Website of the Hungarian Goverment

2 December 2016

Éva Kocsis: In the next half-hour the topics will be pay rises, competitiveness, the pension increase and foreign policy. We have Prime Minister Viktor Orbán in the studio. Good morning.

– Good morning to the listeners.

– Last time we finished our conversation by speaking about the economy, and how a wage increase can be implemented at every level in the labour market. We’ve since learnt that the agreement on minimum wages for skilled and unskilled workers has been signed. When we spoke you were relatively confident that this increase would be achieved at every level. Why do you think it’s obvious that all employers will be able to afford this?

– I’ve been a Member of Parliament since 1990, which means that I’ve attended twenty-six budget debates; as a governing party we were responsible for some of these, so we have some experience. I can tell you with due modesty, but with confidence, that we’ve learnt what the consequences are. We know that if we turn a dial on the great machine that is the economy, in order for the economy to work well as a whole all the other dials will also need adjusting. I’ve also learnt that if we set clear targets – and before we set them we speak about these targets with the economic stakeholders as part of a genuine consultation, and as a result they know the directions and intentions of the Government’s economic policy – we can achieve the accord between the Government, employers and workers which is necessary to attain those targets. We must talk straight, with courage and clarity, and must be brave in setting targets. I’m sure it’s no accident that after 2010, when we had to pull the country back from the brink of bankruptcy, we didn’t just say that unemployment – which stood at around 12 per cent at the time – should be reduced, but I asked employers and workers to set our target as full employment. And today unemployment is below five per cent. In the same vein, this time I’ve asked them to come to an agreement about the implementation of a major tax cut in return for pay rises, and to jointly set the target that not only should everyone in Hungary have a job – as mostly today we can already say that those who want to work in Hungary are able to do so – but that in Hungary it should increasingly be worth everyone’s while to work. And everyone will get a tax cut if, in return, there are pay rises. This is the simple logic behind our decisions.

– Well, if higher wages must be paid, it also means that those businesses must raise the money somehow, and they must adopt a more responsible attitude. Do you think this could have an impact on improving competitiveness?

– Naturally I think that tax reductions always enhance competitiveness, and I also think that pay rises indirectly lead to an improvement in the quality of the workforce. So we’ll be more competitive.

– Last time we also spoke – or at least, we started speaking – about the basis of this forty per cent pay rise, the real pay rise to be implemented over a five-year period. And we spoke about economic growth, and about how the reduction in interest burdens contributes to this. Job creation is an important element in this, but we spoke less about this. Meanwhile, another important element is narrowing the gap in the wage-output ratio across the region. Let’s take a look at job creation.

– Well, we started with a 12 per cent unemployment rate, and today it is under 5 per cent. In 2010 unemployment in Hungary – the degree and extent of unemployment in Hungary – was only around the nineteenth lowest in Europe, but we have now made it to the top five. This means that Hungary is one of the countries least affected by unemployment. I would venture to say today that those who want to find a job of some kind in Hungary are able to do so. It’s true that the situation is not yet ideal, so we shouldn’t sit back and relax. We must also recognise that there are regional differences, and it’s also true that it’s not always easy to find a job, and that people don’t always get the jobs they want or have studied for. But we can say that everyone has access to a job of some kind – and in a worst-case scenario, to a job in a public works scheme. This is why I’m saying that today the goal we should set is no longer job creation, but to make working much more worthwhile.

– I have a study here, and it states exactly what you have said. Unemployment is effectively at a record low, but there are regional difficulties. There are obviously many reasons for this, including mobility. But I also have here in front of me a study by Századvég about how labour shortages can be reconciled with labour surpluses. One of the important factors in this is the transformation of schools, the transformation of vocational training, and thinking ahead to the needs of the labour market in one or two years’ time, or in just six months’ time.

