

Hungary's economy

A Magyar mess

Hungary may soon be overtaken by its neighbours

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Readers' comments




It's sad to say, but it seems that fate of young Hungarians is similar to other Eastern European neighbours: to emigrate to England, France, Spain or Germany for hard working and sending some euros back home to help their parents and children. Enjoy your European citizenship!


Well, when a PM goes on a rampage speaking about "if you don't like it, you can leave this country" as though it were a cool line from a movie or pop song without any consequences then, yes, I unfalteringly become alarmed. If anyone actually laughs at such comments or tries to dismiss it, and further if they come from a country where hundreds, if not thousands were severely injured by law enforcement officers in 2006, then it is I, a Hungarian citizen, who is direly ashamed of them. Actually, what led to the current state was not as much the responsibility of "free health care" as they seem to suggest (though it was invariably an immodest and important component), but rather the ignorance and incompetence of people (such as Gyurcsany, for example) who refuse to address the issues of outrageous social welfare and many other-even more critical- spendthrift government hand-outs.


Sadly Ostvan displays a typically Hungarian self-pitying approach to his country's plight. If the prime minister is 'mentally unstable' how would he describe the increasingly nationalistic and demagogic Viktor Orban? this gentleman still cannot accept the verdict of the electorate in 2002 when he was deservedly booted out of office. I can recall Mr Orban being so mortally offended by The Economist when he was PM that he refused to attend a conference organised by the same newspaper. And let's not forget that the seeds of the current crisis were partly sown during the time of the Fidesz government. Mr Orban sacked a very able Central Bank governor and abandoned a sensible gradual devaluation policy not to mention subsidising housing loans at an unsustainable level among other things.Fidesz have no solutions to the current crisis and are quite content to resort to images of populist romanticism which is very dangerous politically. Sure, the MSzP is equally incompetent but I feel I can safely predict that if Fidesz came back to government the IMF would be called in within 6 months after a massive run on the Forint.The solution? an entirely new pragmatic political movement needs to be formed free of the polarising sclerosis embodied by both Fidesz and MSzP. Ultimately until the people can trust their leaders nothing will happen. Hungary seems determined to learn the hard way.


The article is right.The political forces are very-very strange in Hungary.The socialists make liberal economic policy and the conservatives make social economic policy and they would like to give more room for the state.It's based on the old hungarian conservative traditions.Because the old conservativism in Hungary was a state-based social conservativism with strong patriotism and strong religion.I'm a true,religious conservative and I'm wondering this current political system.We need real change(s).True socialists,no former communists and of course true conservatives with the will to make free market economy,more liberalization and less selfishness.And I don't want to leave my country!

Sad Citizen

Thank you Economist for an objective article. As one of those resentful citizens I am very sad for the opportunities Hungary missed in the last 18 years. The Great Transformation ended in pitiful squabbles and shameless grabbing of public funds by politicians, rampant corruption, the destruction of a once well functioning educational and healthcare system. The country is closer to its neighbors in the Balkan than in the EU. Budapest's streets are filthy and inhabited by homeless beggars. Intelligent people leave the country and their talents are well received in western countries.


There are some half-truth in your articles, as it is usual. First $ 2. This vote is not about $ 2 or not, but against a government, recruited among old communists and close friends and which illegible, couldn't tell truth either to their supporters, achieved criminal-diplomacy and corruption and the prime minister is mentally instable. The well over than 50% voted against lies, the unlimited corruption and undemocratic way of administration.Hungarian taxes are among the highest in Europe and the social network is practically demolished. The government knocked down the national industry in 6 years. Fidesz's poll ratings are almost 64%, against some 15% for the Socialists.Mr Gy, a former communist youth leader turned multi-millionaire through proven corruption and his reputation is zero. Under FIDESZ administration Hungary was the first among the "newcomers" and now our figures are terrible. They stopped the economic growth and they can imagine only one medicine; even higher taxes and this cannot yield development. Now the government plays with ideas, usually ridiculous ones. e.g. the state will pay pension those over 85. That is this voting was all about.


"We screwed up"

I am glad to see a relatively unbiased analysis of the crisis we have not been (and will not be, until there is a change of government) able to get out of. The article mentions the horribly and uniquely high tax burden that Hungarian workers and employers must suffer. I would like to emphasise this more, because many fail to see the importance of this issue. A recent OECD survey showed that we pay the second highest tax rate (54 %) in Europe in case of a single earner and the HIGHEST (43 % I think) in case of families. As long as this is not changed or reformed, there will not be investments, new jobs, economic growth. The opposition has been saying this for years but the government called these views "voodoo policies" - ask them why... As the example of neighbouring countries show decreasing tax rates can generate higher tax revenues at least in Eastern Europe. Read this article and you will know why: http://budapesttimes.hu/index.php?option=com_content&task=view&id=4743&I...

