’t. So not having children won’t give you a more comfortable and higher standard of living. We’re not there yet, but we’re getting closer step by step. And this is how it all came about. Tax breaks for families with children, changes to the child care benefit system, and now lifetime tax exemption for mothers with two children. So everything’s come from this logic. And in the meantime we’ve hardened our stance on migration policy. There’s enormous pressure on us, because Westerners want us to sign up to their migration-friendly policy. They want Hungary to be just as much an immigrant country as Germany, France or Austria are; but we don’t want that. On this there can be no compromise. Hungary won’t compromise on immigration, but in that case we need to operate a very good family support system; because the complementary element to anti-migration policy is very good family-friendly policy. Otherwise the number of Hungarians could indeed decline by millions.
Looking at the specifics, you’ve mentioned that everyone is now calculating how much more money an average-income family will have in their budget with the current measures, compared to their current salary.
I’m now navigating a jungle of numbers. We have a measure that makes CSED [infant care benefit] and GYED [child care benefit] tax-free. So if we base our calculations on an average income or slightly less than that, we can say that in the case of CSED, the tax exemption that’s now been introduced will mean an additional income of 78,000 forints per month for a family. In the case of GYED, which applies after a child is six months old, it means an additional income of 43,000 forints on an average income. So there are even cases where someone on CSED – spending the first six months after the birth of their children at home – may receive more money, a higher salary, than if they were working. This is starting to look good. Moving on to the next measure, doubling the tax credit for children means that the income of one million families will increase – so one million families will be affected by this. The tax credit for families with one child has now risen from 10,000 to 15,000 forints, for families with two children from 40,000 to 60,000 forints, and for families with three children from 99,000 to 148,000 forints. And this will happen again on 1 January. So, for two children, there will be a tax credit of 80,000 forints, and for three children, almost 200,000 forints. This means that if you earn around the average salary – which in Hungary today is around 700,000 forints – then the amount you have left over each month could exceed 100,000 forints. This means that a family will have an additional 1 to 1.2 million forints in income per year, for the same amount of work. So, without making any extra effort, with the same job and at the same workplace, your income will increase by more than 1 million forints per year.
You’ve said that the goal is that those who have children shouldn’t be worse off – at least not worse off than those who don’t. In other words, if we translate this, it also means that they can remain in the middle class or enter it. How does the fixed 3 per cent loan programme complement these efforts, or how does it fit in with them?
This is another major debate in Hungary. But, unlike many political debates, at least it’s a meaningful one, which focuses on where the Government should place its emphasis when trying to help young people. Should it be on rental housing or on helping them buy their own homes? Those who are dogmatic – who adhere to the philosophy that there’s only one possible answer to a question – describe this as an either/or situation. I don’t like this approach. Let there be rental housing: rental housing can be built on a market basis, it can be rented out, it can generate income. Let there be private rentals too, let there be homes available to lease. But in our philosophy and in my view, no matter how favourable rental housing may be, there’s still an element of dependency. You won’t be living in your own home. So there can be the Hungarian dream, the American dream, and perhaps even the European dream; but if there’s such a thing as a Hungarian dream, which I can remember from my entire youth and which probably hasn’t changed since then, the essence of that Hungarian dream is having your own home. Because somehow, in the Hungarian mind, this is what gives ultimate independence. It means that you’re not a drifter, you have a place, and nothing bad can happen there. So we consider the solution as having your own home and owning property. It’s true that under normal circumstances young people don’t have the initial capital to buy a home on credit, and market interest rates are so high that unfortunately young people can hardly afford to pay them out of their own incomes. Therefore we’ve had to intervene at this point and have announced a loan with a fixed interest rate of 3 per cent. This is also available to young people, so that the repayment instalments won’t exceed, and in many cases will be lower than, what you would pay in rent or in a private rental – depending on the quality of the property, of course. So you pay instalments, not rent, and in the end you’ll have your own home – which is, after all, an asset. When you’ve paid it off completely you’ll have an asset worth an entire home; if you’re halfway there, you have an asset worth half a home – but in any case, it is your own property. And with that, you’ve entered a group that forms the backbone of every nation: the community of property owners. Because it’s not just about speaking the same language, sharing the same culture, learning the same things in school, and having a common history, but also about everyone having something. People have hardly anything outside Hungary, but this is the land, the place, where you have something – and you belong to the community of property owners. It may be smaller, bigger, more, or less, but you have something that ties you here. This is the essence of the middle class. And now we can help young people by giving them a chance, by saying, “Go for it, so that you can join the community of homeowners in Hungary at a very young age.” This will strengthen the middle class, it’s good for young people, and it will strengthen the nation itself.
