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Welcome. Good morning to everyone.
I have been asked what will happen. I said that something will happen. This shows that the specialist area in which we are here together is indeterminate. In fact this is a unique occasion. We can have an event like this only every ten years or more, when Hungary is holding the EU Presidency. We did this work ten or more years ago. We started this on 1 July, but, as we have heard, international circumstances have arisen which have completely distracted the Hungarian public – and even ourselves – from Hungary’s work for the Presidency of the European Union. In the final analysis, the purpose of this event is to get back to a normal routine and to focus our attention on what is really the greatest challenge of this six-month period. At the beginning of the Hungarian Presidency the Ukrainian–Russian war prompted us to attempt a peace mission. Then there were the floods in Central Europe, the waves of which reached Hungary, followed by flood defence operations. Meanwhile there was practically no coverage of the purpose, aims and tasks of our rotating Presidency of the European Union, apart from a few diplomatic news reports. But this is a serious matter, because Hungary has taken over the rotating presidency of the European Union at an unusually difficult time, and our thinking was that the venue – which I congratulate you on – and the audience are particularly suitable for a serious discussion of what is written here behind me: “European Competitiveness, Economic Neutrality”. In the near future we will frequently come across both of these terms: “competitiveness” and “economic neutrality”. I will talk about these two things in the speech that I have been asked to make.
Competitiveness is easier for me to deal with, because competitiveness is something that you can imagine, it is easy to imagine: we see the race, there are winners, there are frontrunners and there are laggards. Broadly speaking, this is how competitiveness should be thought of. But “economic neutrality” is a tougher nut to crack. It is true – as you will hear or see – that competitiveness is not as simple as my quick definition here; but economic neutrality is a much more difficult matter. It is a strange noun phrase. We know the word “neutrality”, which we sometimes use in politics. But when I hear the word “neutrality”, the first thing that comes to mind is Austria or Switzerland – so it is not in an economic context, but rather in a geopolitical or political context. With this event today, however, we are making an attempt to introduce this term, the term “economic neutrality”, into Hungarian political life, and also into the economic sphere. In the modern age, what do you do when you have problems with a definition? You fire up ChatGPT. That is what I did. I gave it an instruction: “Write a speech on economic neutrality”, and I added, “in a feisty, determined style, for the Prime Minister of Hungary.” Within a minute it spat out a speech.
It was a good little speech. Right now I will read out the first paragraph of what the machine thinks about economic neutrality: “From all corners of the world the sound of clashes can be heard. Economic powers are pressing against one another as they fight the future battle for resources. But we Hungarians cannot afford to drift blindly in this storm-inducing process. The fate and future of our nation is in our hands, and it is time to declare that Hungary is raising the flag of economic neutrality.” On a scale of 1 to 5, I have given the speech written by the machine a grade of 4. Incidentally, I note that this shows that the jobs of speech writers are in danger, and I think that those of journalists are in even greater danger. But reading the answer given by the machine, which is evocative, you immediately see that in reality it falls somewhat short. One gets the strange feeling that these words – these words and sentences written by the machine – sound hollow. And indeed they do. It is quite empty. This is why we cannot rely on ChatGPT alone, but today must dig deeper ourselves to better understand and establish the concept of economic neutrality.
But let us start with competitiveness. As you may know, the Hungarian Presidency, the programme of the Hungarian Presidency of the European Union, is centred on the idea of competitiveness. We have accepted that, since [Minister of EU Affairs] János Bóka and his professional staff have identified the biggest problem facing Europe today as the loss of competitiveness, we should build our programme around this. And the Minister’s team came to the bold conclusion that it was not enough to talk about ways of improving competitiveness, but that we should persuade European leaders to conclude a competitiveness pact with one another at a major meeting in Hungary on 7 or 8 November. The aim of this is to put competitiveness at the forefront. Neither is it so easy to arrive at such a pact intellectually, because you have to bring together an understanding of competitiveness and a number of significant measures that we all – all EU Member States – agree on. But there are also other roadblocks, or potholes – with EU ministers and commissioners behaving like children, perhaps coming and perhaps not, so that you do not know exactly who is coming and who is not. Obviously they think that they are making fools of us; but they are only making fools of themselves, because the European Union is something more serious than a kindergarten. But, despite the sometimes frivolous behaviour of politicians, the situation – the competitiveness situation – is actually a very serious cause for concern.
