Zsolt Törőcsik: This week the Hungarian Central Statistical Office said that in the third quarter of this year there was a significant contraction in the Hungarian economy – of 0.7 percent – compared to the same period last year. According to the data, part of this weaker-than-expected performance was due to weakness in industry, construction and agriculture. Prime Minister Viktor Orbán is our guest in the studio. Good morning.
Good morning.
Analysts and government officials alike attributed the weak performance shown in the Hungarian data to German industry; but the German economy grew – albeit only marginally, by 0.2 per cent. What do you think is the reason for this contraction in the Hungarian economy?
I have a different opinion from the general opinion, or from what the experts say. Everyone talks about the poor performance of industry, but there’s nothing wrong with industry – Hungary has achieved a fantastic level of industrial production. So if we look at what’s happened to Hungarian industry over the last fourteen years, since we’ve had a national government, since 2010, we’ve seen huge improvements – both quantitatively and qualitatively. So the most modern car factories in the world are operating here. And now it’s not just cars powered by petrol, by fossil fuel: we’re also producing the most modern cars in the world in terms of electromobility. We now also produce important, essential components for the aerospace industry, and so there’s an aerospace industry in Hungary. The defence industry, which is the second most sophisticated industry after aerospace, has created huge capacities in Hungary. Incidentally, there’s also growing Hungarian involvement in the space industry, and we’ve always been strong in electronics and IT. So there’s nothing wrong with Hungarian industry. Our factories are modern, even in foreign companies most of the managers are now Hungarian, and we have fantastic workers who run these factories to the highest standards in the world. So there’s nothing wrong with industry as we’re used to thinking of it, with industrial production. The problem we have is one of trade. We should be selling these products. That’s the problem! And since there are only ten million of us, the products of these huge factories can’t be consumed by ten million people, and so we produce for the entire global market. And so our customer base narrows when the world market is in trouble, with the European market in particular being closest to us – and Germany is important in this respect. And if there are no customers, we have to produce less. But we’re not producing less because we don’t have the workers, the good factories, the technological standards or the diligence, but simply because there’s little demand for it now. So this is what the world economy is like. Now it’s fluctuating, but then it will change and there will be a huge demand for these products in the world economy – especially electric cars and batteries. This will come next year, and after this current economic slowdown it will lead to very strong, intense growth next year – certainly around 3.5 per cent, according to our calculations, because huge factories are coming on stream. In recent years Hungary has developed huge investments. These factories will start producing next year. Of course if we’re unlucky then trade will be in a rut, and even though factories are producing we won’t be able to sell their products. But we’re expecting the BMW factory – a factory of fantastic size, with state-of-the-art technology – to start up next year, the big battery factories to start up, and the Chinese electric car industry to start up in the Szeged area. These are industrial capacities that, once they start producing, will all contribute to growth; and as we didn’t have them a year earlier, they’ll boost the 2025 figures in comparison with 2024. And then as the world economy straightens out somewhat, which I think there’s a chance of, if not overnight, even Europe could improve, and then our trade problems will be solved – because Europe is the most depressed of our major buyer markets. This also highlights the fact that we need economic neutrality, because our products have to be sold somewhere. And if they’re not being bought in the West, they’ll be bought in the East. This is why it’s important for us to have not just one half of the world economy as our client, but also the other half – otherwise we won’t be able to sell our very high-quality, world-class products.
Yes, this situation also has repercussions at home, and obviously the first of these is the contraction in the economy.
Well, I’m sorry, but the way to think of this is that you have a huge factory where they make, say, vehicles, and when there’s demand on the world market they work three shifts, when there’s less demand they work two shifts, and when there’s still less demand they work one shift. This means that in such slack temporary periods the people who work there stay at home, and this is immediately reflected in the performance of the industry and in the economic data.
Yes, that’s part of it, and you’ve mentioned that the Government’s target for growth next year won’t change, nor will the targets for wages. So raising the minimum wage to 400,000 forints and the average wage to one million forints is the Government’s target for the coming period.
But I’m more cautious there too.
And after the release of the GDP data it seems that employers are also more cautious. What will it take to afford these pay levels in the workplace?
