Ladies and Gentlemen,
We agreed that hopefully we will touch upon rather sensitive issues during the course of the discussion, so it would be better to speak the Hungarian language on my behalf. And not to misunderstand you, it would be better for you to speak the German language. But to start this whole discussion, may I have some remarks which are not dangerous even in English?
First of all, I am very much happy to be invited here. It is a good occasion. You know, I am here for an official visit, to see your chancellor, which has happened already. I am happily reporting to you that he is still alive – me also; so the conversation was fruitful and everybody can be happy with that. It was more than two hours, and we discussed all the very difficult, complicated issues; but that was a very good one, so I am very much thankful to him. The second, which you probably should know, is that every second year as Prime Minister I come to Berlin to see the Chancellor and the business community – as I did two years ago as well, and before that also in 2018. I think you can read a lot about Hungary in the German press, which is not exclusively positive on Hungary and on me personally. So may I just have some remarks that I belong to the old generation of the European politicians. I was for 16 years in opposition, and I am in power as Prime Minister 17 years. I started to work in European politics as Prime Minister even when Helmut Kohl was the Chancellor here, Jacques Chirac in France and Tony Blair in Great Britain. So I belong to that generation. And I came from the anti-communist underground resistance movement prior to 1990, and I am member of the Hungarian parliament for 32 years. I was elected by the very first election in 1990, so I am an old-fashioned freedom fighter and street fighter from the Hungarian political tradition. So please take me as I am. This is the situation where we are; I hope today we have a chance to have a very friendly and open discussion. Therefore, to start with my contribution, may I just immediately react on some remarks you have made on the Hungarian economy? That’s sensitive, so I will continue in the Hungarian language.
Indeed, in 2010, when we won the election, we publicly stated the objective – and this is important – that there were some areas of the Hungarian economy where transformation would be inevitable. It is not viable for a national economy to have less than 50 per cent of its banking sector in domestic ownership. It is not viable for less than 50 per cent of the energy sector in a country to be in domestic ownership. “Domestic” can mean state or private, but it is domestic. The same is true in the media: it is not viable for only the minority in a country – less than 50 per cent – to be in domestic ownership. And this has demanded transformations. But in 2010 I saw exactly how the banking sector had behaved when the financial crisis erupted in 2008–09. You business people often say that money has no smell. This is true – but its owner does. This means that when there is trouble, everyone looks after their own country first. In 2008–09 the banking sector took all the money out of Hungary that it needed to help their own economies in Austria and Germany; this is legitimate and we have no objection to it, but such extreme vulnerability is not viable for us. Or just imagine that 50 per cent of the Hungarian energy sector – the biggest oil company or the storage capacity for oil and gas, say – was not in Hungarian domestic ownership; in that event, how could a small country like Hungary cope with the energy crisis? These are all things that may make you feel uncomfortable, but one thing is for sure: you can always talk to us openly and honestly. If something is causing pain, if there is something you do not like, our door is always open – the ministers’ doors and mine – and everything can be discussed with us.
There are no surprises in the Hungarian economy. We can tell you exactly what our medium- and long-term plans are in which sector: what will happen in one sector, and what will happen in another. Right now I have agreements with several large German companies. I have made agreements on how we will cooperate in telecommunications development. We have agreed on how we will cooperate in digitalisation. Because we have already discussed it with them, we can tell German companies how we will cooperate in the transition to a green energy system, and in which areas we are specifically looking forward to German companies completing modernisation programmes with us. So there may be some difficulties, but one thing is certain: nothing is hidden, everything is open for discussion, and we will give you honest answers to everything.
Ladies and Gentlemen,
Of course, standing here in front of you, I would be tempted to speak at length, because you are Germans and I am Hungarian: we look at the world from different places, and therefore we see it differently; and there is nothing more exciting intellectually than comparing how a German sees the world with how a Hungarian sees it. And this raises an enormous number of issues: history, when we have stood side by side on the right side of history and when on the wrong side; when we have stood in opposition to each other; what was good, what was bad; what your economic interests are – in the long term and strategically – and what our interests are; how we see this war, and what its impact will be on the German economy. There are many fascinating questions that I should be able to talk about at length, and I am tempted to do so; but I must be brief, because I have twenty-five minutes. There will be a discussion afterwards, and if you want to raise these questions that I have skirted around, I am available to answer them; I will also be frank about what we Hungarians think about these issues.