It is difficult to bring this up, because the moment you start talking about the decline in the European Union’s competitiveness, you are faced with two political problems. Firstly, in the European Union it is not usual to talk about major problems. So in Brussels that is considered to be bad manners. So the basis of the European Union’s culture of internal communication is the same as that which once prevailed in the French royal courts: we come together and we have to say all sorts of things about our values, about unity; and those who speak more graciously are the ones who are moved to the front, those who get more recognition. So in the bubble and the world of the Brusselites, it is taboo to talk in general about problems, about challenges, and indeed about decline. On the other hand, while the groundbreaking philosophical work on the decline of the West was written a good hundred years ago, whatever decline, weakening or decay one talks about leads to one being immediately forced into a certain ideological interpretative framework, and easily being categorised as anti-Western. Therefore talking about the decline of competitiveness in general is in itself a risky thing. But now help has arrived – though not in the form of a guardian angel, as perhaps Mr. Draghi would protest if we called him that. This is because the European Union – I think the European Commission – asked the former President of the European Central Bank and later Prime Minister of Italy to write a report on the state of competitiveness in Europe. It is a very bulky document. I do not know whether reading is still a custom in the student world, but if it is I advise everyone to pull it out and chew through it. I am not saying that one should read all of it, because it is hundreds of pages long; but the more interesting parts are definitely worth reading, because there you will find things that are impossible to say in simple, everyday political or economic communication. So here we have the Draghi Report, which was written by an unimpeachable Brusselsite, the former Prime Minister of a founding Member State. Although this may not be obvious to you in Budapest, the weight given to what is said by a citizen and leader of a founding Member State is different to that given to the words of leaders of countries that joined later.
For those of you who want to spend less time reading, in a few paragraphs I have summarised the most important statements about our Europe, our European Union, our competitiveness – as written by the former President of the European Central Bank and former Italian prime minister. I will present these as points. The person responsible for this oversimplification is not me but the author. Over the last two decades the EU’s economic growth has been consistently slower than that of the United States, while China has been catching up rapidly. EU productivity is growing more slowly than that of its competitors. While relations with Russia normalised – this refers to the two decades before the Ukraine-Russia war – Europe was able to meet its demand for imported energy, with pipeline gas essentially accounting for around 45 per cent of EU gas imports in 2021. But Mr. Draghi, President Draghi, says that this relatively cheap source of energy has now disappeared. Because of this, the European Union has lost more than a year’s worth of GDP growth. The European Union has lost an entire year’s GDP growth because of this, while it has had to reallocate considerable financial resources to energy subsidies and to building new infrastructure for the import of liquefied natural gas. President Draghi says that companies in the European Union are now operating with electricity prices two to three times higher than those in the United States, and natural gas prices are four to five times higher in Europe than in the United States. What the President is saying is that although the energy transition – obviously from fossil to green – will be gradual, fossil fuels will continue to play a central role in energy generation over the next decade, which will mean continued price volatility and unpredictability for end users. Then the President goes on to say that the European Union’s share of world trade is declining, and Europe’s position in advanced technologies that will determine future growth is steadily deteriorating. More than 60 per cent of EU companies – 60 per cent of companies operating in the European Union – see regulation as the main barrier to investment. Regulatory barriers and administrative burdens are cited as the biggest challenge by 55 per cent of SMEs. Today I also met the head of Eurochambres, who identified the same problems as his top priority. Extending what he says into a somewhat historical perspective, Mr. Draghi says that Europe is entering a period in its modern history when, for the first time ever, growth in gross domestic product will not be supported by a steady increase in the workforce. The natural decline in the EU’s population cannot be compensated for by a positive net migration balance – here “positive” is not a value judgement, but a mathematical term. The President also says that the main driver of the growing productivity gap between the European Union and the United States has been digital technology, and the extent to which Europe is being left behind seems to be increasing. As a proportion of gross domestic product, in 2021 European Union companies spent about half as much as US companies on research and development. And so on, and so on.
