The comments were made at a conference held by the think tank “European House –Ambrosetti” on Wednesday morning at the Sofitel Hotel in Budapest. The aim of the conference was to discuss the competitiveness of the so-called “new Europe” countries, with particular emphasis on Hungary, and to present the findings of the think tank’s financial, economic and social research project.
The Scientific Committee of the project consisted of Mr. Péter Medgyessy, former prime minister of the Republic of Hungary, Mr. Valerio de Molli, Managing Partner at the European House – Ambrosetti, and Mr. Vladimír Dlouhý, International Advisor at Goldman Sachs.
Business leaders present at the forum discussion included – amongst others – Mr. Tomas Spurny, CEO of CIB Bank – Banca Intesa Sanpaolo and Mr. Rudolf Riedl, Managing Director at Raiffeisen Evolution Project Development.
Zoltán Cséfalvay, Minister of State for National Economy and Zsigmond Járai, Chairman of the Supervisory Board at the National Bank participated and spoke at the Forum as well.
The key findings of the project, as presented by Mr. Dlouhý and Mr. de Molli are that things in the Central and Eastern European region are not “apocalyptic” for now. Despite adverse external conditions, CEE countries enjoy a strong position, especially compared to peripheral Eurozone countries. Although real GDP growth is expected to decrease in 2012 in all CEE countries, budget deficits and public debts – as well as current account deficits – will stabilize by 2012.
Some problems do remain that negatively affect competitiveness and future development. In particular, a general low–growth environment, insufficient investments in R&D (compared to the EU-15; and with a special regard to investments in the energy sector), and a substantial tax burden (especially in Hungary).
As regards the financial and economic woes of Hungary, business leaders expressed deep concern regarding future growth in Hungary, despite better macroeconomic figures resulting from recent public debt and government deficit reduction. As one of them stated: “Hungary has a ‘no–go image’- an image that is worse than the actual, admittedly bad situation.
Mr. Tomas Spurny CEO of CIB Bank disagreed that the problem was simply one of image, and said that a major factor in the lack of growth is the seizure of bank lending. This is a result of government policies, rather than the unwillingness of banks to lend.
First the government introduced crisis taxes on capital, which reduced the banks’ capital. Then they introduced tighter regulations requiring them to maintain higher capital adequacy ratios, meaning they can lend out less of the capital they do have. The depreciation of the Hungarian Forint (HUF) has confounded the problem as they hold their assets in HUF, but have obligations in other (hard) currencies. As for raising additional capital from abroad Mr. Spurny stated, “no one will lend to Hungary.”
Some of the business people characterized the special crisis taxes as “punitive taxes” by the government and described the overall situation as dramatic, adding “I wouldn’t want to be a businessman in this country”.
At the end of the forum, former Hungarian premier Péter Medgyessy gave a thorough analysis on the state of the world economy as well as the crisis of the Eurozone, highlighting that “it is a crisis of European values, and not the Euro[zone]”; explaining that the real problem is the ineffectiveness of EU leaders, who failed to address the changing world, in which Europe’s earlier vantage is vanishing rapidly, with the emergence of strong competitors such as China, India and Latin America; not to mention the older rival, the US, which is more developed technologically, and is capable of fostering faster growth than Europe, and on a more sustained basis.
Finally, the former PM concluded that ‘the European model’ is in a very bad shape, and it’s practically not working, so more much serious – and concerted – efforts need to be undertaken by EU leaders instead of only temporary measures that were seen in the past few years (from 2008 until now). Mr. Medgyessy emphasized that the Brussels EU summit of December 8-9 was a move forward towards the right direction, but a rather modest step, which so failed to calm the markets; adding that any real solution will obviously involve the establishment of a federative EU, and will also have to be embedded into the global context.
Source: Nicholas Ryan; FreeHungary.hu
Last Updated on Friday, 20 January 2012 20:39
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