First of all, the Hungarian Chamber of Commerce and Industry now has a new president. A new president was elected this week, and we should definitely contact him, because the Chamber of Commerce and Industry has been the Hungarian government’s most important economic partner in terms of economic growth, wages, jobs, and even vocational training. So the significant economic achievements, a large part of these achievements of the last fourteen years – because regardless of the political debates, no one disputes that this is a different economy from the one we lived in in 2010 – are due to the Chamber of Commerce and Industry. They’ve developed many proposals for us, they’ve commented on many of our proposals. And now that we have a new leader after László Parragh, with whom we received excellent cooperation and to whom I’m grateful, we want to maintain that relationship with the new president. This is linked to wages in the sense that I always warn the Government against trying to say what the average wage in the economy should be, what the wage level should be. This is because the people who can really tell us this are the people who work in the economy day in, day out. As a government we work, but we regulate the economy, while the workers and the owners of capital run it. This is a big difference! And what the economy can afford in terms of wages – i.e. what a business can still pay and what wage level would put it out of business – cannot be said from behind a desk, but can be said by the people who work in the economy and run it. And differences of interest mostly exist, and no doubt can exist, between employers and employees, between the owners of capital and the workers; but negotiations – conciliation negotiations – are held to reach agreement among them on what they can still afford. The workers also have legitimate demands, and businesses don’t want to pay wages that will result in their going out of business, in having to close down. That wouldn’t be good for the workers either. So they’re best placed to represent this complex interplay of interests in wage negotiations. It’s not as if someone from the Government, from Budapest, comes along in his elegant suit, lifts his hand and says, “I suggest not five but six, or not six but seven”. So it doesn’t work like that. I hear things like that from some politicians, and it makes the hairs on the back of my neck stand up, because they have no idea how the economy really works. So we have to come to an agreement. And when that agreement is made, all the Government has to do is approve it. And what also happens is that employers come to an agreement with workers whereby they ask the Government to cut taxes, say, so that they can afford to pay higher wages. That’s what the previous six-year wage agreement that’s just expired was like. I was involved in those negotiations. The budget was in good shape, and we were able to help the wage agreements by cutting taxes. There are negotiations going on now, and there will be agreements for 2025, 2026 and 2027. I’d like to see agreements not just for one year, but for as long a period as possible, at least three years, so that then we can have a predictable, plannable wage increase. So let me say it again: the Government has a responsibility here, because it regulates the economy, but it doesn’t run it, and those who run it must reach an agreement.
You’ve mentioned that you’re more cautious about targets. What does that mean exactly?
I don’t know exactly what wage increase a small or medium-sized enterprise can afford in 2025, so I’m more cautious – not on the level, as I’d encourage everyone to pay the highest wages possible. So it’s not there that I have doubts, but on how the Government should behave; and I’m proposing caution. So let’s not allow the impression to take hold – and certainly not the reality – that the Government is telling people what wages should be, but let that be agreed on by those who run the economy.
Of the measures announced earlier, the first was the workers’ credit, details of which were made public this week. This is a loan of up to 4 million forints, open to people aged 17 to 25, people who are in work and aren’t eligible for student loans. What’s the purpose of this programme? Why target this group?
I can honestly say that I’ve been preparing for this for a very long time. I had the good fortune to go to university after high school – when there were no student loans, of course. But I became a graduate, when even fewer people got into university, and I followed that path all the way. But I met some great people, some really excellent guys in high school – and if not in high school, then in the MÁV Előre football team, in the changing rooms and in student life in Székesfehérvár – who went into vocational training and to vocational school. They were excellent guys, and I felt that I was going to go to university and I saw that there was a life ahead of me there, that if I graduated from university, I’d probably earn more than those who didn’t. In those days that used to be more pronounced, but today there’s still such a multiplier. The way I see it, the average wage for people with degrees is one and a half times more than for people with manual jobs. The student loan is also our child, if I may put it like that, because we introduced it during the first national government, after 1998 – between 1998 and 2002. It helps university students, people like us, I could say. Today about 20,000 students have student loans and another 30,000 are paying them back, people who have already graduated. In the last few years we’ve helped about 50,000 students to study and graduate. But I’ve always had a sense of falling short: what about the others? Well, not everyone goes to university, so what about the young guys, the working guys – if I can call them that – who were with us in the changing rooms, who we used to live alongside in Székesfehérvár? So what about them? It’s true that they start work earlier than university students, so we start earning later than young people who have gone to vocational school and into vocational training; but they still have to start, and starting is difficult for them too. So for a very long time I’ve been thinking about how we could somehow give workers – to use the old, socialist language – a start in life, what we could give young workers as support for a start in life. It’s not an easy story to think this through, because obviously we don’t want to support the lazy, and we don’t want to help those who don’t want to work; but the majority aren’t like that, the majority want to work, and they want to learn a trade and use their trade. And sooner or later they have to stand on their own feet. These are the housing difficulties that people have. I also see that permanent relationships seem to be formed later, and people are having children later in life. So the start in life has been delayed, and I think that there’s a material reason for this – in addition to the cultural context. It’s difficult to start an independent life, it’s difficult to stand on your own feet, because there’s no help like that. And now I see that we’ve managed to devise something. There are around 300,000 young people who are either in work at the age of 16 to 18, or who are still studying a trade and will start working by the age of 25. And the purpose of the workers’ credit is to give young working people between the ages of 17 and 25 this one-off opportunity to start their lives. This is a loan of 4 million forints. We’re proposing that this loan should have virtually no interest attached. Getting money today is difficult not only because you may or may not be able to pay it back, but also because you don’t just have to pay back what you receive, but you also have to pay interest. This will be interest-free, and it will run for ten years. And if in the meantime you have children, you can suspend repayments for two years after the first child, and for another two years after a second child, with half of the amount being waived. If you have three children the whole amount will be waived. So it’s all linked together: young working people, family, children and wife; so it’s kind of a complete picture of life when you think about it. So I’m very happy that Hungary has finally reached the point at which it can support not only young people who are studying, but also young people who are working, young workers.