Withouot economic growth nothing can be done or improved, reforms in healthcare or educations can not be financed. This is all obvious if you look around and see what is happening in the world, so next time, dear Hungarians please choose yourself a government, which does not screw up, has the intention and is capable of reigniting the economy and getting the country out of this deep depression.


Hungary is still managed by socialist( reformed )The real hungarians left many years ago when they saw their homes stolen
and they are being sold by the socialist and using it for making themselves rich with stolen goods.It is selling land stolen too, what can you expect from this ????

John Hunyadi

After many years of living in Hungary, I am coming to the conclusion that it is not just the politicians but also the ordinary Hungarians who elect them, who are to blame for the economic mess that the country faces.

Any Hungarian who wishes to elect an economically-competent gorvernment faces Hobson's choice. The current MSZP-led administration has mismanaged public finances but Fidesz, the main opposition party, offers no hope for improvement; indeed, Fidesz' past record in government and its current rhetoric lead many to believe (myself included) that it would be even less effective in reducing the budget deficit and in managing the economy in general. The only party noted for its liberal economic views is the SZDSZ, but as a junior party in the government they have largely failed to promote their reform agenda and, as a result, support for them is fast dwindling.

So much for the politicians. Where the Hungarian people - or more specifically the voters - deserve a piece of the blame pie (a local Magyar speciality, guaranteed free of added responsibility) is their evident lack of support for any substantial reforms, whether in the public finances, education or health. Parties advocating reform are punished at the polls, those that oppose (or, at least, those most shrilly declaiming anti-reform rhetoric) are rewarded by a boost in the opinion polls.

I believe that the majority of Hungarians recognise the problems here (opinion polls show that they regard the health system as failing) but are unwilling to take responsibility for addressing those problems (even to the extent of refusing to formally paying $2 to see a doctor rather than slipping $5 discretely into his or her hand). Ulpius-ulcer is a good example. He or she recognises that tax is too high but blames the one party (the SZDSZ) that would be likely to reduce taxes, if it had any real power. Schools are being closed down because of a declining population, but he or she prefers to point the finger at neo-liberalism. Standards of education, healthcare etc. are declining because the system desperately needs reforming, but he or she believes that this very reform (which has not yet taken place) is the cause of those problems.

Oh well, at least it is sunny today. We can dream of a pleasant Hungarian summer and almost forget about politics and money until, respectively, the next referendum and the annual tax return rudely awake us from our slumbers.


As a Hungarian professional living the expat life for over a good many years I have never given up the thought of returning, but making the case for it is not becoming easier. The current mess has deeper roots, it is more extensive, and it will have more serious consequences than contemplated by your correspondent.

There is a saying in Hungarian according to which this is 'a country with no consequences'. Of course that's a bit of an oxymoron, because we know from physics that there are always consequences, even if they are not immediate. The growing discontent is a consequence of the public realizing that they have been genuinely duped by a government calling for sacrifices, when the need for these sacrifices are clearly a result of the same government's failure to do its job. Not insignificantly, many in the same government made their money in the heydays of privatization in the early nineties through means that in a properly functioning democracy would land you in jail and out of court in no time.

For democracy to work there has to be trust and a clear mandate by leadership to take painful measures. Through outright lies that they addmitted to, doublespeak of the worst Orwellian type, incompetence and corruption the current government has lost it all. That's what the recent referencedum was about.

There has to be accountability and it better come through the ballot box and come as soon as possible. The alternative might be a failed state in the European Union. How's that for a historic first?

von Kalmanchey

Hungary has been the leader pupil in class until 2002. During the 1990s Slovakia, Romania and Ukraine (as well es the various formations of Serbia) were suffering from nacionalist-socialist, semi-democratic, chaotic politics.
Than things began to change.. Why?
I think that the lessons tought by the west and interiorized so willingly were not the right ones.
Relying on FDI supported by uncontrolled privatization led to an unhealthy ecomomic structure i.e. practically there is no domestic ecomomy. In Hungary presently there are three Hungarian companies worth mentioning: MOL (oil), OTP (bank), Richter (pharma) - at least 50 would be needed. This is the real problem. There is no economy without domestic companies. Relying on multinationals only is a threat since they might migrate away pretty soon.

Studying the wrong lessons is a major threat for today's pre-eminents as well.


