Hungarian Social Watch Report 2013

Hungarian Social Watch (SW) Report 2013

by Matyas Benyik

In Hungary a system has developed that is both disrespectful to the rule of law and constitutionalism. Hungary has turned against the democratic ideals of the world, civil liberties are restricted and today it is on a declining economic path. Political life is characterized by a murderous policy divergence, confrontation and a dangerous ideology-based polarization. The majority of the society is struggling with unjust and unequal relationships without even the hope offered by mutual solidarity. Hungary’s international prestige, integrity and credibility are now at its lowest point.

Political, financial and economic situation

When the global financial crisis broke out in 2008, Hungary was already in a precarious economic situation. Although the government had introduced major austerity measures between 2006 and 2008, these cuts did not prevent a flood of international speculation which threatened to collapse the country’s economic and financial system. Immediate support from the International Monetary Fund and the European Central Bank allowed Hungary to avert the worst economic scenarios. Nevertheless, the crisis underscored several weak points in the Hungarian system which could no longer be ignored, these include:

– an extremely high exposure to foreign currency debt (mainly in the private sector);

– high levels of external debt financing;

– low level of employment combined with a high rate of  long-term unemployment[1] and

  activity rate;

– low average monthly wages (USD 616)[2] comparing to the productivity level;

– premature consumerism generated by the banks offering low interest rate credits denominated mainly in Swiss Francs, which led to very high level of households’ indebtedness[3];

– sharp conflicts between the Socialist Party (MSZP) and the right wing party (Fidesz);

– a dangerous ideology-based polarization of Hungarian society.

In April 2010 Fidesz won a two-thirds majority in the parliamentary elections and then again also in the local elections in the autumn. During the electoral campaign Fidesz promised to create one million jobs, stimulate economic growth and cut taxes. Despite the fact that the new government’s decisions have decreased the structural fiscal deficit and fixed the budget shortages through temporary measures (e.g. crisis taxes on the financial, retail, telecom and energy sectors, nationalized private pension funds), the economic growth continued to slow down (by 1.5% in third quarter of 2012)[4]. One of the first acts of Prime Minister Viktor Orban’s government was the purchase of a large share of a private oil and gas company (MOL) under Hungarian management.  Shortly afterward the government bought a company (RABA) producing trucks and military equipment. It started negotiations with the German-owned utility company E.ON. Although these re-nationalization measures could be hailed by some, the main concerns lies in the unorthodox economic policy – a quickening social degradation and the neglect of Hungary’s most needy have still remains today. In truth, the only aim of these steps by the Fidesz government is to change the previous Socialist elite and replace it with faithful Fidesz office clerks.

Adding to these worries are the Fidesz government’s populist and anti-democratic actions, for example:

 – Introduction of a controversial new media law requiring a ‘balanced view’ determined by a  committee dominated by Fidesz party members;

– Dismantling the important budget committee and installing a new committee with limited

   powers;

– Challenging the independence of the National Bank of Hungary;

– Curbing the power of the Constitutional Court;

– Pinning its economic policy on a target of boosting growth through cuts in the personal and corporate income taxes (by 16% and 10% respectively) in favour of the rich and upper-middle  classes and the Small and Medium-sized Enterprises;

– Offering Hungarian passports to all ethnic-Hungarians living outside of Hungary (about four million people), thus stepping on the sensitive diplomatic toes of the neighbouring countries;

– Changing the Constitution towards a very conservative and nationalistic direction. This

   includes the tenets of Holy Crown and extra ‘protection’ of marriages between men and

   women;

– Passing of a new election law that is embedded within the Constitution. This new law forbids associations to put in for an election.[5] This appendix was enacted a few days after a left-wing coalition (called ‘Together 2014’) was established in October 2012.

Social situation

Over the past two years and since the new government came to power, the risk of impoverishment has increased and more brutal forms of poverty have emerged. The introduction of the flat tax system, the continuous reduction of social benefits, the stopping of the modernization of the educational system, the limited penal policy hitting primarily the poor have all brought a sad expected result. While members of the government are making mockery of the elementary rules of logic, they talk nonsense about the state of the economy, a large strata of the society are losing their present and future possibilities. Four hundred and seventy two thousand people were made unemployed in the second quarter of 2012[6] and 300 thousand receive no benefits at all. It is terribly difficult to figure out what they are doing for a living, because the black economy options have also narrowed.