But now I will talk about something else: essentially about some of the basic questions related to German-Hungarian cooperation. The first thing I think it is important to say is that German-Hungarian economic cooperation is not essentially based on economic foundations. Of course there is a financial basis, rational calculation, profit margins and profit expectations, but the foundations for German-Hungarian cooperation are cultural in nature. Of course we do not know the whole German world, because your world is huge. What we know is what is closer to us: we know the Bavarian world and the Swabian world. And I have to say that if you ask a Hungarian what he thinks about Germans, what he thinks about the Swabians and the Bavarians, the majority of Hungarians will give you a positive picture and will say that it is not only profitable to cooperate with Germans, but good to cooperate with Germans. I belong to the generation that was brought up being told that if you want to know what it means for things to be in order, then go to Germany; because over there things are in order. So there is a very positive prejudice – partly for historical reasons, and partly because of your cultural achievements. Hungary is perhaps the only country outside Germany where the German minority – and a large German majority lives in Hungary – has access to German-language education, from kindergarten to university. The German minority is represented in Parliament, elected by the Germans living in Hungary. Whether this is positive or not, I would indicate that they also cooperate well with the governing majority. So the foundations of German-Hungarian cooperation are much deeper than any which could be destroyed by any political campaign or occasional disagreement on economic issues. This is why, as the previous speaker said, 300,000 families in Hungary owe their livelihoods to jobs in German companies. And 6,000 German companies are making profits in Hungary.
Ladies and Gentlemen,
When we returned to power in 2010, times were extremely difficult because of the global financial crisis of 2008–09. Since then twelve years have passed. Since then the world has gone from crisis to crisis. Incidentally, the most important thing that gives me the greatest confidence when I speak here in front of you is that since 2010 we have come out of every crisis stronger than we were when we went into it. We came out of the financial crisis stronger than we went into it. We came out of the migration crisis stronger than we went into it. We came out of the COVID crisis stronger than we went into it. I have to say that if you look at the numbers, there are few European countries that have handled crises as well as Hungary has.
What is the reason for this? In 2008–09 there was a big debate in Europe about the character of the financial crisis: was it a cyclical crisis, or was it a structural crisis indicating a deterioration in the competitiveness of the European economy? Most European countries said that it was a cyclical crisis, a feature of capitalism: sometimes there are lows, sometimes there are highs, and eventually things balance out. I have never accepted this interpretation. The lesson that I have learned from the 2008–09 crisis is that it was a structural crisis, and that underlying it was the fact that, unless we change, we will not keep up with the rising Asian countries, and Europe will continue to lose its share of world GDP, lose markets and lose in technological competition. So in 2010 we gave the right answer: deep structural reform. And accordingly we have completely transformed the Hungarian economy.
Today we are relatively crisis-proof, because since 2010 Hungary has built a Hungarian model. Of course this is always greeted with suspicion by those who do not follow it. If you do something differently from other people, after everyone else has convinced themselves that they are doing the right thing, they will look with suspicion on people who do it differently. And we have built a Hungarian model both in social policy and in economic policy. The Hungarian model in social policy is conservative, Christian democratic social policy reminiscent of Chancellor Kohl’s time in office. It involves a work-based society. We never use the term “welfare society”; that sounds very suspicious to us, because in their lives everyone wants welfare – it’s just a question of who makes the money for it. And so welfare is something suspicious: it is about people who do not work getting money from people who do work. We don’t like this, so instead of a welfare society we are building a workfare society. In Hungary the focus is on work, so in Hungary – completely exceptionally – unemployment benefit is paid for three months. Three months! And if someone has not found a job after three months, they have to go to their local authority, which will give them work. This is financed by the state and the salary is half the minimum wage. And if from there someone can enter the labour market, they will get paid the minimum wage. When we started governing in 2010, there were 300,000 people in Hungary who had been on welfare benefits for longer than three months; back then we said that they should enter this sphere of community work. Today there are fewer than 80,000 such people. The remainder have been absorbed by the market: now they are working in the labour market. In 2010 the employment rate in Hungary was somewhere just over 50 per cent, with 3.6 million people in work. Today the employment rate is around 75 per cent, and 4.7 million people are in work. This is not economic policy, it is social policy: where do you put the emphasis, on welfare or on labour? We put the emphasis on work, and we think that welfare will be the result of work: work is not the result of welfare, but welfare is the result of work. This is our approach.
