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.

With "recovery" exceptionalism and self-flagellation returns

As one can hear more and more positive forecasts and predictions - and the summer recess ended as well - the media is filled again with "analysis". Economists and analysts, politicians and gurus are once again on the scene and pre-crisis narratives are once again sold, without discount. Although this time at least their opposite is on the imaginary shelves...

The self-flagellation, so popular among Hungary's "intellectuals" is back directly or indirectly as well. If a politician of the respective country's makes a statement on the inevitable fast recovery and even faster future growth of Romania, Slovakia, Bulgaria etc. it is immediately bought by the media and distributed, without any comment, contextualization etc. As if the last half a year would have never happened. Nobody seems to be interested in the respective countries beyond a set of basic data, nobody seems to have learned the lessons of debacles. Moreover, a modest, but very visible flow of articles on Slovakia as the country offering the model to follow appeared again, quite in pre-crisis fashion. The past is bright and the future will also be, as they implemented the right economic model. Doubts are not dismissed, they are rather omitted from the picture. One quarter of growth - even though it means quite serious decline on a year-on-year basis and was driven by state spending certainly not sustainable on the long run - was enough for this conclusion. As if nobody would be willing to consider the limitations of dependency on only one industrial sector, the possible impact of the competition for investment on the level of wages, especially with high unemployment depriving the state from predicted incomes, not to speak of the possibility of a second wave of economic decline.

Moldova reloaded

After the riots in the wake of the elections in April the parliament in Moldova was unable to elect a president (according to the constitutional provisions a candidate needs 61 votes in the 101 member parliament, the communist party had only 60 MPs) and as the constitution prescribes early elections were held at the end of July. The results - although the communists still retained their position as the far largest party - are different enough to modify the balance of power, but not different enough to resolve the deadlock. The outcome is highly improbable, even though adherents of so-called pro-European parties are in a cheerful mood, celebrating the fall of the last communist government. I do not want to discuss the options and possibilities as I have very limited expertise on the Moldavian politics. But the situation has some underlying characteristics worth to outline, more precisely the distorting effect and influence of the application of a very limited dichotomy - pro-Europeans and pro-Russians - regarding the political divisions in the area on the perception of external observes.