On 30 November 2011 the Hungarian Government adopted a 10 year-long National Social Inclusion Strategy (NSIC) accompanied by a short term action plan for the period between 2012 and 2014 saying: „Today in Hungary nearly 30% of the population, i.e. three million people lives in poverty or social exclusion according to the EU indicators. Among them around 500 to 600 thousand people are Roma.  Poverty rate is approximately 70% among the Roma […] Their employment rate is under 30% […] As regards education, primary school completion is above 80% among the Roma, but secondary school completion is only 20%. Significant territorial disparities and housing segregation also hit the Roma disproportionately…”[7]

Despite the praise-worthy goals of the adopted NSIC, very little has been been accomplished up to now. According to the latest figures from the Hungarian Central Statistical Office[8] (HCSO) 42.2% of the Hungarian society is characterized by material deprivation and 23.1% by severe material deprivation. This means that almost two-thirds of society cannot go on vacation, 24.7% struggle with arrears, 2,860 thousand cannot eat meat dishes every other day, and 1,154 thousand cannot afford heating.

It is also clear from the HCSO analysis that the poverty rate and the risk decreases with age. 17 years of age are the most vulnerable. In 2010 only 20.3% , one year later already 23% were poor. Young adults also face above average risk of poverty.

It may seem surprising that the risk of poverty for elderly people are in the best situation. The relative position of the elderly is better because pension benefits are regular and predictable. During the socialist era, all the already retired people had a job. Many pensioners, however, do feel poverty as the average monthly net pension in 2012 is HUF 93,615[9] (about USD 425).

Consecutive austerity measures[10]

The Hungarian sovereign debt started in 1970 when the country began to increase USD debt partly due to the slowing economic reforms in the 1960s and to the global economic situation. Even at that time the Hungarian economy was dependent on imports of raw materials and energy as well as on exports of goods. When the oil crisis broke out in 1993 and the price of raw materials increased, the economic outlook deteriorated significantly. Although attempts have been made to stop this indebtedness, the debt continued to grow in the 1980s and reached 66% of the GDP by the end of the decade.

Between 1989 and 1994, the debt continued to rise, the ratio went up to 90% due to the economic recession, the high inflation and the consolidation of banks. The deteriorating situation was saved by the so-called Bokros austerity package. Due to the privatization of revenues, as well as to budgetary rigor, a crash was avoided. Though serious social deterioration occurred between 1996 and 2001 the public debt in 2001 represented only 52% of the GDP.

The recent growth of the debt began in the first half of the second term of Fidesz, it spent lavishly while preparing for the elections. Under the Socialist government the rise of the debt did not stop either. The Maastricht threshold was crossed in 2005 and by the end of 2006 the Debt-to-GDP ratio reached 61.8%.

In 2006 it became clear that the high primary deficit is not sustainable in the short term and austerity measures were introduced at the end of that year. The restrictions and cuts, however, resulted in a stagnation of economic growth, which dropped further because of the spiraling global financial crisis.

At the end of 2010 the debt was already 80%. Between 2006 and 2011 the debt ratio increased by 15 percentage points, but this was primarily due to the economic downturn and the weakening of the Hungarian currency, the forint.

The Ministry of Economy announced that the debt was 77.035,4 million euro at the end of the second quarter of 2012, equivalent to 77.7% of the GDP.[11]

As a precondition to a new IMF loan and to the elimination of the EU’s excessive deficit procedure the Orban government approved new austerity packages in October 2012. The new package of measures hits the majority of enterprises (banks, public service providers, and telecom companies in particular). The Hungarian population is also directly affected by the increased taxation on financial transfers and fringe benefits. These measures further worsen the situation of the domestic economy, which was already in recession. The package aimed at cutting next year’s budget deficit represents 1.2% of the GDP.[12]

Instead of admitting that the whole economic policy failed, the government lays the blame on the European Union. The group leader of the green opposition party (LMP) warned that „the transaction fees and public utility taxes on banks and firms involved in the transfer will be passed on to the households.”

