"This autumn will probably not be inscribed in the history of Fidesz as a period of splendid ideas. Hungary's main opposition party is frantically trying to escape even the appearance of having anything to do with the crisis management of the Socialist Party (MSZP). But what it will really accomplish with its shoddy communication is the brick-by-brick destruction of its professional credibility that it has been building up for years in opposition.Portraying Hungary's stand-by credit agreement with the International Monetary Fund (IMF) as a hugger-mugger deal is a mere blunder; the rejection of the fiscal responsibility package is a mistake of historic proportions and the call on the central bank to cut its base rate immediately to 6.00% is pure madness.
To the list of lapses mentioned above we may add the party's proposals for a 0% social security contribution and drastic tax reductions (with not even hints on spending cuts) and we are already at a loss about the concepts of Fidesz which it bases its policy on.
We might refer back to how German Chancellor Gerhard Schröder and his election rival Angela Merkel became “friends" when the future of the economy was on the line, but from a certain point of view the scruples of Fidesz are understandable.
It is not such a shocking surprise that the party does not want to give its name to an austerity package that is the consequence of the shamefully inferior governing of the Socialist Party and the Free Democrats. (Just forget about the euphemisms used to describe the 2001-2006 period. When we look at what Slovenia, the Czech Republic and Slovakia have achieved and tears start rolling down our cheeks, the only ones we can blame are the left-wing governments.)
From now on, however, we should also treat the babbling of Fidesz about “responsible opposition" and the likes as a joke. But let's admit: the job of any given politician is vote maximization so we should accept that Fidesz sees the key to this in its current policy. (It has the right to be wrong about this, but we leave that to decide to political analysts.)
What is becoming an ever-hotter issue is what level of credibility Fidesz will have when it is voted back to power. And make no mistake, the markets will start guessing at once what Fidesz really wants and we can already see how damaging the lack of economic policy credibility can be.
We ponder what a party can really want whose key remark about the IMF-led rescue package is that there must be a secret clause in there where the real, nasty and painful truth lies.
We need to give it to Fidesz that its budgetary performance was nice compared to what came after that. Then again, how should we judge a party that happily nods on the 100-day programme of profligacy and six years later it rejects the fiscal responsibility package on trumped-up arguments? And it does so probably aware that this law is the most important step of the past years towards the creation of the institutional conditions to fiscal stability. Moreover, the bill comprised several compromises that matched the taste of Fidesz - in theory that is.
And then we are hit the hardest yet: Fidesz President Viktor Orbán calls on the central bank (NBH) to cut its key policy rate to 6.00% from 11.50% - right now! In more civilised countries a suggestion like this is closely followed by awkward attempts for clarification, but in Hungary it is more than enough if Fidesz cites “European examples" as a perfect explanation to its rate cut idea.
Meanwhile, not a single economist would argue that such a step would bring about an immediate exchange rate crisis. So how well-founded this idea really is - professionally?
At the moment, we know the following about the economic policy of Fidesz:
- massive tax cuts with aggressive and diversified contribution reductions;
- with no information given on spending side measures to offset these;
- with the rejection of rules that would enhance fiscal discipline;
- and drastic monetary easing, completely disregarding the aspects of financial stability.
Well, the outcome of these would be no less dramatic than what the past governments put on the table. Of course, we are fully aware that what leaves the mouth of politicians is not necessarily what their actual policy will be. But Fidesz would most likely be better off if it did not build its credibility on this, because a few more seasons like this and it will have nothing to build..."
Source: Portfolio Online Financial Journal
21.11.2008