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Good day, Ladies and Gentlemen.
I also respectfully greet you. I’m glad to be here. I don’t know about you, but listening to the two ministers I’m reassured – I see that things are going well. They’ve said everything that was worth saying, and I’ll just keep you here a little longer for a few more thoughts.
First of all, a few things have been said that I’d like to comment on; and then I’ll come to the substance of what I have to say. First of all, I congratulate you on surviving the election, because the last time we met was before the parliamentary election. I’ll also gladly accept congratulations – it’s better to be together in this than for us to be apart. I’d like to draw your attention to the slide that the Finance Minister showed – I think it was him. Everywhere in Europe, I think without exception, budget deficits tend to increase and public debt tends to increase, because it’s easier to win an election by spending more instead of less. But he showed that in Hungary in the election year, in 2022, public debt fell and the budget deficit fell – contrary to the general European trend in election years. It’s foolish, stupid and politically malicious to claim that the Government subordinated the year 2022 to electoral considerations. If it had, in ‘22 as compared to ‘21 our deficit would have increased, not decreased. And the national debt wouldn’t have fallen, but would have risen. Personally, I’m proud of this fact, because – by giving priority to the logic of the economy in a way that’s completely different from that in Western Europe – not only did we do this in the ‘22 election, but also when we won ‘18 and ‘14 elections: in the election year we did not abandon the main thrust of economic policy, but reduced the deficit and reduced public debt. Therefore, of course, the credit goes not to the Prime Minister but in essence to the Finance Minister, who, after animated presentations by the Economy Minister, informs the Government about the financial situation in a tone which is just as reassuring as his colleague’s is dramatic – thus restoring the balance of economic policy. He doesn’t do this badly, since – I repeat – it’s thanks particularly to the Finance Minister that in the election year neither the deficit nor the debt went up, but, on the contrary, went down.
You’ve also seen that we formed a government after the election, and you’ll have noticed – even if you don’t care about politics at all – that from 2022–26 the focus of this government is on the economy. If you just look at the structure of the Government, what portfolios there are in it, and who we’ve invited into government, you’ll see that it’s an economy-focused government. We have the Minister for the Economy, the Finance Minister, of course; but to deal with the area of higher education and innovation we’ve invited János Csák, who’s also from your world. To lead the Ministry of Energy we’ve invited Minister Lantos, who’s also from your world. We’ve called back Minister Navracsics to deal with European Union and regional development issues, in what’s basically a development portfolio, and therefore focused on the economy. And we’ve created the Ministry of Construction and Transport, for which we’ve recalled Minister Lázár, to head up another economic portfolio. And all this is in addition to the classic area of agriculture. This clearly shows that, when it was formed in 2022, the Government was keenly aware that the big issue for the next four years would be the economy. As we learned from Bill Clinton in ‘92: “the economy, stupid”; any fool can see that the most important issue in the coming four years will be the economy.
We tend not to make midterm government changes: if you’ve been paying attention over the past twelve years, you’ll have seen that I belong to the school of thought in corporate leadership tradition that rejects hasty action: my philosophy is “steady as she goes”. It may be necessary to change from time to time, but the large-scale introduction of new blood into the Government tends to bring more confusion than benefit. Yet now, after the formation of the Government in May 2022, within a very short period of time there had to be interventions in the structure of government – something that in our practice has never happened before. This was necessary because it became clear that the Brussels sanctions had very rapidly driven up energy prices, and energy had become a key issue for economic success – and even a key issue for the country’s ability to finance itself. And energy couldn’t be left as the responsibility of a secretary of state in a large ministry – especially when energy regulation is being handled by an energy agency that’s separate from the Government. In these circumstances an independent energy ministry was needed: one capable of delivering the policies that are essential for the functioning of the economy. It was therefore necessary – essentially within months of the Government’s formation – to change not only ministers, but also the structure of the Government. I think it’s clear from the improvement in the quality of government decisions taken since then that Minister Lantos has not only taken this portfolio, but has also taken control of it, and shown himself to be extremely active. The calculations of future industrial energy demand which were presented here are the result of his work, for which he is to be commended. This is all I wanted to tell you about the Government.
