Category Archives: Hungary

Hungary back on the tightrope

It’s the kind of news that must make capital markets folks bang their head on a wall, but the Reuters headlin can’t be ignored: “Hungarian government denies IMF talks have broken down.”

If anyone’s gotten the wrong idea, it might have something to do with what Hungary’s chief aid negotiator Mihály Varga was quoted as saying: “We are once again in the clutch of foreign forces; once again a remote interest is bringing trouble on our heads.” The context of the statement is telling, as Varga reportedly said this on October 23, the day Hungarians commemorate the 1956 Hungarian uprising against the Soviet Union. He said that while “the boots of foreign soldiers are not trampling on our soil, our country is still in shackles.”

It’s all very well claiming this is just for public consumption, except it sounds awfully like the public is being prepared for some looming battle.




IMF pushes stand-by loan idea for Hungary

Are IMF and Hungary really talking about such different things? Couldn’t it all just be pre-negotiation banter, ahead of a deal that was always going to happen? Prime minister Viktor Orban may have put out a rather defiant-sounding list of items that are not on the table for the Hungarian government, but when it comes down to it, the IMF doesn’t seem to be asking for that anyway.

Instead of slicing more costs from the budget, it wants Hungary to commit itself to growth policies and a pro-business approach. Now, this sounds benignly positive, but it’s likely a veiled criticism of the ad-hoc series of taxes and special charges that have been levied on various sectors and businesses. And you can’t help thinking about all the strategic companies (oil, gas, water) that the government in Budapest seems to want to take back into its control through buy outs. The IMF’s point seems to be that Hungary needs to rebuild corporate confidence with greater predictability in policies.

Completing a deal with the IMF would do a great deal to solidify confidence in Hungary’s economy, and its government. What remains to be seen is if Orban thinks he has enough political capital to spend on such an agreement.

The easy life

This is definitely our favorite headline of the week:

Orbán: Hungary can solve problems without IMF but loan makes life easier

It definitely sums up the last several months of “talks” between the embattled government in Budapest and the International Monetary Fund, which you get the feeling wants to lend Hungary the money for the good of the world, but would secretly rather let the country sink. Orban has said in the past that he won’t allow Hungary to lose control over its own destiny to the money counters, and that the country will never be a colony of Brussels, or Washington DC. This is arguably a good way of avoiding the fact that it’s too late for that. But headlines like this, rightly or wrongly, make him sound like a recalcitrant teenager asking his father for money, but making it clear that he doesn’t actually need it and not to expect any gratitude. Still, for anyone who’s hoping life can start getting back to normal in the country, this is probably progress.

For a bit more context, which is probably appropriate rather than just repeating headlines, here are some of the quotes (hat tip PoliticsHU):

“Hungary is stronger today than it has been in the past and it is not dependent on anyone. We can overcome all troubles on our own, including financial and economic problems, using our own resources,” Orban said.

“The IMF loan would obviously help a lot because Europe is in a serious crisis, and another wave of crisis is approaching that will also affect Hungary. This will be easier to fend off if there is a safety net behind us. We could manage without it, too, but this would require more energy and would be more expensive,” Orban said…

“It is unacceptable that we should cut pensions, wages, child support or jobs.”

If we understand correctly, Hungary could use the loan because Europe is in crisis. And structural changes are not on the table. If we’re misinterpreting this, please let us know.

The Euro can wait

Great quote care of Reuters from Hungary’s Minister of Economics, which at first reminded us of that incredibly forthright admission from the country’s former prime minister that the ruling class had been lying for years, and that it couldn’t go on. It would have been daring, of course, had he said it to the public, but if memory serves, it was taped secretly and leaked spinelessly to the press. Still, it’s one of those rare moments in which you see politicians actually behaving self-critically.

In his most recent column in a Hungarian weekly publication, Minister of Economics Gyorgy Matolcsy is making the case that Hungary should can the idea of joining the Euro for the next couple decades. And in a remarkable display of chutzpah, he chides the European Union for its economic mismanagement. Seems like you could substitute the word Hungary for Eurozone here quite easily.

The euro zone faces a protracted financial and economic crisis because it grasped too much and aimed too high

Is he saying that Hungary doesn’t face a protracted financial and economic crisis because it bit off a bit more than it could chew? One can imagine him penning these thoughts in the car, as he’s whisked off to the latest round of bailout talks with the IMF.

While we’re at it, if anybody knows what this means, we would love to get our hands on an English translation:

Hungarian policy can follow a multi-step strategy which strengthens the economy without the euro in the next two wartime decades and enters the euro zone following a new peace.

But maybe this is purely intended for local consumption, and is part of a campaign to prepare citizens for what’s to come. No doubt Hungary can get its economy back on track, and it’s entirely possible that a frank admission that membership in the Eurozone isn’t going to happen in the near future is a healthy step. Now all it needs to do is to quit frightening off foreign investors for long enough for some deals to go through and we can start talking about progress.

Nokia dials Budapest, hangs up on Vienna

Is this part of the cost-cutting switch over to CEE people have been warning about, for what seems like years now? Nokia says it’s going to be closing its Vienna-based headquarters for Central Europe and moving 60 jobs to Budapest. Those willing to follow the jobs two hours down the M1 are allegedly welcome to do so, but would they really be the same jobs (i.e. at the same salaries)? Wonder who’s looking for the office space for Nokai…

It doesn’t mean the company’s workforce at its factory in Savar can breathe easier, though, as half of the plant’s workforce are being given pink slips.

Prologis records 615,000 sqm in leasing in Q2

Prologis Park Budapest/Sziget

Prologis announced that its European operations produced 615,000 sqm in leasing activity, including a 17,500 sqm new lease in Prologis Park Pilsen-Stenovice to an existing 18,000 sqm client, a 20,400 square meter build-to-suit expansion at Prologis Park Hunxe in Germany, and a 20,500 sqmlease extension with UTi Hungary Logistics LLC at Prologis Park Budapest/Sziget.

Worldwide, the company leased 3.3 million sqm of space and beat expectations by finishing June with a 92.4% occupancy rate (details here). Same-store net operating income rose 0.4% over the same period in 2011.

Hungary on the IMF track now?

It wasn’t long ago at all now that supposedly well-placed observers were warning that Budapest was hunkering down for a long bout of negotiations that they might not even be interested in. The perception was that the Hungarian government thought it either didn’t need more money from the IMF and the EU, or it figured it could do a nationalist/populist pirouette in order to ride out the consequences if the deal fell through.

So what’s changed? The world’s financial markets aren’t generally very forgiving in such matters, so it seems unlikely the world has capitulated. More likely is that Budapest is sending a very different message now. The Wall Street Journal blog says

A senior Hungarian official welcomed that Budapest submitted next year’s draft budget early, saying this allows lawmakers enough time to make necessary changes to ensure the debt-laden country will meet its deficit target for 2013, a pre-requisite to get much needed financial aid from the EU.

“There are unresolved issues in next year’s budget but there’s still time to amend them thanks to the early discussion,” Arpad Kovacs, head of the Fiscal Council, told the Wall Street Journal in an interview Monday. The fiscal council is an independent body, which monitors the country’s fiscal policy with a veto right on the budget.

That’s a very different mood from just a few weeks ago.