The GDP share of social expenditure in Hungary is below the European average and it is more than it was two years ago. The experts praising the last austerity package have no idea whatsoever about the social impact of this because they have no notion of what constitutes poverty. Poverty is considered as the individual’s own responsibility, this is also believed even by those who would otherwise subscribe to theoretical beliefs of helping the poor. The Hungarian Christian Democratic Party (KDNP) – a coalition partner of Fidesz – is incredibly far from the principles of democracy and Western Christian practice declaring: „The poor do not already belong to the social community. It is about people outside the society, whom we have no responsibility.”

 Hungarian civil society answers & civil resistance

Hungarian civil society, including trade unions, are today very weak. This includes the many social groups that have been humiliated and hurt in the past two years. Not only the unemployed and the poor, but also doctors, teachers, and civil servants who are also affected. Regretfully, solidarity between the most vulnerable groups of Hungarian society has not strengthened, this is often because they dislike each other and do not cooperate. There is a fierce fight for employment. A big question is if and when these humiliations and unkept promises by the Fidesz government become understood and  politically conscious within these groups.

As long as those in power go unchallenged, the „divide et impera” strategy will remain successful. It is particularly important to understand that with these divisive politics the Hungarian people themselves – unlike in other European countries – are more individualistic in character. The lack of solidarity has an understandable past which may be connected to the policy of the previous Kadar regime (between 1956 and 1988). At that time the majority had been faring well and very few needed to join forces socially. The market economy is today attached to this same spirit of ‘Divide and rule’. But today not only the non-poor turn against the poor, but also the different groups of poor people turn against one another. The interaction between these social groups can only be expected if the tensions degenerate into assault and battery. A hitherto unseen ghettoization is occurring and conscious efforts are made within the cities to get rid of the Roma and the poor. The ban on begging in public areas has also intensified.

However, people do not want to be silent anymore. The left-wing criticism against Fidesz is not yet successful, but a growing dissatisfaction of a large strata of the society has led to the birth of a new movement called “Together 2014”, which aims to unite the opposition vote in a bid to unseat PM Viktor Orban in the next election.[13] Together 2014 is an alliance between former PM Gordon Bajnai’s ‘Patriotism and Progress’, ‘One Million for Press Freedom’ (Milla) and the trade union-based ‘Solidarity Movement’. Together 2014 is a centrist anti-Fidesz electoral alliance (not yet a political party). It should be said that at the time of this writing, Bajnai has not indicated if he plans to run for office. After the establishment of Together 2014 was announced in October 2012, the left-wing opposition parties appeared hesitant, both about what it actually stands for, and whether or not to join the coalition. Ex-PM Ferenc Gyurcsany’s Democratic Coalition Party (DK) immediately supported this initiative, while the leadership of the Hungarian Socialist Party (MSZP) declared it will consider joining the alliance. The Green Party ‘Politics Can Be Different’ (LMP) remarked that Bajnai has not distanced himself enough from the previous Socialist government (MSZP) and will decide later. It is still unclear if this rainbow coalition of Socialists, Liberals and Greens is workable, i.e. whether they can come up with political program that is credible to the Hungarian voters.

However, civil society organisations (CSOs), progressive groups and individuals have already started to violate Fidesz’ policy interest. While democratic institutions whither away, CSOs continue to learn democracy. New coalition of civic groups, movements, trade unions and opposition parties are now in the making. The CSOs of the Hungarian Social Forum Network actively participates in these new movements.  There are several smaller and weaker civil movements as well e.g. Fourth Republic! (4K!), ‘One Million for Democracy’, ‘Real Democracy Now’, ‘Occupy Hungary’ and ‘Hungarian United Left Movement’ (MEBAL).  If these progressive groups cannot join forces and stop Hungary from going towards the abyss, at some point we will face a Weimarian situation.

Budapest, 18 November 2012.