Decarbonisation. The President says that the European Green Deal was based on the creation of new green jobs. So the justification, the story, the tale – take your pick on the name you give it – was that the new green policy would create new green jobs. But the President says that the political sense of the initiative – the European Green Deal, as an initiative – is called into question if decarbonisation leads to a decline in the industrialisation of Europe, because the result will be that we are actually relocating such jobs to other countries. So if the green transition is not coordinated with industrial policy, then in fact production will leave Europe and jobs will leave with it, and there will not be the creation of new jobs, but shrinkage of economic output. As I heard this morning, half of European companies see energy costs as the second most important barrier to investment. The following statement is striking: even if the targets for the deployment of renewable energy sources are met, the European Union targets, the proportion of hours in which fossil fuels determine energy prices, is not projected to fall significantly until 2030. This means that right now the Green Deal is causing unemployment, and is not actually resulting in cheap energy, because the price of energy is still determined by the price of fossil fuels. There is also a little encouragement in this report from a Hungarian perspective. President Draghi deals with the battery industry, and says that in the European Union this industry is showing improving prospects, proving that a focused political effort can be successful. This is music to Hungarian ears! This is the case, even if those who benefit the most are not EU players. In other words, it is still worth doing. Public support for battery development has been key in strengthening Europe’s position, with public funding for this technology increasing by an average of 18 per cent per year in Europe over the past decade. But in terms of patent applications for this technology Europe is still behind Japan and South Korea, so here it is worth making further industrial development efforts.
Looking at the car industry, the President says that it is one of the most important examples of the EU’s lack of planning, with the application of a climate policy without an industrial policy. This is a very important statement, although it is expressed in truly Brusselite language. His point is that climate policy is a priority and one should derive other policies from it – and indeed one must derive them from it. If we do not determine what kind of industrial policy is consistent with climate policy, but simply sweep the opinions of those involved in industrial policy off the table, which is the practice in the European Union today, then we will be implementing a climate policy that will actually destroy our industry. The European Union has not followed the ambitions – its green transition and climate policy ambitions – with a concerted drive for the transformation of the European supply chain. Therefore European companies are already losing market share, and this trend could accelerate. I will not bore you any further with the words of President Draghi.
In any case, I just wanted to say that the ministry and the EU Presidency being led by János Bóka recognise that the Hungarian Presidency should focus on competitiveness, and this concept receives strong confirmation in this report. There is also a second part to the report, which I do not recommend reading. I am not saying that it is superfluous, but – after describing these terrible things, which essentially encourage one to contemplate suicide – the second part of the Draghi report says that there is a solution to this, and makes proposals. I will not present these now. Some of them coincide with what we think, and perhaps I can say with due modesty that they coincide with what is in the interests of the Hungarian national economy; and there are some proposals that do not coincide with what we think. Basically, the President sees the solution as lying in a federalist direction, but I think that this proposed solution could be the subject of another conference. What is important today is to be aware that we are in a new situation. The competitiveness of the European Union is deteriorating at a rate that the Hungarian economy quite simply cannot withstand. So Hungary must respond to everything that I have just tried to support with quotes from President Draghi.
There is no doubt that in recent years the global economy has changed, that there has been a shift of emphasis. In the Government Balázs Orbán describes this as a “world system change”, while as Prime Minister – being more romantically inclined – I describe it as “two suns in the sky”. Meanwhile the Governor of the Central Bank and his associates regularly warn us to “keep a sharp eye on Asia in the coming decades”. And indeed, so far trade among Asian countries has accounted for about 15–16 per cent of world trade as a whole, with all forecasts predicting that in the foreseeable future trade among Asian countries will grow to 60 per cent of total world trade. This is the future. Obviously the dynamism is in Asia: it has the most money, the biggest banks, the biggest investment funds, the biggest companies, research institutes, universities, innovations and patents. This process cannot be stopped. It would also be interesting to hear something about why this has happened, and why, if the West sees this as a challenge, it has allowed it to happen. But that would go beyond the scope of our meeting today. Perhaps I would just say that what happened in 2001 – if I am right about the date, and perhaps Péter Gottfried can confirm this – was that China was admitted to the WTO [World Trade Organization], and was thus effectively brought into the system of world trade. After this, because of its size and potential, it has followed the path I have just been describing to you. These are perhaps known factors. The more inquiring students and teachers will all have heard about them.
