Hungary?s next central bank governor is expected to be named on Friday and Gy?rgy Matolcsy, finance minister, is the most hotly-tipped candidate. So Matolcsy?s weekly newspaper column on economics, society and culture attracted more than the usual amount of interest on Thursday when he used it to accuse foreign businesses and banks of orchestrating attacks on Hungary and to assert that a planned loan agreement with the IMF and EU would have destabilised the government and led Hungary into default.
Under a strapline ?Government under pressure from big business coalition?, Matolcsy said measures such as taxes on banks and utilities and the nationalisation of pension funds had met resistance from powerful interest groups including European banks and multinationals, who had put the government under pressure ?by all possible means?.
?This,? he wrote, ?is what lies behind attacks in the media, the EU infringement proceedings, the ratings downgrades, financial market speculation and political attacks.?
This is how he summarised the present government?s achievements:
The starting point is a measure of the size of the success. The new government inherited a bankrupt fiscal position in the middle of 2010. Had it not been for our decision to make a budgetary adjustment equivalent to 3 per cent of GDP, the deficit would have been around 6 per cent, instead of 4.4 per cent, which would have forced an immediate government default. A new IMF/EU agreement would have pre-emptively prevented this [adjustment]. We know what the outcome of such an agreement would have been: a political stalemate as early as the autumn, government instability and a fragmenting parliamentary majority. If we hadn?t successfully reformed the government without the IMF/EU, we would have had to pay the price of accepting external help: we would have lost the opportunity, through our two-thirds parliamentary majority for a complete historic renewal of the country.
That?s one point of view. Another is that Hungary?s deficit-cutting measures ? especially the nationalisation of pension funds ? are one-off tricks that cannot be repeated. Meanwhile, critics say, an increase in the national minimum wage has put many businesses and jobs in jeopardy.
Matolcsy is one of the architects of what he called Hungary?s ?non-traditional? economic policies led by Victor Orb?n, prime minister ? who refers to Matolcsy as his ?right hand?. His appointment to the central bank would be especially significant because outgoing governor Andras Simor, whose six-year term ends this week, has been a leading proponent of more orthodox policies including using tight monetary policy to fight inflation and defend the forint ? something Matolcsy dismissed last month as ?catastrophic?.
The fact that Matolcsy is being tipped doesn?t mean he will get the job. Few politicians, after all, can pull a surprise like Viktor Orb?n can. But the idea that monetary orthodoxy may be about to give way to Matolcsy?s ?non-traditionalism? has clearly spooked markets. The forint fell slightly to Ft296 to the euro on Thursday, from less than Ft290 two weeks ago.
Related reading:
Hungary: Simor?s last days, beyondbrics
Hungary?s ?catastrophic? minister, beyondbrics
Guest post: the fake conservatism of ?centre-right? Fidesz, beyondbrics
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