Taking out a loan of more than 10 million forints, up to a maximum of 50 million forints in this programme, is no small thing: it’s a big commitment that needs to be thought through, because it also represents a kind of commitment. What should be considered by those who are still thinking about whether to go for it?
First, it’s worth noting that this is a 25-year loan with a fixed interest rate throughout the term, and there’s no exchange rate risk. We all remember what happened with foreign currency borrowers. In 2002 a left-wing government came to power in Hungary, and they immediately abolished – or abolished after a year – the home creation system that was in place at the time. They tried to steer people towards rental housing and foreign currency loans. And with foreign currency loans, there is exchange rate risk. The current loans are in forints, so there’s no exchange rate risk – nor is there any interest rate risk, because we’re talking about a fixed 3 per cent loan, which is predictable. This means that if someone takes out a loan of, say, 20 million forints, then according to our calculations they’ll save 60,000 forints per month because they’re not paying market interest rates, but a state interest rate of 3 per cent. If they borrow 30 million, they save 90,000 forints per month; and if they borrow 50 million forints, they can save 150,000 forints per month. This means that you can buy a property more cheaply, and also a bigger one. So if I compare the option of taking out a loan on the market – not a state-subsidised loan – with taking out a state-subsidised loan, for the same amount of money you can get an apartment or house that’s at least one room bigger. So I can say this to young people. Of course it’s difficult to think like them, but it’s worth getting started, or at least taking a look. I should note that they’re showing enormous interest. So not only have I been able to figure out these numbers, but everyone has already found the numbers that apply to their own lives. And since the 3 per cent fixed-rate loan can be combined with other family support measures and other types of loans, if you’re planning on having children you can get some serious government support. But I think the biggest attraction of the 3 per cent fixed-rate loan is that we’ve changed our previous policy. We’ve linked having children with support for home creation. Because Hungary only had so much money, it had to be directed towards families, and a large part of it still has to be. But this is a home creation loan that isn’t tied to your place of residence – so it doesn’t matter whether you live in a village, a town, or the capital city, and there are no requirements related to marital status. So you can be single, have a family, or be in any kind of situation. So it’s available to everyone – anyone can apply for it.
Well, for this programme to work, we need apartments that those affected can afford to buy. At the same time, in recent years many construction companies have reduced their capacity. How will there be enough real estate for this programme?
First of all, the loan can be used for new apartments and for apartment purchases. I see all kinds of estimates here, and real estate market experts are saying a lot about credit these days. Looking at the various figures, I’d venture to say that there are currently around 100,000 apartments in Hungary waiting to be sold, but there’s been no demand for them. There’s always a debate about how to stimulate home creation: whether to give people loans and resources to stimulate demand; or to support the construction industry, and if there are more homes, then they’ll be cheaper and thus more affordable; or whether to do what we’re doing now, which is to support buyers, i.e. young people, but impose certain cost limits to prevent price increases. So you won’t be able to use this loan to buy any size of home: it can’t be used for luxury homes. This means that if you buy an apartment, its value mustn’t exceed 100 million forints, and if you buy a house it mustn’t exceed 150 million forints. So we’ve built in a cap against price increases. And we’ve also built in a provision that this new or second-hand apartment mustn’t cost more than 1.5 million forints per square metre. This is another barrier we’ve built in to prevent price increases. So I believe that this will be a harmonious, rapid start; but then the property market will develop in a balanced, harmonious way, with many more homes, houses and apartments being built than earlier. There is construction industry capacity. Hungary has the skills for this. Since we managed to reach an agreement with the Roma communities that we wouldn’t give them unemployment benefits and social assistance, but would support them through work, in those families there are generally more children and lower incomes; many people have gone into work, and many have gone into the construction industry. So I think there’s also a labour reserve there that will be mobilised when the construction industry takes off.
Well, it’s interesting that you’ve mentioned the cap on price increases, because many economists and politicians criticise the programme because they believe it will drive up housing prices. Péter Magyar, President of the Tisza Party, for example, has said that real estate prices will rise by 20 per cent in two weeks – not only in Budapest, but everywhere. How realistic is this danger, even with the aforementioned limits in place?
