Friday, December 30, 2011

On the paradox of sovereignty

There should be nothing surprising in the Hungarian governments reluctance to accept the terms of the EU and the IMF for a new agreement, at least for those following the developments in Hungary. The EU insists on repeal of some recently passed legislation, while the IMF made very clear that there is no way Hungary can hope for anything else than a stand-by-agreement with hard policy conditionality. A detailed action plan, quarterly reviews, and again reinstatement of the fiscal policy framework dismantled  in the last twenty months. At least for the time all of this is unpalatable fro the Hungarian government - despite signs that they are trying to conclude their separate pact with the IMF with or without the Eu's blessing. (The government announced the chief of the Hungarian delegation will visit Washington for informal talks next January in order to meet with IMF general director Christine Lagarde, other directors and the staff responsible for Hungary, but there was nothing about reestablishing contact with Brussels and the EC.)

The reason behind this reluctance is - besides underestimating the risks most probably because government politicians are eyeing the reserves of the Hungarian National Bank as a source of liquidity that can enable the country to weather the storm until growth resume - a deeply seated desire for sovereignty. The conflict - fashioned as an economic war of liberation or independence - is about Hungary's ability to conduct its self-styled policies. One can argue - rightly - how short-sighted this old-fashioned concept of sovereignty is today, discuss how impossible is it nowadays to dissociate one country from the world, or point out that even the giants of the world are steering towards forms of collective world governance, even if only out of necessity. But the Hungarian situation conceals far more than a simple arch-conservative or super-traditionalist understanding of sovereignty. It is deeply paradox.

The government struggles to establish a precautionary or flexible credit line with the IMF, something they phrased as safety net or insurance, an agreement providing IMF money almost unconditionally in case of necessity - in the name of economic sovereignty. They reject conditionality because it would grant supervision over Hungarian policy decisions for a foreign institution.  However, one and a half years ago, at the wake of the previous IMF program everyone expected the parties will to arrange for exactly the same type of agreement. Then the Hungarian government suddenly disrupted the negotiations, after some days of hesitation and confusion announced the war of economic liberation on the IMF and proceeded with her unorthodox measures designed to resolve the problems that the IMF program was intended to resolve. It seemed the IMF won't ever return and sovereignty is regained successfully. Only one year passed and the necessity of a new understanding with the IMF seemed inevitable in order to avoid the worst. But - directly because of the disruption the government inflicted upon the country - the government has a very slim chance to get the desired flexible credit line. The one they would have easily got before the war started. They would have now their beloved sovereignty without the war. But the harder they fought for it the farther it slipped away...

P.S. Actually, if one looks after a similar concept of sovereignty there is one handy parallel in the neighborhood, albeit from some decades earlier. The Romanian government - not independently from the very strong nationalism in the country - thought of and acted similarly in the international community since 1918 and until 1989. Surprisingly their fervor for sovereignty somehow abated in the last decade, or at least they have learnt how to manoeuvre.

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