– Naturally we still need to deal with a number of problems. Everyone familiar with reality in Hungary can see that we are not yet where we would like to be. But we can also say with confidence that the situation is more promising today than at any time since 1990. We’re not saying that we’ve arrived, but that we’re well on the way, and that the direction of travel is promising. I can tell you that we now have the best chance in 27 years to simultaneously reduce our sovereign debt, improve competitiveness, reduce taxes and increase wages. I think it’s also important for everyone to appreciate, or consider, that these achievements weren’t won in the lottery and they’re not down to luck. Similarly, it was not the external effects of some international trend that created the foundations for these wage increases, but the thorough work that we’ve done over the past six years. Over the past six years almost everyone in this country has been working. I’m not talking about the Government now, because that’s natural. Since 2010 each and every Hungarian has taken up the idea that we must do more to prevent the economy from collapsing, and to set off in the direction of the goals we set more than twenty years ago, at the time of the fall of communism. And the Hungarians have done it. This is a people repeatedly defeated in the 20th century, and frequently reduced to faint-heartedness. What I’m going to say now will sound strange, but I’d like to pull the country out of this state, because – as well as being talented and hardworking – the Hungarian people are now also successful. So we’ve found the right direction, we’re on the right track, we’ve managed to pull our resources together, we have our results, and we belong to the community of winning countries. We are among those countries whose situations are improving, and we’re one of the winning nations. This is an unusual state of affairs – something we haven’t experienced for a long time. But if we don’t acknowledge this, if we don’t understand this, if we’re unaware of this, we can’t come to the right conclusions and set appropriate new targets.

– All those things you mentioned are the basis of competitiveness, and of long-term thinking. But if we are to convert these into figures, what kind of data are you reckoning on for, say, next year?

– We have promising data, I can tell you that, because in every dimension the situation will improve. Sovereign debt will fall and the budget deficit will decrease; or at least stay at the same level – it won’t worsen. We’ll manage to stay in control of inflation, even if it’s higher than this year. We’re reckoning on a much more substantial pension increase compared with the more moderate one planned earlier, and we’re reckoning on a further fall in unemployment. This is tricky, because we’re saying that there’s no unemployment, and at the same time that unemployment will decrease; the logic of the human mind tells us that these are two contradictory claims. But the truth is that there’s always some unemployment, because jobs are always lost. The question is whether new ones are being created at the same time. So there’s always some temporary unemployment: according to the science of economics, when unemployment is at three to four per cent there’s effectively full employment. We’re very close to that. I see an increase in demand for housing construction projects, with more than twenty thousand planning permits being issued recently. Families are now also starting to build, as we have also been able to increase tax benefits for families with two children. So, as I promised everyone before the 2010 election, I think that everyone – including pensioners, active workers, the elderly and the young – will be able to take a step forward.

– You also mentioned the pension increase. How badly will next year be affected if the European Commission decides to phase the regulation of fixed energy prices out of the European market?

– First of all, we won’t allow them to do that. It would have a detrimental effect if we allowed them to, but we won’t allow it. We should prepare for the continued strengthening of our opposition position in Brussels, because here is yet another issue. I’d be happy to side with the majority in Brussels on every issue, as I also believe in strength in unity. I believe that we could achieve more if the European peoples were all heading in the same direction. But I can’t side with silly proposals which are detrimental to the interests of the Hungarian people, and neither can Hungary. The idea that we should phase out the official regulation of prices from the European energy system would mean having to do away with reductions in household utility bills. The Commission, the European Union, is wrong in thinking that competition leads to lower prices. My experience is that in the energy sector this isn’t the case. Competition doesn’t lead to lower prices, but through all sorts of background deals it actually leads to higher prices. I’m not saying that this is the case everywhere, and I’m particularly not talking about the US , but I think that if there’s no price regulation in Europe – particularly in Central Europe – pensioners, families and people in a difficult situation will pay substantially higher energy prices than they do with a system of price regulation. Hungary insists on the reduction of household utility bills, and we’ll defend it; and though this will be an extremely difficult struggle in the year ahead, we stand a chance of success.

– I was just going to ask whether this is not another front which …

– It is another front, but we didn’t open it. I don’t want to play the role of an arrogant country or an arrogant prime minister, because that’s not in our nature or in mine. We seek reasonable solutions, and prefer agreement to conflict. But we mustn’t agree on bad things, and we are not the ones who want to change the current system – but Brussels does. They have opened up a front, and there’s nothing else for it: we have to take up arms and enter battle.

– We’ll come back to Brussels later, but let’s talk a little more about economic growth, as it’s obviously affected by external economic circumstances. For instance, the fact that the Germans themselves are reckoning on their own economy slowing down until 2018. Won’t this affect us…

– The connection you’re talking about does exist, there’s no doubt about that, as a considerable percentage of the Hungarian economy’s output is aimed at exports. This means that if there’s no one to buy our products, the growth of the Hungarian economy will also slow down. But I wouldn’t allow us to sink back into a mentality in which Hungary is permanently a self-pitying victim. Self-pity is one of the most harmful emotions, and if we say that things are going badly in the world – and that things will go badly for us also – this is a certain form of self-pity, and I wouldn’t recommend that. If world economic growth slows down, or our markets are expected to see negative trends, everyone – including the Chamber of Commerce, the trade unions and the Government – is expected to seek a political direction which can maintain the country’s economic growth, or at least protect it as much as possible, even with poor or deteriorating external conditions. So we’re not laying down our weapons, as we want higher growth, no matter what.