I think this stems from a lack of knowledge. I don’t assume any malice, although there was an MEP named Kinga Kollár who said that what’s bad for Hungary is good for Tisza. So I could even think that they’re attacking it because it’s good for the country and therefore bad for them – at least they themselves tend to think that way. But let’s put that aside for now and not assume malice, but examine why people might come to such a mistaken conclusion. There’s a lack of knowledge. They’re not yet familiar with the regulation, they haven’t read it thoroughly, they haven’t called Miklós Panyi. Miklós Panyi sits in a programme office: we have a programme office where anyone who has questions, suggestions, comments, problems, difficulties, or concerns can go. So anyone who says this hasn’t yet spoken to Miklós Panyi. I suggest they do. On the other side they haven’t done this yet. So we’re talking about a party that’s never governed and doesn’t know how these mechanisms work. We’ve implemented quite a few housing programmes. In 2002 we launched what I think was a very good programme, which wasn’t as groundbreaking as the current one, but it was a serious programme, and then the Medgyessy government abolished it. But we have experience in how to do this. And we’ve also had bad experiences too, because after it abolished the civic government’s housing loans the Left tricked or forced people into foreign currency loans, and that caused a lot of trouble. We had to rescue a million people from the trap of foreign currency loans. And we did rescue them. Then we created a million jobs. If you have a job, you can start thinking about buying a home; but if you don’t have a job and are unemployed, you have no chance of getting your own home. According to European Union statistics, which can’t be said to be friendly towards Hungary, we’ve been able to help one million people out of poverty. And so the middle class has also grown, and with the current home creation programme we can build on this background. So those in politics who attack us have never implemented such a housing programme, and so they don’t have the knowledge that a ruling party has and needs to have.
At the same time, the measures we’ve discussed so far must be implemented in an uncertain economic and geopolitical environment. Take the tariffs agreement, for example, which was sharply criticised yesterday by German car manufacturers; and in Hungary last week, it was said that an action plan to protect industry and jobs is needed in order to ward off the effects of this agreement. This week Péter Szijjártó has already held talks with the companies concerned. How do they assess the situation, and what solution is emerging?
In general, it’s worth knowing that the Hungarian economy cannot perform to its full potential as long as the war continues. But as soon as a ceasefire and peace are achieved, the performance of the Hungarian economy will increase significantly. What does this mean? A serious question for us was whether to launch this home creation programme with a fixed 3 per cent rate now, or to wait until peace arrives. Because it’s true that in wartime conditions, such as those currently prevailing in Europe, there’s always some risk involved when launching any such programme. What if the war reaches Hungary, for example? But I think that the four or five years since COVID have been enough: four or five hopeless years, or four or five years of struggle, at least – I’d rather say four or five years of struggle, when there was constant trouble. You’d turn on the radio, the TV, talk to your colleagues, look around your workplace, and you’d see uncertainty, unpredictability, trouble, threats, and a bad, grey atmosphere. And I don’t think this can go on any longer. So I thought that this programme had to be launched – war or no war. The family tax reform we’ve talked about here today also has to be launched, and the fixed 3 per cent programme also has to be launched. If the family tax revolution succeeds and young people become interested in starting a family, this will fundamentally change the way they think about the future. And that’s important! War or no war. So we took the risk. We debated it a lot in the government, and I was on the side of those who wanted to take the risk, to launch these economic programmes despite the continuing war. They had to be adjusted, and some emergency brakes had to be built in – which is why it took six months. I’d have launched them in March, but common sense dictated that we should build in some brakes, because who knows what will happen here. But now these are safe programmes: both the family tax revolution and the 3 per cent loan. But the arguments of those who drew attention to the risk were further reinforced by the fact that a tariff war has broken out between the United States and Europe. What does this mean? Up until now, when we exported products to the United States we paid a 2–3 per cent tariff. This has now been raised to 15 per cent. If a product came from America that competed with our products, the Americans paid 10 per cent. We don’t have time to go into why this was the case, but that’s how it was. So they used to pay 10, and now zero. So we’ve lost 12 per cent when we export a product, and we’ve lost 10 when one comes in. There’s been a shift in the tariff position of more than 20 per cent. This is hitting the big companies we work for, which then take their products to different parts of the world, including the United States. It’s hitting them right in the neck, kicking them in the ribs, and shooting them in the lungs. So if we don’t react in time this could have serious negative effects on jobs in Hungary. This is why we’ve convened these consultations. Péter Szijjártó is working on this, and plans are taking shape, which we’re calling the jobs protection action plan and the industry protection action plan. This is what we’ll protect jobs with. This agreement that the European Union has made with the Americans is a bad one. I can complain about how bad it is, but that’s how it is now, and we need to protect ourselves from the effects of this bad decision. We’re going to do this with two action plans, and I’d like to make decisions on this topic at one of the government meetings this summer.