I’d like to confirm what Minister Márton Nagy said: without market financing we won’t be able to achieve our goals. I approach this from another direction, but I’d like to reassure you that the Government hasn’t turned socialist – and certainly not communist – and doesn’t think that it can control the economy and finance the economy in place of the market. If such a thing were possible, I don’t know if it would be good. But it isn’t possible, and that’s certain. Those who have tried to do it have lost 20, 30, 40 or 50 years of their lives – as many of us here have; it was called socialism, and it ends in bankruptcy. So the Government doesn’t want to change its strong commitment to the market and to private ownership. It knows that from time to time we need to launch forms of financing, as Minister Márton Nagy has said; but we aren’t doing this because we want to replace market financing – and we definitely don’t want to displace it, because that isn’t possible. We can only achieve the macroeconomic objectives that the Finance Minister has talked about if we have market financing. Here we run into one of the problems that I’ll talk about later. Market financing exists when you can get credit at interest rates that are affordable for businesses – something which isn’t available today. If it were available, then Márton Nagy wouldn’t have to launch the factory rescue programmes, the reindustrialisation programmes and goodness knows what other programmes that have just been mentioned here, because the market would be able to finance the operation of the Hungarian economy with appropriate interest rates. This is the only reason we’re intervening, and we’ll only intervene up until the point at which market financing is fully restored. Through state intervention we’re trying to make up for the absent amounts and the absent affordable interest rates. But this isn’t a coherent part of our philosophy, and it isn’t part of it: it isn’t a change of direction by the Government, but crisis management.
Photo: Fischer Zoltán
After this I’d like to comment on President Parragh’s observation that the rebuilding of economic relations between Russia and Europe is desirable, and that it’s likely to take place after the war. I share his view that it’s desirable, but not that it will happen. I don’t want to stray into the territory of a geopolitical lecture, because that isn’t why you’re here. But if we look at what’s happening, we can see that Europe’s power structure is being transformed.
So there isn’t simply a war – that’s only on the surface. That’s at the level of newspapers and commentators – and of course at the level of lives lost, which is important. But it isn’t yet clear whether the war was actually launched for this purpose, or whether it’s only in the meantime become clear that the war is a suitable vehicle for completely reorganising the power structure and power machinery of Europe. Therefore the rebuilding of Russo-European relations won’t simply be dependent on economic policy considerations, but on the success of this experiment in restructuring. What am I talking about? What I’m talking about is that up until now the power structure of Europe has incorporated the economic foundations of Russia providing cheap energy and cheap raw materials and Europe providing advanced modern technology, with Europe dominated by the Franco-German axis, and Russia on the other side. This cooperation has produced European economic success. This was the structure, boiled down to its most basic terms. And if you look at what’s happening now, you’ll see that the first step has been to decouple the European economy from the Russian economy. Of course, you still need raw materials and you still need energy, but it will come from somewhere else. And one dependence is slowly but surely being replaced by a dependence in another direction. And if you observe what’s happening, you’ll see something that sounded absurd a year ago. For example, given the process of enlargement of the European Union so far, the notion that Ukraine would become a member of the European Union – or even that it would become a candidate for membership – seemed so absurd a year ago that people paid no attention to it. What’s the situation today? Ukraine is a candidate for membership of the European Union and there’s talk of it becoming a member in the near future. And if you focus on how NATO membership for Ukraine sounded a year ago, it belonged to the world of absurdity. Now they’re talking about it becoming a member – incidentally, of course, when the war is over: Ukraine, or what remains of it, will become part of NATO territory, perhaps as an independent state with NATO membership. A clearly visible process of restructuring is taking place. What does this mean? It means that a type of Central European core is emerging that we haven’t seen on the map before. Because it’s clear that Poland, with 40 million people, and Ukraine – with 20 or 30 million, but we don’t know how many will remain – will form an economic area in military terms, in security terms and in economic terms. So together with the Poles this means 60 to 70 million people. These two together will be more than either France or Italy – counted as separate countries, of course. It will have the second largest area after Germany. And the American attempt to cut the European economy off from the Chinese economy, or to reduce the density of economic contacts with the Chinese, will mean an economic trial for Germany that will bring the already huge economic potential of this new Central European, North-Central European region – including the financial opportunities arising from its reconstruction – closer to that of Germany. What you heard in public the day before yesterday, when the English, the British, said that in ten years’ time Poland will overtake Britain, only sounds like a joke to Hungarian ears. If I remember correctly, it was the British Chancellor of the Exchequer who said that – or perhaps the Governor of the Central Bank. It’s only absurd to our ears. In reality, if you look at the figures, this is what you can see. And this is coupled with a security policy concept: Britain leaving the EU, the Scandinavian countries now joining NATO, the Baltic states, Poland, Ukraine – and even Romania, to say a few words about our problem. This is a new band, a new security policy zone. And this will have economic consequences. If you observe closely, you can see that US military forces are no longer being deployed in Germany, because Germany isn’t the key country from a security point of view, but – because of the war in Ukraine – they’re being deployed in Poland. Restructuring – a restructuring of power in Europe – is taking place in several dimensions, in a coordinated way. This isn’t what I came here to talk about – I’m just saying it here as an aside.