The second important thing about the Hungarian model is that it is a family-based model. Hungarians are an individualistic people. As the previous speaker said, freedom is extremely important to Hungarians. We are capable of dying for freedom. Living for it is not bad, but most of all we are capable of dying for it. So the Hungarian is individualistic. But the most important thing in the Hungarian mind is the family. Individualistic and family-oriented. This is why the family, the traditional family, is at the centre of our social policy – just as it was in your country until 2017. This is the legal situation in Hungary. And in terms of GDP, Hungary spends the most on family support. It is very difficult to finance this, it is very difficult to do it fairly, but basically we give families tax credits linked to work: we finance families through work. So we are not providing a welfare-type benefit, but are financing families with tax credits gained through work. But at the heart of this is the family and the sanctity of the family; this is something that must not be taken lightly, which must not be joked about, but must be respected.
The third important thing in our social policy is that we build on national pride. I know that when something like that is said in Germany, it is seen as suspicious; but, as I said, we are different and we look at the world from different places. A Hungarian needs a few things to live: a person needs to have a mother, a father, and national pride. If any one of these is missing, a Hungarian cannot live in the world. So national pride is one of the most important things for us, and our social policy is explicitly based on it. And we want Hungarians’ national pride to be increasingly based on achievement. History is a beautiful thing, we have a fantastic history, we have good character traits which are also very good, and our language is unbeatable; but the best thing is if national pride is also based on performance. And performance-based national pride is an important part of our social policy.
And finally, an important element in our social policy is that we do not have multiculturalism. So Hungarian society is not multicultural. I know that sounds strange to a German ear, because here you have a multicultural society. This is a progressive-liberal idea that we respect, but one that we do not share. So it is different here. In Hungary we do not have a progressive approach, but on most social policy issues we employ a traditionalist approach. So these are the socio-political foundations of the Hungarian model.
And there is also an economic basis for the Hungarian model. In the economy the first and most important element of the Hungarian model is low taxation. We think that high taxes will kill the economy and kill the incentive system. It is good if people earn a lot. They work a lot and earn a lot, and the state does not take a lot from them. So we have low taxes. We are the only country in the world with a truly flat tax on income. The only one! Other countries have similar things, but they all have a zero band. We do not have a zero band: it’s a flat tax, a completely flat tax. We have a low corporate tax rate: 9 per cent. And we have no inheritance tax, because we think that inheritance is a family matter, and that the state should have nothing to do with it. If the wealth created in a family has been earned by every member of that family, you cannot take it away in the form of tax just because the older family members die. To our minds that would not be right.
And what is most important is that when we talk about equality, we do not want to regulate the output, but to regulate the input. This means that, unlike social engineers, we do not want to say how equality exists in a society, who can be rich and how big the difference should be. We do, however, want to have a say on the input: when you get a chance, when you study, when you want to get a qualification, when you look for a job; you have to be given equal opportunities, but after that we cannot guarantee that everyone will make the same use of those equal opportunities. In fact it is good if they do not. Difference is important, and differences in wealth are also important, because they motivate people to work even more. This should not be eradicated, but acknowledged and accepted. Therefore we are pro-equality on the input side, on the opportunity side, but not on the output side. On the latter we are much more in favour of difference, wanting to see a merit-based society.
Something worth knowing about Hungary and the Hungarian model is that we are the fifth most high-tech country in the world. Looking at Hungary and the Hungarian model, it is important to know that we are the ninety-fifth country in the world in terms of population but thirty-fifth in the world in terms of exports. We are the tenth most open economy in the world. Our exports-to-GDP ratio is the tenth highest in the world. We are one of the ten most complex economies in the world. When you look at what GDP is generated from, from what sectors, you measure it by complexity; and although Hungary is small, it is not a monocultural country, but is one of the ten most complex countries.
And finally, another part of our economic policy is border defence. At first glance this may sound strange, but border defence against migrants is an economic issue. This is because we are an open country and we therefore need to be in a free-trade zone, which is the Schengen Area. If Schengen is not protected, if the external borders of the EU are not defended, then the internal market will collapse; and that is bad for Hungary. So the first reason we defend our borders and do not open a corridor passing through Austria to Germany along which migrants can calmly walk is that by doing such a thing we would be destroying Schengen and destroying the single market. So we would rather build a fence, arrange border security and protect the internal market – without which the Hungarian economy would be unable to function.