– Is the policy of eastward and southward opening already that direction?

– Yes, there is more to the world than Germany. While in one sense we respect Germany and see it as a model in terms of discipline, performance and quality, and a sizeable percentage of our export products are sold in Germany, Germany is not the whole world. The world has other corners as well. As a result of the Eastward Opening, we’ve managed to achieve a considerable increase, even during the current sanctions against Russia. And the Southward Opening has also begun: we’ve also started selling Hungarian products in regions to the south of us.

– Now, as regards the direction of the economy, you listed a number of things – from the wage increase to pensions and foreign trade. But when you’re in a Cabinet meeting, what is the next practical step, what are the specific economic measures for the next six months?

Well, this is a tricky question. It’s a complicated matter which I should sum up in simple terms, and I’m not sure I’ll succeed. You should see a government as something with at least three brains at once. So you have to think about three heads. There are strategic objectives over the next ten to twenty years. Like the North Star, this is something that you need to keep in view at all times, even though what we’re doing at the moment is not about that. But we can’t go in the opposite direction to the goals which we’ve set for the next ten to twenty years. So there is a brain which continuously focuses on strategic issues. And we have a brain which monitors whether recent decisions are in line with our intentions, because a government makes a decision, and then events take their course. The economy and the people do not always respond to a decision in the way we assume they will. In a best-case scenario, that is what happens. And at times like this experience helps, because we’ve already designed the budget, as I mentioned, and this is not our first economic policy programme; but we must continuously monitor the impact of our decisions. And the third brain must think about the good short-term decisions which we must make. So we have to think of all three dimensions at once. This is why our job is as exciting as it is; it is a major challenge, and you don’t always succeed. In today’s world, the number of successful economic policies is rather limited. Major forces must be mobilised – not only for implementation, but also in terms of the intellectual work involved. In my view, Hungary is doing well. Here I’m not talking about the Government, but about academia, about the world of intellectuals, about economic players whose job is to think about economic policy. I think we’re doing well, and we are competitive in terms of thinking. And while self-praise is perhaps not a pleasant thing, this is something I can say in Hungary’s favour.

It’s no accident that one by one we’ve won these enormous battles with strategic economic dimensions. I don’t know if you remember when we sent the IMF home. They said that this was an unorthodox economic policy which would lead us to ruin, and the Hungarian opposition continually said the same thing. And we should likewise not forget that the Hungarian opposition didn’t support a single one of our measures: we didn’t receive support of any kind – either in tax cuts, pay rises or pension increases. So the Government had to find a way to succeed against the international headwind and the headwind created by the Hungarian opposition – and I find this a particularly worthwhile achievement. We’ve won great battles and, slowly but surely, Hungary has turned from a black sheep into a success story. Even if they don’t like it, this is something which our opponents are also slowly beginning to recognise.

– As you’ve mentioned battles, in two weeks’ time there will be another battle, I think, on the European Union stage, in connection with the migrant quotas. But now you’re going there with the decision which the Constitutional Court published on its website on Wednesday. This states that the Constitutional Court of Hungary can examine the joint exercise of powers through the institutions of the European Union to determine whether it violates human dignity, fundamental rights, the country’s sovereignty or our identity based on the historical constitution.

– This appears to be an abstract issue of legal philosophy, and an issue of constitutional law. But it isn’t.

– But I’m curious about the text, the practical part.