Sadly the biggest problem is that the population allows this to happen. It is narrow minded for any Hungarian to believe that we can keep getting all these services for free especially seeing that we are a poor country that aspire to be rich. Short term pain is necessary for long term gain. We need to demand as a population smaller government and less taxes. We are so adept at trying to find loopholes that we may as well say we want nothing but security and roads from the government. The rest leave it to the citizens.


It is nearing ridiculous that the "Economist" prints reports of any government's output branded as "mess"y, while being the one giving its support to it in the first place.The question raises what would any EU citizen say about a government that within 6 years in office, would increase national depth 10 fold, unemployment 300°%, a seven years ago stable inflation shooting off migrating birds, all social services bankrupted, schools, kindergartens, hospitals and ambulances erased, while the club of friends forming the governing elite becoming ever richer? What would the EU citizen say of a PM who in an all too often repeated scenes, "Freudian spill" uses natzi slogans to win elections, has it's face placated 10 stories high, and would call anybody remotely critical of him an antisemite rightwinger? To the western readers of this a comparison comes to hand: What if Hitler had a son, would be elected once democracy had broken out, and would use the old party for exactly the same thing that it was established for in the first place? In his last speech /03.15/ he called himself "Conductor of the nation"?Hungary's ills stem from years earlier, when the failed nomenklatura was left intact, unpunished, our western "friends" were let in to "advise", and our national depth of 20bn$ from the communist era not erased but increased ever since.Hungarians have payed hundreds of billion dollars since, making our dear creditors ever fatter, the citizens of our country "growing" backwards, so that today they can enjoy living standards of the 70's!! A country that once was a jewel in any empire's crown for its amazing agricultural output now has to import basic commodities such as eggs?flour,potatoes, sugar!who's bakeries are going bankrupted?...And The Economist that thinks that referendums are about doctor visiting fees? We pay and we pay disproportionately hard for everything we think we should get for our taxes, but we do not get anything for our efforts. A good 3 million live under or about 200 pounds per month, but have to pay EU market prices for energy and services, please do tell us, where do you get your ideas about comparing this society to the one your writer seems to live in? Or what is his/her reality? Standpoint of comparison?The World Bank has published a paper in its characteristically philantropic manner stating that a country such as Hungary does not need more than 6 million people for sound functioning! Well, go wish longevity to Gyurcsány, he and his government is on the shining path of market liberalisme to achieve that genocidal goal.And another thing. If only the opposition was right wing? It barely makes the centre-right, during their surprise period in power /98-02/ they haven't moved their little finger even so that these old guard-communist -billionair -freemarket -freaks and their policemen and agents and provocateurs and creatures, that a westerner have never even seen in movies,be done away for good. And this country has no future at all until it finds it's own voice, it's own fabulous language, it's own LIFE.The situation is so alarming, that in order to avoid a complete meltdown, somebody has to be courageous enough to take the most radical steps in the near future, or this country can be written off all maps for good. It is already a colony for multinationals, maybe they should have the bone and the spine to declare Hungary an extension of their firm?


Would you like to live in a country, where there are no consequences �€� of telling lies, wilful deception. Yes, everyday people cannot understand the difficult background of macroeconomics but in case of a charismatic leader ask, do you want to pay one euro per visit doctor, and they answer no. You can say they (3.3 million!) sold the possibility of progression and got only one euro, but most of them think his/her own vote was a protesting tool. Unfortunately. Is it really an eastern european (with little capitals!) phenomenon? I don't think, it is a typical instance of consequence of immoral political contest for authority. And the consequence... everyday people pay it. And their children. And their grandchildren.

Wycombe Highest

Let's play the blame-game.
It is not my fault but:

1. My father's
2. The others'
3. The facists'
4. The communists'
5. The neigbours'
6. The foreigners'
7. The politicians'
8. The industrialists'
9. The greens'
10. The freeloader's
11. The hadicapped people's
12. The younger generation's
13. The older generation's

Come on! It is our own fault. We are all responsible. If we would all do everything in our power that we can to make this country better then it would be better. But until we play the blame-game... Let's stop playing.

And yes, in a way I blame all of you. :) I am a Hungarian as well.