Now, in addition to the credit for workers, let’s translate a little of the whole policy of economic neutrality and the new economic policy into everyday language. Because we’ve talked a lot about the objectives and the strategy behind it, but how will families and businesses feel its effect in their everyday lives? How will it be easier for them?
There are various kinds of business. In the traditional classification, there are large, medium and small, and then there are microbusinesses. I think that the big ones don’t have problems. The development of the last fourteen years has strengthened large enterprises, large industrial production capacities have been built up, and large service centres have been established. You can see this everywhere. Now there’s not only MOL and OTP, as before, but now Richter is very strong, construction companies are very strong, and our IT companies are very strong. So we have what we call a “club of champions”, which includes those large companies that are not only strong at home, but also in the international arena. Let’s not forget that we’re building a road in Congo, for example, and if everything goes as planned we’ll soon be laying a telecommunications cable between Africa and Europe. So Hungarian companies are doing some quite amazing things abroad, in addition to the usual office building and food industry investments. So they don’t have any problems. The challenge for medium-sized enterprises is going international. Now I’ll say an approximate number. As I recall, in 2010 we had three thousand companies, three thousand medium-sized enterprises that were out there in foreign markets, in the international space. Now there are fifteen to sixteen thousand of them. So I think that medium-sized enterprises are also on the right track. The ones that are really struggling – and it’s not just here, it’s all over the world – are the smaller enterprises. That’s why our current programme, the Sándor Demján Programme, is aimed at small businesses and helping them to access capital. Because it’s very difficult for someone who works for 5 forints to be able to manage what needs 10 forints. And we’ll help them by stepping in, the state will step in with a shareholder loan if it’s wanted by anyone who applies for this programme. We can immediately increase the size of a company with recapitalisation similar to that of a shareholder loan, and this will also expand the opportunities for efficient, well-operating companies. This has never been done in Hungary before, it’s a completely new thing. We’re trying out a new economic policy. The world is changing so rapidly, and there are all sorts of things – from the war onwards. I don’t need to say it here and now, but everyone feels that we’re in something new, and in this new situation the old economic policy will no longer work. Workers’ credit is one aspect, but so is this programme for provision of capital to small enterprises. So I believe that if there’s an entrepreneurial spirit in small businesses, they can join the Sándor Demján Programme, and then they’ll be able to show rapid growth, unusually rapid growth. And now we’ve also launched the European Union calls for applications. Here too, there are all sorts of scare stories about there being no money, and so on and so forth. Of course there’s money: 12 billion euros. If I multiply this by 400, it gives us 4,800 billion forints in our account, waiting for businesses to access this money for meaningful development. Some of these calls for applications have already been issued, and some of them will be soon. So small and medium-sized enterprises will have access to support and funds from applications in the period ahead. Therefore the nature of the 3–3.5 percent growth in the year ahead won’t be about watching the big companies grow and the economy strengthen, but about being able to get involved, to participate, and to be part of the growth. This will spread the benefits of economic growth to workers through wage increases and also to small businesses. So I’m looking forward to a fantastic year. Now everyone’s still swimming in this fog, GDP fell in the third quarter, and of course on an annual basis we’re still at the European Union average. But I can see the measures that have already been taken, and I can imagine the impact that they’ll have in the year ahead. And so, with all my reticence, I have to say that we’re going to have a fantastic year in 2025.