The other risk you mentioned is the Russo–Ukrainian war. According to the news, the Russian and American presidents are meeting next week. Earlier you said that talks and agreement between them are necessary to end this war. How optimistic are you now, hearing news of the talks?
I am. It’s good news, because I still maintain that a ceasefire and the lifting of sanctions can only happen if the US president reaches an agreement with the Russian president. I’m not happy that the Europeans have fallen asleep. So Hungary has had a proposal on the table in Brussels for years, and on several occasions at council meetings and prime ministerial summits I’ve personally said the following. I propose that it shouldn’t be the leaders of the European institutions who go to Moscow, because we’ve seen what they were capable of during the tariff negotiations, and that won’t be enough – even less in Moscow than in Washington. So it shouldn’t be they that go: the German chancellor and the French president should go together to Moscow to negotiate on behalf of Europe. Or if they don’t go to Moscow – as we would if necessary – then they should hold such a meeting somewhere on neutral territory. So let there be a Russian–European summit, because the war is in Europe. We must be the most active, the most proactive. So this is what we’ve proposed: a European–Russian summit. This isn’t the case now, because Europeans – quite wrongly, in my opinion – are following a different logic. But it’s possible that a Russian–American summit will take place soon. And if a Russian–American summit does take place, that’s good, because it could lead to peace – but the Europeans will be left out of it. We’ll be supporting actors in the management of security issues on our own continent. Why is that a good thing? So I continue to urge that if possible there should be a Russian–European summit, and as soon as possible – if possible before the Russian–American summit, but if not, then definitely after the Russian–American summit. In my opinion, if Europe wants to keep decisions about its future in its own hands, it mustn’t sit at home like a sulky little child, shouting insults at the Russian president, but must behave as the rules of diplomacy require. If there’s a problem, it must be negotiated. This war cannot be ended on the front lines: there’s no solution on the battlefield. Diplomats, politicians and leaders must end it at the negotiating table.
Since we’ve already mentioned Presidents Trump and Putin, let’s bring up a news item from last week. Special Counsel John Durham’s report and its classified appendix have been made public, revealing how, during the 2016 campaign, the Democrats – in collaboration with the Soros foundations – tried to discredit Donald Trump with accusations of non-existent Russian connections. Reading this report now, what’s the most important lesson to be learned from it?
In America this is a bombshell, but somehow it’s receiving less attention in Hungary and Europe. But it’s a real bombshell, a political bombshell. Well, as this report reveals with supporting evidence, it turns out that what happened was that there was an agreement to fabricate a false story about the relationship between US president Donald Trump and the Russians, and to explain Hillary Clinton’s election defeat by claiming that there was a secret Russian–Trump collaboration in order to achieve it. The agreement on this fabrication was made between three groups: the Democratic administration – we’re talking about Hillary Clinton’s State Department; the Soros Foundations and similar systems, essentially Soros himself; and the paid media. The story wasn’t true! This in itself is a scandal. Now it’s also come to light that state agencies were used for this purpose. So this wasn’t just a media campaign, which we’re familiar with here at home, and nor was it simply party-political manoeuvring; but state agencies were also involved, in order to create a false narrative based on completely false evidence, or constructed without any evidence at all. And they hounded the American president for years, accusing him of this, initiating all kinds of proceedings – none of which, as it turns out, were based on truth. Well of course, this “joke” is only new to newborns – because what the hell’s going on here in Hungary? Of course, we protect against state institutions participating in such things, but here we have the Soros Foundations, here we have the dollar media, the Americans were here for a while, and now instead of them Brussels is here. Well, what’s happening is that they’re constantly building up disinformation campaigns against Hungary, both in Hungary and abroad, with the aim of weakening the Government, of persuading it to make decisions that are in line with certain Brussels interests but contrary to Hungarian interests, and of ultimately succeeding in bringing a Brussels government to power in Hungary as well. The American story is also about us.
After this report, are there any steps that need to be taken at home?
Yes, but these are matters that are too serious for me to discuss in half a minute.
Among the subjects that I’ve been asking Prime Minister Viktor Orbán about were the family subsidies that are coming in the next few days, the fixed 3 per cent loan programme, and the effects of the tariffs agreement.