Thank you Tilio - at least now we understand each other. I too cannot see where a new movement will come from as there is no leadership here but all this is well known. I write this in the wake of the news that SZDSZ wants to pull out of the coalition so in that case it is very likely we could see an election this summer which Fidesz will win. I know this will anger those who think I am a MSzP provocateur but such a govermment will not last very long after they have promised increases in the minimum wage, pensions etc and find out the state has no money in the coffers.You only have to look at the economics. The only thing which keeps domestic consumption going with 1.2% growth is borrowed foreign capital, especially from Switzerland. This is why the MNB keeps interest rates as high as it does in a long-term vain attempt to maintain the Forint which is at the mercy of international speculators anyway. The first thing you would see on the morning after a Fidesz victory would be Fitch etc downgrading Hungary even further, the BUX would plunge and the Forint soon thereafter. The squealing you will see then will make the visitdij row look like a tea party.As has happened so often in Hungarian history it will take forces from outside to sort out the mess. John Hunyadi is right - you get the government you deserve and ultimately you can't have your cake and eat it. Perhaps someone here should apply JFK's most memorable utterance - 'Ask not what your country can do for you, but what you can do for your country.' Never has that been more apt in the case of Hungary now.


It's no surprise that several posters here have misunderstood my posts. Tilio - just because I criticise Fidesz does not automatically make me a MSzP supporter as you assume - as does Laurifer who shows by his comments that he is incapable of dealing with rational argument. My main criticism of Mr Gyurcsany is not so much that he 'lied' - more that he did not clearly communicate the mess the country was in two years ago when he was re-elected and that he was not tough enough in enacting structural reforms which are 20 years overdue anyway. Now I fear it is far too late.For the record I too am sick of the corruption under MSzP but would it be different under Fidesz? I think not. This will only change when all politicians from all parties have the courage to look into themselves and admit they have created a moral cesspit. No wonder half the country is cheating; it is because of the poor example being set - if its OK for him its OK for me etc.I also see on this thread very personal, emotion-led vitriol directed at MSzP which very rarely happens in the opposite direction - ie from MSzP to Fidesz. Mr Gyurcsany is a politician - of course he is not candid with the truth, so Laurifer are you tellng me that Mr Orban is not so inclined? If we are to judge politicians on the basis of their lie-telling then why haven't the British rioted in the streets over Tony Blair's half-truths on Iraq which had far more serious consequences then anything F Gy has ever said?And to those who claim the present government is Orwellian I say try living in Zimbabwe or Myanmar - I'm sure that nice Mr Mugabe would accommodate you. His thugs are little different than the shadowy Magyar Garda who hide behind Fidesz.Again, I repeat, the only solution is for a new party to be formed free of the tainted influences of both main power blocks and until a new generation grows up. Sadly this will not be for another 10 years at least but in the meantime we will have an almighty economic crisis - it doesn't matter who is in power; Hungary will be told to get its house in order or leave the EU. When that happens, the reality will hit home and its not long coming.


The biggest problem in Hungary - and that is why I am pretty pessimistic about the country - is that the party which might be able to help the country out of this difficult situation is led by a populist politician and his small circle. And unfortunately the leader who might (have) be(en) able to put this country to the right track is backed by a party with full of former Communists who were successful in surviving the so-called regime change in 1990 and still occupied with enjoying the benefits of "governing" a country. (I think this leader would agree with me having in mind his infamous (but really good) speech in �sz�d.) In conclusion I think the solution would be that the populist leader and his circle should be forced out of power in that party, because it is much easier to get rid off one man than one party.

Slovakia was lucky enough as in its case the able leader was backed by the pragmatic party and the populist leader had the party of the "old guys" .


Haha, the article is spot on. I'm saddened and bemused at the same time when reading news about Hungary, 'squabbling for short-term advantage' is just comical with the kind of structural problems we have.Really the only choice left is to vote with your feet, leave, make use of your talents elsewhere and return when things get better.


Thank you Economist for a fare analysis.From outside difficult to see the truth if you are listening to the fals informators from inside.I just read the first 6-7 comments - not one was mention the real main problem in our country - only the sad results.Today's MSZP-SZDSZ coalition of the Hungarian goverment is so much neo-liberal, they are basically hard enemy of they own people!! and that is what they call REFORM-politics! The SZDSZ which is a 2% liberal party is govern over the coalition partner like the tale on the dog.They are the same people, who where atheist-communist and russian-friends, very soon the biggest democrats and they get the new skin, now they are liberals!!!Under these circa 20 years they privitized all valuable parts of the hungarian industry, most of them became millioners. The country total insolvent, only the western investments do well, all native companies, agriculture is in poverty. The tax so high, the bureaucracy every month bring a new flower - the goverment don't give a damn about people, only the PROFIT !They close down lots of state schools, railway lines, post offices, the education level droped dramaticly - and of course it is "liberal". They use this word like philanthropism, humanism but it is actually it's opposite. Probably everybody have heard about Simon Perez was very happy, about the economy of Israel at the end of 2007. He said: " We are buying up Manhatten, Poland and Hungary "And that is the truth.


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