What is perhaps less known is our response, the West’s response to this set of phenomena. If I were to sum it up simply, I would say that the West’s response is bloc formation. We are trying to respond to changes in the world economy in a way that is leading to the creation of power blocs. To put it more simply, there is an attempt to separate the Eastern and Western economies – the Eastern and Western world economies, if you like. At times this is being attempted with a vehemence and rhetoric reminiscent of the days of the Iron Curtain. As a politician, I can say that if we do not speak in terms as elegant as “bloc formation”, but if I use our own language, the West’s response to the transformation of the world economy is nothing other than a return to the logic of the Cold War. Indeed what we are trying to do – what they are trying to do in Brussels and in Washington – is to bring the 20th century back to life. In fact this is breaking the world economy in two. Instead of a single world economy, we are seeing two hemispherical economies. This is the reality. It cannot be, and yet it can emerge – it is happening every day, every week, with every decision. The question is how the East will respond. For some time the East has struggled to prevent this process. I clearly remember the big conferences in China in which China unexpectedly appeared as the main defender of the WTO, and generally appeared as the advocate of a multipolar world economic order. Probably they seriously thought that the response of bloc formation that was emerging from the West could be contained. But if we now look at what is happening to the east of us, we see the construction of an independent financial system in full swing. If we try to ascertain the ultimate driving force behind the decisions there, we find that they are seeking to replace the dollar-based global financial clearing system with a non-dollar-based Eastern financial system. And if that happens – and they are not far away from it – we will have a split world, we will have two financial systems. There are interesting statistics on how Chinese foreign trade’s share in dollars has fallen compared to its share in yuan. The implications are not only theoretical. I am now taking a big leap down to a lower level of abstraction, to what we will face when a previously unified world economy splits into two. Obviously in June 2024 you had already sat your exams and were glad to go at last, and you did not immerse yourselves in the economic news. But if you had, you could have read a major investigative study and report by Reuters – not the Chinese news agency, not Moscow, but Reuters – on how the Americans built and financed an industrial disinformation campaign against the use of Chinese vaccines during the COVID period. So when the world economy is split, when it is no longer technologically unified, when everyone is trying to win territory for their own technology, then this is not just a theoretical, economic debate. It comes to us, knocking on the door of politicians. We draw political conclusions, we put resources into this fight, and a struggle begins that may remind members of the older generation here of the pre-1990 contest between the Soviet and capitalist parts of the world economy. And if you looked at the news from the day before yesterday, you saw that the Americans have decided to spend 1.6 billion dollars in the near future on the information war against China. Some of this will also be spent here, so do not be surprised if we see this in the Hungarian public square. But that is not a matter for me, but for the President and staff of the Sovereignty Protection Office.
What is the European Union’s response? We have seen what the East is doing, we have seen how the West has responded, we have seen how Asia has responded. What is the European Union doing in this situation, what is the response outlined for us in the Draghi Report? In the European Union at the moment there are two schools which cannot be reconciled with each other, and every debate bears the imprint of this fundamental difference in thinking. One school, which I would call the transatlantic semi-European Union, is the transatlantic school, which is perhaps half of the European Council. This says that we should recognise that there are hemispherical economies. Europe’s job is to take its place in the Western hemisphere alongside the United States of America, and therefore to participate in the construction of a transatlantic world economy. This means, as described here, to be subordinated to the United States of America, which now has a considerable competitive advantage. This is the transatlantic answer. There are also representatives of this school in Hungary. In recent days I have also read leading Hungarian politicians arguing in favour of this. There is another position, and this says that in Europe we need strategic autonomy. The French president introduced this way of thinking and this expression into European politics. They and the countries around them do not see Europe’s future in being part of a transatlantic economic system, but in a strategic autonomy whereby Europe shapes its own relationship with all the other players, according to its own interests. Obviously we Hungarians, on the basis of our historical instincts, are also in favour of this second option. What a pity that it will not work either! Because unfortunately the idea of strategic autonomy has come only from leaders who imagine a federal Europe being part of it. So they are not talking about strategic autonomy on a national basis, but about strategic autonomy for a federal Europe.
