Saturday, January 23, 2010

Hungary - once again left behind

For years the idea of Hungary having a unique and unparalleled crisis, that could not happen elsewhere was a dull, repetitive syntactic element of almost every commentator's opinion. Reasons were easy to find: nowhere was such a bad government identified, no society was more attached to its socialist past, no politicians were so fearful of losing elections, no country so corrupt. But at least, being the worst among every ECE country was a mazochistic consolation for supposedly having lost the forerunner position. (However, I have many times bored my few readers with this topic.) We even had and has our own, specific and particular crisis that was caused by our own government. (Yes, even today.) 

And now the world or the fate again turned against this small and much-suffered nation and with the effects of the crisis on state-households slowly, gradually but pronouncedly unfolding everywhere others are again overtaking Hungary, or at least almost literally repeating everything that was once considered as unique and not easily reparable mistakes. Not only in one country, but in a series of states.

Greece is the obvious example in many sense, with accounting tricks, giant budget deficit (once the Hungarian reaching 9,2% of GDP was described as world record and a clear sign of exceptional insanity, than what about a value somewhere between 13,7% and 15,5%?), social resistance to changes, a deficit reduction program considering raising revenues, not exclusively relying on budget cuts etc. 

But something similar happens in neighbouring Romania, the country of a small miracle recently, many times perceived as the next economy overtaking Hungary. After a year of incompetent governing, when politicians was not ready to take energetic action and accept unpopular measures because of the presidential elections at the end of last year, a nominally right-wing government announced some steps not so unfamiliar for people knowing something about Hungary's last few years. A minimal expected tax on companies, change of the tax base effectively raising the tax rate for most of them, simple lay-off of budget personal instead of "structural reforms", introduction of new taxes, like the "junk food tax", preservation of the privileges of the very rich, dubious contract in motorway construction, and immediate retreat as signs of some resistance appear. (The prime minister denounced his minister of finance regarding the lay-off of about 100 000 people from the state sector, and described proposals from ministries on new impositions as ideas of unexperienced people.)  What is clear: there will be weaker domestic demand in an economy earlier fueled by consumption and the government's only hope is EU funds and investment. (What would be badly needed, the minister for economy announced that his intention is to introduce electricity in every Romanian villages in 2012. Think of it, EU 2010!)

But the most ridiculous series of events unfolded in Germany. The liberal party that entered the government as junior partner after the social democrats lost at about 10% of their vote share at last year's elections, in September, represented a very straightforward free-market agenda, and proposed changes on the very same fields as their Hungarian counterparts, for example lower taxes with fewer tax rates (and elimination or reduction of some taxes usually hitting the very rich) turn towards more private health care system, with a unitary contribution for everyone, irrespective of their income. As the state household of Germany is not in a good shape (and as according to some observers the chancellor, Angela Merkel in the last years became more social democratic) it led to very loud and heated clashes inside the coalition. Albeit a meeting of the party chairs last weekend served as a solution for the internal fights that threatened to deepen the problems of a coalition that was welcomed by its members as the realization their dream coalition for more than a decade, but obviously made a very week start, it is not clear whether this attempt will be successful in the long run. And the similarity to Hungary is more than striking. An intransigent liberal party is pushing an agenda against the will of a majority and against the possibilities, always referring to the coalition agreement and causing upheaval. (Ok, in Germany the minor Christian social party also has some role in this situation, as they try to impede the erosion of their voter base with a confrontative image, acting as a counterbalance of the liberals.) 

I won't say, that the fate of the German coalition will be similar to the Hungarian one, but I somehow fail to see the prudent politicians, willing to make personal sacrifices, boldly acting against temporary unpopularity etc. And even the Polish government (in a country which at last, contrary to forecasts, avoided economic contraction) fails to bring budget deficit under control for electoral reasons. We are once again lost, others leading the pack.

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