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Hungary Tells the IMF to Get Lost

On July 22, the 386-member national parliament of Hungary passed the "national economic revolution" package of Prime Minister Viktor Orban with an overwhelming majority of 301 to 12 votes and one abstention. The package includes a tax on banks to be used to lower the budget deficit, and several restrictions on credit issuance, which were hotly protested by the IMF, and led to the spectacular breakdown of talks between the Fund and the Hungarian government on July 17.

The IMF's decision to "punish" Hungary by blocking the remaining 5.5 billion euros of a 20 billion loan agreed upon two years ago, was mocked by the Hungarian government, who says it can do without the doubtful assistance of the Fund. And Janos Lazar, chairman of the parliamentary group of the governing FIDESZ party, said that "despite IMF pressure, we will not squeeze the poor more."

The parliamentary debate on the legislative package was introduced by Orban, with the words: "I suggest to study and explain our relationship with international financial institutions from a new perspective... We want to restore the lost economic sovereignty of Hungary, because there is no economic growth without it." The agreement with the IMF signed by the previous government has pushed the country into a debt trap, he said, but the 29-point program proposed by his government will lead Hungary out of that trap. Note that in his first major speech after taking office, Orban insisted on the clear differences between speculative capitalism and productive capitalism, stressing that his government resolutely adopted the latter.

On the plan for the bank tax, Economics Minister György Matolcsy explained that Hungary’s plan "has caused quite a storm in the global business community." This has less to do with Hungary, which is a small country, he said, than with the "fear that if Hungary introduced a bank tax of this magnitude, Germany, France, the UK, Romania and Slovakia would follow suit."

Indeed, Hungary is not alone in standing up to the IMF. It received support from the other three governments of the Visegrad-4 group (Czech Republic, Slovakia, Poland) at their Bratislava summit on July 21. The four leaders resolved to coordinate their steps before every important EU event, to make sure, as Orban put it, that "no new Iron Curtain, this time of finances, divides our countries from the rest of Europe."

From Slovakia, which took over the chair of the Visegrad-4 group for the next 12 months, the new Prime Minister Iveta Radicova also announced that the drastic budget austerity of the previous government would not be continued. The Slovakian people, she said, suffered severely in the 1990s and at the beginning of the Millennium, when their living standards were cut by 10% in order to save the banking system. "This will not happen again, the population cannot be made the victim of irresponsible governments again and again," she concluded.

Unfortunately, rather than supporting these countries' moves to defend their populations, the French and German governments propose to impose harsher sanctions on states that do not comply with the Maastricht criteria. And virtually every Western European government has prepared crushing austerity packages for their own populations, despite the fact that such policies are already dooming them. In France, in the midst of the scandals pouring down on the Sarkozy presidency, some media are comparing Prime Minister Fillon to Pierre Laval, the notorious budget cutter. In Italy, although the Italian austerity program is modest in comparison to other EU member states, the population sees it as a shift and a betrayal of the nation, robbing Prime Minister Berlusconi of a majority support in opinion polls, while his government coalition is cracking under centrifugal tendencies.

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