This debate is not concluded, and so I ask you to see what I say in a necessarily sceptical or critical light, but I believe that a federal Europe is a ship of dreams that is heading for the rocks. To put it another way, there are three problems, three reefs, that it will hit – and has already hit. So I think imposing strategic autonomy on a federal basis is an attempt to square the circle. A federal Europe will crash into the migration issue, and is already holed below the waterline. It is not possible to create a common, federal position on migration, because the interests, approaches, instincts and values of the Member States are so diverse that it is not possible to create a federal migration policy. The dreams will also hit the prosperity reef, because with a federal system in the European Union we will only be able to produce poor economic performance – at least this is what recent experience has shown. There would be too many countries suffering a decline in living standards, a trend that they would want to reverse. This will therefore always militate against a federal Europe. If you do not want to hear riddles, then just conjure up the image of, say, the Netherlands. There is also a third reef that federalist ideas will hit. This is also one of the proposals in the Draghi Report, although we are not happy about it. This is the reef of credit, of collective borrowing; because a federal Europe will need to be financed, and we do not have any money. What idea could be our redemption? Well, then for that purpose we will have to use someone else’s money! This is called credit. Let us borrow together, preferably a lot: this is what President Draghi says. Incidentally, the Hungarian Constitution does not allow us to participate in such collective borrowing, or only in exceptional cases; but because of its size Hungary does not play a decisive role here. Yet apart from us there are larger and more powerful Member States in the European Union for which the acceptance of collective borrowing would be economic suicide. They will never accept it. So a federal Europe will run up against these three reefs: the reef of migration, the reef of prosperity and the reef of collective debt. So if the European Union wants strategic autonomy, it should not be on a federal basis, but on a purely national basis, envisioning the European Union as an alliance of nations.
There have already been such turns, national turns in some countries. In Europe the word “nationalism” is forbidden, it carries a stigma, so let us put that aside for the moment. The term “patriotic turn” means the same thing, but it can be used. There is a patriotic turn everywhere – or at least these forces are gaining strength. Such a turn has taken place in the Netherlands, in Italy, France is teetering on the brink, and it is the dominant trend in several Central European countries. So, all in all, I would say that if the European Union wants to respond effectively to this major decline in competitiveness, it should argue for strategic autonomy – not on a federal basis, but on a national basis. But in Brussels this idea is not favoured by the majority, and we are in a minority. In fact we are not a minority in terms of numbers, but we are definitely in a minority in terms of positions of power. Therefore I have no hope that the European Union will find a common response to its decline in competitiveness, or that Hungary will also solve the problem of Hungarian competitiveness if it shares in such a response. We cannot expect that.
Consequently, we have to ask this question: If the EU cannot do this, can we Hungarians? I think that in order to enable ourselves to do this, we must first of all do away with the taboos, and now – using the vehicle that is the Draghi Report – we must establish a few things. The first is that if the European Union returns to bloc formation, then everyone in Europe will be ruined. Therefore it is worth saying at government level that bloc formation is against the interests of the Member States of the European Union – or most of the Member States of the European Union. It is also worth breaking the taboo linking the past with the future, the idea that in this new world emerging before us we have no choice but to continue what we have been doing, just with small corrections. This is not true! There is a new world, it has new problems, and the answers of the past do not provide solutions to these problems. It is worth saying that the 20th century cannot be brought back to life, and instead of any kind of feverish, ideological approach, we need to use the voice of reason, to proclaim a new economic policy – or at least a new chapter in European economic policy.
