IMF-talks in the Hungarian press
Thursday, 24 November 2011 12:39
Left-wing commentators consider Hungary’s intention to resume talks with the IMF as sufficient reason for the prime minister to resign, although they don’t believe he will. A pro-government and anti-IMF commentator describes the government’s move as an act of capitulation.
In Népszava, editor in chief Péter Németh welcomes the decision, although he finds the explanations given by the government highly deceptive. “Let’s not worry about the government’s incapacity to admit defeat… and let’s be happy to see a strengthening Forint and a chance of recovery” – Németh argues, but adds that his next concern will be a question which figures in the title of his editorial: “When will PM Orbán resign?”
Népszabadság devotes three commentaries on one page to the prospect of new talks between Hungary and the IMF. Péter Pető bids farewell to the prime minister in the headline of his commentary, but admits that the left-wing opposition is not strong enough to dismiss the premier. He believes, however, that since Mr Orbán has opposed co-operation with the IMF for over a year, now that his government has asked for new negotiations, his own party should replace him. “It is not the right wing that has to go. It is Orbán,” – he argues.
Róbert Friss remarks on the same page, that the Prime Minister has absolutely no intention of resigning, although an earlier rumour suggested that he had excluded an IMF-deal as long as he was in charge. In Friss’s view, the main question is whether the government actually intends to reach a deal with the IMF, or whether its initiative was only meant as a kind of “oral intervention”, aimed at avoiding a downgrade of Hungary’s government bonds by the rating agencies.
In a third comment on the Népszabadság OpEd page, Bence Kriván suggests that the future IMF talks will not be an easy ride for the Hungarian negotiators. “Forget about dictating to them at the negotiating table” – he warns. The IMF can be criticised and will not respond in public, but when it comes to opening a credit line, it will stick firmly to its conditions. “Our bargaining position depends on our market standing,” – Kriván remarks, and suggests that the government has pursued “amateurish policies” over the past eighteen months, which have undermined its credibility.
Hungarian weeklies went to print before the unexpected announcement was made on Thursday, and therefore bear no reference to the resumption of talks with the IMF in their commentaries, although some would certainly deem it necessary.
In his front page editorial, the editor-in-chief of Élet és Irodalom, Zoltán Kovács, suggests that Hungary will only be able to keep its public deficit below three per cent next year if it submits a completely new draft budget. An alternative would be to turn to the International Monetary Fund for help, but “Orbán insists on keeping Hungary IMF-free”. By the time the issue reached subscribers, the prime minister had authorized the resumption of talks, although Kovács thought that such a decision would be extremely risky, politically speaking: “The return of the IMF to Hungary would result in a huge loss of authority for Orbán, the consequences of which are simply incalculable”.
Magyar Narancs also believed that Orbán could never let the IMF back to Hungary, but argued in its unsigned editorial that someone else might find it indispensable. “(Socialist PM) Gyurcsány was toppled (by his own party) at around 300 Forints to the Euro” – the editor remarks. “How big is Orbán’s margin?”
In Figyelő, Gábor Lambert criticises the pro-government narrative, according to which Hungary is waging a “freedom fight” against the IMF and “certain financial circles”. He believes that this kind of rhetoric and the policy ensuing from it might create social conditions that would jeopardize the political élite which believes it can profit from such a narrative.
In a bitter commentary in Magyar Nemzet, Tamás Nánási believes the freedom-fight is over, and it has ended with Hungary’s capitulation. Only three days ago, Nánási published an editorial asserting that returning to the IMF “would entail a price much higher than we are forced to pay by following our own path,” (BudaPost,November16). Now he believes Hungary has been forced to the negotiating table through the “concerted effort of the actors of the financial markets”. Nánási compares what has happened to the case of a man opening a restaurant near Lake Balaton who is soon blackmailed by a mafia boss. Either he is willing to pay a “protection fee”, or his restaurant will be set on fire. “This is how the offer suddenly becomes attractive.”
Rightwing Hungarian daily Magyar Hírlap believes that following a series of warning signs, the cabinet’s decision to initiate talks with the International Monetary Fund was a pragmatic one.
Hungary’s government will begin negotiations on a new type of cooperation with the International Monetary Fund – the economy ministry announced on last Thursday, bringing immediate relief to the markets. The Forint gained over two percentage points in a period when analysts had feared a further slump, connected to S&P’s threat to downgrade Hungary’s sovereign debt. Earlier speculation assumed that PM Viktor Orbán would not resign himself to resuming talks with the IMF any time soon. In the headline of its editorial, “Pragmatica sanctio”, Magyar Hírlap likens the decision to a decree by Charles III, Emperor of Austria and King of Hungary who, in the absence of a male heir to the throne, enshrined the possibility of female inheritance in 1723.
At a time when Hungary had become a negative lead story in Wall Street Journal and Financial Times blogs, and government bonds were being subject to shortings by speculators, “news of the IMF talks was a positive message from a financial point of view, although question marks remain,” writes the paper’s main business analyst, Csaba Szajlai. One of the most important questions is how a future agreement will affect the government’s economic policy.
“Nonetheless, a potential loss of political credibility is still preferable to leaving the country without a penny or devoid of credit” – writes the pro-government daily.
Analysts usually sharply critical of the government’s economic policies suspect that the Hungarian government has no real intention of cooperating with the IMF, but wants to buy time to calm the markets instead. Such a manoeuvre, these commentators warn, would be a threat to the Forint.
“Those who had been worrying because of the possible downgrading of Hungarian sovereign debt were relieved by the announcement that the government is turning to the IMF in order to seek a new type of cooperation. The Forint has gained 3 percent, the benchmark on bonds have decreased by 40-50 points. … But it is much too early for optimism,” Csaba Gaál writes in daily Világgazdaság. He thinks that the government will have to pay a high political price for the U-turn, and abandon its harsh anti-IMF rhetoric. This will weaken its support and will make future structural reforms and austerity measures harder to introduce. Moreover, it is not at all clear whether the Hungarian government really wants to cooperate with the IMF, Gaál suspects. He finds PM Orbán’s statement about accepting no conditions from the IMF highly illusory. If, however, Orbán was serious when he stated that no strings should be attached to the IMF agreement, this may imply that he only wants to buy time and calm the markets with the negotiations, without real commitment to an agreement.
“How much time can be bought by such a strategy? Judging by the example of Turkey, quite a lot. But we are in a different situation, as the crisis in Europe is deepening. … Going down this path can mean that the government will soon lose not only the support of its voters, but also that of the markets.” “The IMF story has discouraged those who speculated against the Forint, but has not yet convinced the markets and the credit rating agencies,” warns Tibor M. Kovács in Hírszerző. M. Kovács also fears that Orbán only wants to buy time instead of abandoning the unsuccessful strategy he has pursued so far, and to further increase state intervention in the economy, exemplified by the recent buying-up of the Rába automotive company. “Orbán must be confident that the Euro zone will collapse or at least will be fragile for a long time, and that there will be very serious problems in the world, which will divert attention from Hungary. This would mean that the EU cannot force anything on us,” M. Kovács speculates, and believes there is no guarantee that the IMF will provide help for Hungary. If the US wants Orbán to fall, the IMF can reject a loan or attach too harsh conditions, which the government cannot accept. “The markets will understand, and will kill the Forint. This could lead to the end of the Orbán government.”