Ladies and Gentlemen,
So much for the past and the Hungarian model. Let us talk about the present and the future. What is the biggest challenge? We see the biggest challenge today to be the threat of a great recession across the entire European continent. We can talk about why this is the case: energy prices, or the complete breakdown of Russo-German, Russo-European cooperation. I see many causes for this recession emerging on the horizon. And for Hungarians the question is this: if there is a widespread recession at European level and we are in the same market, will we be able to create a local exception for ourselves? How can we stay out of recession and maintain economic growth? For Hungarian policymakers this is the million-dollar question: “In a single market, where everyone is threatened by recession, is it possible for you, as a country of ten million people, to stay out of this recessionary environment?” This is the big question. Now, of course, I cannot tell you that we have the answer. I would be happy if I had a blueprint in my pocket, a blueprint on how to do it. But one thing I know for sure is that if we want to be the local exception, then we must continue to focus on development, investment and technological innovation. This is why we want to employ crisis management that focuses on investment while managing the crisis. This is what we did with COVID. Almost everywhere in Europe helicopter money was distributed, essentially to keep consumption up and to help people in society. We did not do that. In essence we survived the COVID crisis – and are going to have between 5 and 6 per cent growth this year, with 7 per cent growth last year – because then we put all our money into investment. We told companies – including German companies – to develop and not to lay off people, and that we would give them the money to do that. We encouraged them to work together with us for everyone’s benefit. We announced such a programme, distributing a huge amount of money to economic operators – but on the condition that the investments would be operational within a year. We started doing this in April 2020, and by April 2021 these numbers were already showing up in the economic growth figures – and even more so in this year’s figures. So in order to keep Hungary safe from the current recessionary threat we are thinking about something along similar lines. I see a chance of doing that.
Why do I see this chance? Where will the deficit come from? Where will the recession come from? Beyond high energy prices, the recession will emerge because in many European countries the most important thing for the functioning of the economy will be lost. This word – the thing I am talking about – is “security”: predictability and security. And in the coming year we need three kinds of security: political security, energy security and physical security.
When I talk about political security, I can tell you that as a government we are capable of action, and we have a two-thirds majority in Parliament. So the Hungarian system is extremely stable. Incidentally, in the period since 1990 Hungary is the only country [in the EU] that has not had to hold a single early election. Every one of our elected parliaments has served out its four-year term. You are quite good at this, but even in your country there has been an election held earlier than the end of a full four-year term. But in Hungary every parliament has served its four years, and every government has served its full term. So you can rest assured that – as we have a two-thirds majority – political security and political stability will be in place in the period ahead.
The second kind is physical security. I am sure we will talk about this, but you may know that I am the only prime minister today who speaks with the voice of peace. All the other European prime ministers speak in the voice of war: how to defeat Putin, how the Ukrainians will win, how to win the war, how to put more, even more and yet more energy into the war. My approach is completely different. I do not believe in this war: nothing good will come out of it; only bad things will come out of this war. This is why I believe that peace is needed. Hungary will not get involved in any conflict, we will not supply weapons – we can obviously talk about that – to Ukraine, and Hungary will certainly be an island of peace – whatever happens in the upcoming period. So – whatever the progress of the war – in the period ahead physical security will prevail in Hungary.
And the third kind of security is energy security. Today the situation is that we have enough gas reserves for six months. So if from tomorrow morning not a single further molecule arrived, for six months we could continue to run the Hungarian economy as if nothing had happened. We have a very large storage capacity, as they say, and we have been continuously importing a large proportion of our gas from Russia via the southern pipeline, which has not yet been blown up – unlike the Nord Stream pipeline, which has been severed, and after the gas supply via Ukraine has also stopped. So we have energy. We are not shutting down our nuclear power plant – in fact the opposite is true: we are now extending its operating life for years to come, and we are also building a new nuclear power plant, which will help us to secure energy supplies in Hungary in the medium and long term.
So I can say to our German friends – and I can say to you – that in the years to come Hungary will be a country where there will be political security, there will be physical security, and there will also be energy security. So I would like to encourage you to continue working with us as you have done in past years. Of course Hungarians are not perfect. Sadly I have to admit that we are not perfect, but one thing is certain: those who cooperate with us will benefit. I wish you great success in this!
Thank you for your attention.