– When I heard this, I first tipped my hat to the decision of the Constitutional Court and the Hungarian constitutional judges; and then I threw my hat up in the air, because I’ve been given an enormous amount of help in the battle which I’ll have to fight in Brussels. This is now not only about what the Hungarian government thinks, and it’s not about how we interpret a referendum in which three million three hundred thousand people clearly expressed their will and created a new unity in the interest of protecting Hungary. And now we can also dismiss the opposition’s objections. We can forget that the opposition decided to side with Brussels, that Jobbik tried to trip us up, because we have now succeeded in sidestepping an opposition which has tried to throw up obstacles to our progress. Though it would have been better if our wording had been clearer, the Constitutional Court of Hungary has determined that, based on the existing text of the Constitution, and even without a constitutional amendment, the Hungarian government has the right – and, most importantly, the duty – to stand up for Hungary’s constitutional identity and fundamental interests everywhere, including in Brussels. We cannot support a decision by Brussels which violates Hungary’s sovereignty. The Constitutional Court has settled the issue with absolute clarity, stating that no one else can tell us whom we should live together with: given that the composition of the population forms part of our constitutional identity, this is the prerogative of the Hungarian parliament and the Hungarian people. Hungary’s population cannot be changed with an outside decision, the proportions and composition of its population and the rules for residence in Hungary cannot be changed by an external decision. So this is a great relief for every Hungarian, and it’s good news for everyone who takes Hungary’s security seriously, who doesn’t want immigration, who doesn’t want us to be invaded, and who doesn’t want Brussels to move people here who don’t want to come here, and whom we also don’t want to be here.

– I should now start keeping count of how many times I’ve asked you whether there will be any major progress on this issue at the upcoming EU summit. I’m pessimistic. I think you’re optimistic, if I’m not mistaken.

– This is like a joust. At these meetings we all march in – as I said before, we engage in battle. Everyone dons their armour, mounts their horse, and we clash. Lances break, and at the end of it there’s a result. So far, they’ve been unable to throw us off our horse. It’s also true that we haven’t thrown them off either, and so for the time being this match is drawn. But the side which wins time will boost its chances.

– What about the balance of power? The Slovaks are working on a proposal.

– The balance of power is like David and Goliath. On the other side is Goliath, opposed to us on this side, the Visegrád Four. According to the EU’s decision-making mechanism, however, the prime ministers can only adopt decisions on important issues based on unanimity – and therefore even David stands a chance. Repeatedly deploying this weapon does not make for a comfortable situation, and I’m not looked upon kindly, but rather with disapproval – and I’m accused of destroying unity and who knows what other terrible things. But there’s nothing else we can do – we must insist on our national interests.

– You’re only talking about the Visegrád countries, but according to the news yesterday or on Wednesday, Milos Zeman said that neither the Czech Republic nor France supports mandatory quotas for the relocation or resettlement of refugees. There will be a referendum in Italy, and elections in Austria. We should add that Francois Hollande announced last night that he’s not running for president again. What he has to say about the quotas is now, from this respect...

– Here I’d like to use some stronger words. People don’t want immigration, don’t want to see foreigners in their midst – they’re happy to help those who are genuinely in trouble, but they don’t want to let people in whom they won’t be able to live alongside, and whose presence will lead to worsening public security and the increasing threat of terrorism. People utterly reject the notion that everyone is entitled to the good life, even if they make no effort to deserve it, and the notion that people can come here and share or take away from us everything that we’ve built. Those governments and countries which do not understand this and which disregard popular opinion will all fall – this is just a question of time. And this is what’s happening. We just have to persist until democracy is restored, because democracy in Europe today is in a state of imbalance – there’s no democratic balance. The people have ideas which are different from those which their leaders want to impose upon them. The time will come when this distinction will disappear, and it will disappear according to the rules of democracy. And since our poet Petőfi we’ve known that it is the water which is the ruler: water will not be ruled by the ship, but the ship will be ruled by the water. This is a rule of iron, and it will prevail. Those who failed to adopt this democratic attitude at the outset will also learn that they either become democrats, or they fail. And gradually, step by step, this is what’s happening in Europe – and indeed, in my view, this is also what happened in the United States. This will happen; we just have to hold on until those of us who clearly state that we don’t want immigration in Europe are finally in the majority.

– Is this also your message to those who are preparing for the votes in Italy, France or Germany?

– I wouldn’t like to mention any particular country. We have enough problems as it is, and I don’t want to draw any more fire.

– What about Turkey?

– Well, Turkey has a good chance of maintaining its stability. When we look at Turkey, we can see what’s happening there from a variety of angles. In terms of the Hungarian people’s interest, the most important consideration is that there should be a stable, predictable and firm government there. Because if there’s trouble in Turkey, let alone chaos – not so long ago there was an attempted coup there, and the President and his family only escaped with about twenty minutes to spare, because they wanted to kill him. He managed to escape, and so Turkey now has leadership. And we would like the leaders and the Turkish people to preserve their country’s stability; because Europe will suffer greatly if order breaks down there, and if the country does not have clear and strong governance.

– You’ve been listening to Prime Minister Viktor Orbán.