And this brings us to the second theme of our presentation today: economic neutrality. So if Brussels – as I have said – is unable to do this, the task for Hungary, the task for Budapest, is to formulate what would be a neutral economic policy which in the global economic situation described here would give it a chance of success, a chance of improving economic competitiveness. When it is the first to formulate something, Hungary must always ask whether it is justified in being the first. Modesty, humility and problems of size are arguments in favour of waiting for others to come up with their sharp insights. But the issue at hand, economic neutrality, is one in which Hungary is perhaps justified in being the first to speak out, and it is worth taking on the role of formulating the theory and practice of economic neutrality, and then implementing it in Hungary. I think the reason for this may be that Hungary seems to be the country most suited to this, because Hungary has been pursuing non-ideological economic policy for many years. So, economic neutrality – although we did not know it was called that – has become part of our life and part of our daily practice over the last few years. Think of the pandemic, for example. When it was obvious to the countries of the European Union that only Western – mainly American – vaccines should be used, Hungary declared that to be nonsense: “Excuse me, people are dying, America isn’t the only place in the world! Vaccines, scientists, research institutes and medical professors live elsewhere, they’ve developed vaccines, and since the world doesn’t have enough vaccines, why shouldn’t we be happy to have access to Russian or even Chinese vaccines?” So in recent years Hungary has developed an economic policy that is very close to what you might call economic neutrality. But it is enough to refer to another example, that of migration: there we have also seen that while the whole of Europe has tried to approach the problem of migration along ideological lines, Hungary has not done so, but has looked at the issue itself and said that we do not want any part of it. So when it comes to looking at the issue itself, and not approaching something from an ideological point of view, in this case the issue of competitiveness, then we Hungarians are good at this. And if it does not seem immodest, I would say that we are probably the best.
So let us talk about what economic neutrality would mean. The point of economic neutrality is that even if the world economy is divided, there will still be areas – let us call them overlapping areas, contact points, permeable channels – where the two world economic systems come into contact. This was true even during the harshest periods of the Cold War. One only needs to think of Vienna, which was such a place. So for Hungary the essence of economic neutrality is that we are in the exact place, both geographically and intellectually, where the different world economic systems – even if they are moving away from each other – inevitably overlap and meet somewhere; and the flows of money will also need permeable channels. Since Hungary’s national turn away from liberal economic policy in 2010, we have a national government, national sovereignty is our most important objective, and we actually have the power or political basis for a neutral economic policy. I am not saying that in 2010 we knew that the world economy would split within fifteen years, but the Hungarian survival instinct, which has always tended towards independence and sovereignty, is proving useful right now. Let us see what principles and fundamentals should anchor and define economic neutrality. The first and most important principle of economic neutrality is that we decide with whom we do business. So, if we want to do business with someone, we will not do so through another centre of power, but establish relations directly. The second aspect, or the second principle, on which economic neutrality can be based is that we do business with whoever it is most profitable to do business with. Nothing will have precedence over the criterion of economic efficiency and competitiveness. The third principle could be to say that we will negotiate only on the basis of our own values. This seems to be obvious, but the practice today in Europe – and even in America – is the opposite. This is because there is tying.
Take the issue of EU financial support, for example. This is a hornet’s nest, which I will not go into now – except to point out in passing that the situation in reality is not the same as that you have read about. Be that as it may, some of the European Union money due to us is made available, but some of it is not. Why has it not been made available? When was it suspended? When was it sidelined? It was when Hungary passed the Child Protection Act, and we were told that if we withdrew the Act, the money would be sent. The two were tied. It is very important for economic neutrality to be intolerant of tying: one must not mix ideological issues with economic issues. So in any economic relationship there can be no woke, no gender, no migration, or whatever other precondition. We must strive to ensure that our economic relations are purely economic and that therefore we do not have to give up any of our own values for the sake of economic relations.
And finally, it could be an important principle to be oriented in all directions. This is not easy for Hungarians. A significant chapter in the education of Calvinists like myself is discussion of the historical background to the fact that the former peripatetic students from Sárospatak – and we have former Constitutional Court judge István Stumpf with us – and from other places went to the West and tried to bring the models seen there back home. So it has been firmly embedded in the genes and instincts of Hungarians for 400–500 years that modernisation is somewhere to the West of us, and that therefore the primary direction of orientation will always be to the West. But what I am talking about is that the world has changed, there is a change of world system, and everyone – including people like me – is learning that modernity and modernisation are not exclusively Western. There are many examples of modernisation in the Central Asian world, and in the Chinese world that I mentioned. But they are also found in Asian countries that have had good relations with the West and have been successful in the past, such as South Korea or Japan. So modernity is not an exclusively Western category. Because of the changed situation, if we want to develop, if we want to be modern, if we want to be competitive, today we need to be open to every point of the compass. These are, in fact, the few principles that define the posture of a country aspiring to economic neutrality.
