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“Hungary in state of near-crisis” according to central bank governor

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Hungary – On Monday, 5 December, MP Bence Tordai from the green party Párbeszéd posted on his Facebook account some quotes taken from what the Hungarian National Bank’s governor had told MPs sitting on the parliament’s economic committee.

The least we can say is that, as usual, György Matolcsy did not mince his words and even took the gloves off to talk about the Orbán government’s policies, even though he is himself a member of Fidesz.

“Next year, inflation will be at 15–18%”

Matolcsy was economy minister in 2010–2013, under Viktor Orbán. What he has just said to MPs is that Hungary is not only

the fourth or fifth most vulnerable country in the world

in economic terms, but also “the fourth country in the European Union” for low productivity. Matolcsy went even further and said that the Hungarian economy has, of all EU countries,

the second largest twin deficit [a combined deficit of the government’s budget and the current account balance, ed.] after Romania, and it will be first next year, reaching the level we condemned when we were in opposition”,

that is, when Ferenc Gyurcsány was in power, followed by Gordon Bajnai, before Fidesz won the 2010 elections.

The central bank’s governor also predicted that “next year, inflation will be at 15–18%” because of the surge in energy and food prices. He further explained that the current scourge of inflation is mainly due to the fact that, although it is an agricultural country, “Hungary has the second lowest farming productivity in the European Union after Bulgaria”.

And he made no concessions when assessing government policies:

In many ways, we are in trouble because of our own decisions”,

as “the consistency of economic policy between the government and the central bank has been disrupted, and it is costly”. For György Matolcsy, “the government’s crisis management strategy is wrong. The price ceilings cause excess inflation of 3–4%, they must be removed immediately”, he said, noting in passing that “Hungary is the only country that uses more gasoline and diesel fuel than before the energy crisis”.

According to Matolcsy,

“The surge in energy prices, the inflation crisis […] cannot be solved with tools of the past, and it is better not to return to socialism. Price ceilings and all such solutions that look good turned out to be inoperative under socialism: the regime collapsed.”

He then summed up his assertions by saying that “after 2010, we did not make the right decisions, [and] after 2021, the government has made the wrong decisions” in terms of investment in energy efficiency, which would require 20 trillion forints (48 billion euros), and the failure to prepare farming for the climate crisis.

Mihály Varga: “All countries are forced to take action”

Such harsh criticism from a figure who cannot be said to be close to or complicit with the left-wing opposition, and whose competence in economic matters is undisputed, could not go without a response from the government. Thus, Economy Minister Mihály Varga (who is Matolcsy’s direct successor, having been in his position since 2013) wrote on the same day, also on Facebook, that

the governor of the central bank is right to say that there is a problem, but this problem affects everyone: high energy prices are dragging the economies of all of Europe into recession.

All countries are forced to take action, including Hungary. Thanks to our response to the crisis, economic growth has so far remained high (at 4.1% in the third quarter, the seventh highest rate in the European Union) and employment is high (4.7 million people are employed, with unemployment remaining below 4%). ”

He then tried to instil hope with the vague assertion that: “It is possible to build on the achievements of the past few years.”