Obviously there’s a geopolitical space in which this economic policy must be implemented, and we spoke about this at the beginning. Tuesday’s US presidential election is important from this point of view. How might either Hungarian economic policy or the geopolitical space around us be affected by who the next President of the United States is?
We’re facing a testing week, a testing week in the history of the entire Western world. You know, a week ago, the Eastern world held a summit, there was a global summit, in Kazan I think. It was for the countries called the BRICS: China, Russia, Brazil, South Africa… They’ve now expanded, there are now more of them, ten or so countries have joined, and they gathered in Kazan. This was the Eastern world economy. This is not to be underestimated, because twenty years ago this wouldn’t have been big news, but now we have to say that these countries account for a larger share of world economic output than the Western world economy. So the Easterners got together and decided what they were going to do. And next week in Hungary the Westerners are coming together. So there will be a Western world summit in Budapest next week. We’ll be hosting forty or so European leaders. This is the biggest diplomatic event in Hungary’s history. I know it will be inconvenient, the airport traffic won’t be easy, and I apologise in advance – especially to the people of Budapest. There will be 45 to 47 heads of state and government here: not only the EU leaders, the Germans, the French and the Dutch, but also the British from outside the EU, the Turks, leaders from Caucasian countries, and from the Northern and Western Balkans. So it will be a Western summit where we have to deal with two things: two days before that will be the US presidential election; and European competitiveness – which is looking pretty bad and in decline – needs to be reversed. We’re also expecting Mr. Draghi – the former Italian prime minister and former President of the European Central Bank – because he’s written a major study on this and has made proposals, which we’ll also be discussing here in Budapest. But the most dramatic element will undoubtedly be the US presidential election. At the beginning of the year, reading the signs and not speaking off the top of my head, I said that by the end of the year the balance of power in the Western world would be quite different from that at the beginning of the year. Perhaps I said this first in the annual State of the Nation address. And this is what has happened. This is because the European elections have resulted in the creation of the Patriots for Europe group in the European Parliament – a new force has emerged in Europe, which I believe will soon be a majority force; and the wind is changing in America too, with the Democrats leaving and the Republicans coming in – Donald Trump will be President again, and that means that by the end of the year pro-peace political forces will be in the majority in the West. Today there’s a pro-war majority in the Western world. After the US election I think that there will be a pro-peace majority. There is pro-migration politics in the Western world today. After the US election, together with the Patriots here in Europe there will be a Western majority that’s anti-immigration and that wants to eliminate migration. And in terms of the gender issue, the destruction of the traditional family and the propagation of these new forms of coexistence, today there’s a pro-gender world in the Western hemisphere. This will change from next Tuesday, with the Patriots and Donald Trump in America together pursuing traditional policy defending families. So a big change is coming in the Western world. I think there’s a new centre, there’s a new majority. The vast majority of people are pro-peace, anti-migration and anti-gender, and these are the forces that we Patriots in Europe represent, and I think these are the forces that will enter government on Tuesday in the United States.
How can Europe – even Europe in the broader sense, if now we’re really talking about the European political community – deal with this new situation? Because this week you took part in a roundtable discussion with former German chancellor Gerhard Schröder, in which you said, for example, that the Americans and the Russians will sooner or later make themselves understood on the war, and will be speaking the language of strength. But where will Europe’s place be in all this?
It will be up to us Europeans. I’d say that what we’re doing now is sitting in our place in the corner, there on a low stool in the corner where we have to sit, while the gentlemen sit in armchairs negotiating with each other – I mean the Americans and the Russians. That’s the situation today. So we’ve got to get our act together, we’ve got to do this in Budapest. We’ve got to realise this if America has a pro-peace president – something which I not only believe, but which I also see in the figures. We’ll see on Tuesday, but from the figures, I read something which is different from what I usually hear on your radio or on Hungarian Radio – which is that the race is close. That’s not what I see. So if what we expect happens and America becomes pro-peace, then Europe cannot remain pro-war. Quite simply, the burden of this war – which I believe Europe has irresponsibly jumped into, and which the leaders of the European institutions have dragged Europe into – is a burden that Europe cannot bear alone. If the Americans switch to peace, then we must also adapt. This is something we’ll be discussing in Budapest.
I’ve been asking Prime Minister Viktor Orbán about the state of the Hungarian economy, the importance of the US presidential election, and next week’s major diplomatic event.