What is the content of economic neutrality? What can it be? First of all, financial neutrality. So if we want to have a neutral economic policy, it is impossible to always obtain from the same financial market the financial instruments needed to run the country – or loans, in plain language. So we need to be present on the London money market, but we also need to be present on the Japanese money market, we need to be present on the Chinese money market, and we also need to be present on the Arab money market. We have already taken the first steps in this direction with financial credit relations with Qatar and China. The second aspect of economic neutrality is investment neutrality. There is no need to be selective about the capital investments that come to Hungary. If you look at the amount of capital that has landed in Hungary over the last thirty years, you will see figures – I hope I am quoting them correctly – such as 25 billion euros of capital being brought here by the Germans, 9 billion euros by the Americans, 9 billion euros by the Chinese, followed by South Korea. So it is clear to see – especially from recent developments – that Hungary is moving towards investment neutrality, accepting investment from all the major power centres of the world economy. The third element of neutrality is market neutrality. We will sell to whoever will buy. There is no need to overcomplicate this. We see an interesting endeavour to the south of us, in Serbia. Serbia is a country that wants to join the European Union; and recently it has signed a free trade agreement with China covering 15,000 products, I believe. This is because they think that the two can run in parallel until they join the European Union. We do not know what will happen, but we are watching. It is an interesting experiment. In any case, this clearly shows that in our neighbourhood the idea is already gaining ground that we should make the best possible use of the market, regardless of ideological and political affiliations. The fourth element in economic neutrality is technological neutrality. And here I am not talking about Huawei and the telecommunications and infocommunications world, but Paks [Nuclear Power Plant]. If you read the newspaper – or the wrong newspaper – you will see that this is a Russian project. But if you get closer to reality, you can immediately see that this is an intercontinental project: huge American, German and French companies are working there together with Russians and Hungarians. This is technological neutrality. And finally there is energy neutrality, which I have already spoken about, based on the words of President Draghi. I will not bore you with that any further. If we know what the posture is, what the basic principles of economic neutrality are, and if we can roughly see what the five important elements are that make up its content, then we only have to ask one question: What is the policy of economic neutrality? In other words: What political decisions follow from the points I have made here? These are in the process of being formulated. I could say that we are working on it. There are some points I am certain of, while some other points we still have to discuss.
What I am going to outline for you here is something that I think in the longer term will remain an enduring economic policy element in the policy of economic neutrality. The first is the issue of growth. The European Union is stuck in a growth band below 3 per cent, somewhere between zero per cent and 3 per cent. This year the European Union may be able to grow by 1 per cent; but unless there is some kind of radical economic policy turnaround, which I have said I do not think will happen, the EU will not be able to break out of the 0–3 per cent GDP growth band. This is not enough for us! So the first – and perhaps most important – element in the policy of economic neutrality is that in the longer term we must stay within the 3–6 per cent growth range. Next year we can take the first step. Of course if you read the reports from the Central Bank and the financial institutions, there are uncertainties over what economic growth will be next year. I always chuckle when I read such things, because it is as if we had nothing to do with it. I thought government decisions played some role here – but whatever. So I think we can enter the 3–6 per cent economic growth band next year, stay there in 2026, and then aim for the upper end of the band.
The second important political consequence is that we must not slide back into debt slavery. So let us talk straightforwardly. This involves an unusual language, in which I know they tend to talk about public debt. But what we are talking about is a kind of debt slavery; because once the public debt reaches a certain level, there is no going back from that, and you will be paying for the rest of your life. There is a debate about whether there is such a limit at all, and where it is. I do not think that theoretical, economic instruments can be used to define this limit. I think such a limit can only be drawn on the basis of experience. I have been observing and doing this for thirty years, and I think that it is somewhere around 90 per cent. When a country’s government debt reaches 90 per cent of its gross domestic product, it is almost impossible to get back from there to a range in which debt is not being continuously repaid. I have not seen any such cases in recent times, and so Hungary must strive not to slide back there. Sometime around 2010 we were already at the 85 per cent level, we were close to the brink, but we came down from there and were almost in the 60 per cent band when COVID pushed us back again. And now we have fought our way down again – because here lower numbers mean success – to somewhere around 70 per cent. So for the time being the Hungarian economy is able to avoid sliding back into debt slavery. I think that this is the key issue for economic neutrality. Because if you lose your financial independence you cannot stay neutral: your creditors will tread on your neck and your lungs and squeeze the breath out of you. And ultimately, instead of neutrality, they will be the ones who decide which orientation you choose. This is why it is right not to let the IMF back in, and public debt must continue to be reduced. To do that we need a well-maintained, disciplined fiscal policy.
The third element in the policy for economic neutrality is that we still need foreign capital. So while priority is given to Hungarians in Hungary, and priority is given to Hungarian small and medium-sized enterprises and large Hungarian entrepreneurs, Hungary cannot grow in the 3–6 per cent economic band unless we bring in ever more foreign capital – preferably in the modern technology sector. Continuous tax cuts. This is a key issue in the policy for economic neutrality, because what needs to be competitive is not macroeconomic figures, but our companies, our enterprises, Hungarian small and medium-sized and large enterprises. And for this we need tax cuts. To do this we need to announce a programme of capital provision for small and medium-sized enterprises, and this is one of the major tasks for the 2025 budget. Minister Márton Nagy is working on this. We need to offer a comprehensive and significant capital provision programme for small and medium-sized enterprises. I think that the content of the policy for economic neutrality is that it sees the family as the crucial nucleus, the fundamental element of the economy. This is why it encompasses family policy, and this is why we need to double child tax credit in 2025. This is a logical consequence of economic neutrality. The important thing is that if we want to value work, we have to change the unbalanced situation in which there are student loans, but no workers’ loans. It is a good thing that for young people like you who are going to university we are extending credit to pay their tuition fees, to enable them to concentrate all their energies on their studies, and even to access credit needed for living expenses. Indeed, we are now providing tax credits to companies, so that if they employ you they can take over the repayment of your student loans. This is a very good thing, and it is important. But what about those who do not go to university? What about young people who go out to work? They too have to start their lives somehow. This has been missing from the Hungarian system so far, and so in the next budget year we expect the Minister for Economic Affairs to provide a kind of young worker’s credit for those who do not go to university or start their adult lives there.
And then there is the question of new technologies. So economic neutrality can only stand on its own two feet – and the policy of economic neutrality can only be defended – if it does not involve exclusion from the technological mainstream. So although we have a conservative government, a national and conservative government, we must not alienate ourselves from modernity. We need modern technologies. If there is no modern technology, there will be no competitiveness. We need the car of the future to be made here in Hungary. We need the high technologies of green energy to operate here in Hungary. We need Hungary to have the most digitised official documents, and we need Hungary to have the most extensive digital public administration in Europe. Having talked about the foundations of economic neutrality, then about its content, and now about its policy, then I must say that the mirror image or reflection of the policy – the mirror, I would rather say – is the budget. And therefore we can expect elements of the economic neutrality policy to appear in the 2025 budget.
We have run out of time, and are treading the boundaries of impoliteness. There are many more questions, but I will raise only one more here with you. If economic neutrality or a neutral economic policy is something that Europe should be able to do, but cannot, is it something that Hungary can do alone? This is the challenge, this is the greatest task for Hungary: to remain a neutral country in a world of economic bloc formation. Can we do it? That is the question. What should you do when you are not sure of the answer? You should ask ChatGPT again. That is what I did. The machine said the following. I will quote it, in two paragraphs. I asked it to write the text for me in a forceful style. “We must not be victims of the economic games of any great power. Our independence is the cornerstone of building a strong, prosperous nation in the long term. And we shall build it. A Hungary where decisions are in Hungarian hands, and where the Hungarian economy serves the Hungarian people, not foreign interests.” Then the machine says: “Hungary will not bow its head, it will not bend, it will not yield. We are the guardians of our nation’s future, and we shall write that future. Only our path leads to true freedom, and on that path nothing can stop us.” This is what the machine said. Well, if a machine that has no imagination, no soul and no heart can say that, then it is up to us, who have imagination, heart and soul, to say at least that much. Therefore I am certain – and I would like to reassure you that we can all be certain – that if Hungary is determined, it can implement a policy of economic neutrality. Together with the machine I say: there is only one direction to go, and that is forward!
Go Hungary, go Hungarians!