I haven’t even thought it through in a way that the public can digest, so please forget it. I only say this because the comment by the President of the Chamber on rebuilding Russo-European relations after the war reflects a natural and understandable human need, but it’s far removed from reality. Therefore Hungarian foreign and economic policy will need to give a great deal of thought to the type of relations it can establish and maintain with Russia, if at all possible, in the next ten to fifteen years. Now it’s clearly in our interest, for a number of reasons – and fundamentally for energy reasons of course – to salvage as much of this system of relations as is possible. But today no one can say whether we’ll succeed in this, or for how long. And yet one of the key issues in economic policy planning, primarily for energy reasons, is the future of Russo-Hungarian relations. This is a pressing question. We need to think a lot about it and we’ll also need to talk a lot about it among ourselves. That’s what I have to say about rebuilding.
But let’s be clear about the economic consequences. Here, too, referring back to the thoughts of one of the speakers, this year – in 2023 – the European Union has given Ukraine 18 billion euros. Nominally as a loan, but I don’t think that you’ve joined a consortium that provides loans to Ukraine. Let’s call it a loan. Of 18 billion euros. This isn’t being spent on military spending, this isn’t being spent on the Ukrainian army: it’s money to run Ukraine – the pension system, the bureaucracy, the justice system, and so on. This is also roughly what the Americans are giving – we’re at 36 billion. And this is roughly what the IMF is giving. This means that every year the Western world will put in between 50 and 55 billion euros, just to keep Ukraine running, to keep the Ukrainian state viable. We’ve done it this year, but what will happen next year? This is while we’ve been experiencing a European economy that is becoming less competitive. So taking every cent out of Europe and sending it to Ukraine is causing internal political tensions all over Western Europe. Here we’re faced with another very difficult set of issues: on the one hand a protracted war, and on the other the need to keep Ukraine functioning. Where will the money come from? And, according to the President, who spoke before me, if we’re not careful we might even end up sooner or later with part of the European Union cohesion funds that are due to Hungary ending up in Ukraine. So over the next few years and months this whole issue of the restructuring of power, the costs of restructuring, who bears the costs, from where and from what sources, will be among the most pressing and most open questions.
Here there’s also been talk of the labour force, but on this it’s very important that the Government digs in its heels and remains determined. I’m not sure that every economic stakeholder will be happy with the Government committing itself on this, but I think that the industrial policy numbers are right: in the next year or two, Hungary will need 500,000 new workers. This raises a lot of questions, and I say this because here we have to be very firm, as economic rationality is only one of the criteria that we’re being guided by. If you’ve ever seen the way certain Western European countries are overburdened or patched up with guest workers, you’ll see the dilemmas that we have to face. In addition to this, politics cannot go into this with its eyes closed. Therefore it must be made very clear that when we talk about these 500,000 new jobs, the focus must first of all be on mobilising internal reserves. The internal reserves aren’t in public works. We started in public works with maybe 200,000 people, and now we’re at around 70,000. That pool is probably not where we’ll find the type of skills and knowledge that the economy could use under market conditions. It’s not a reserve, but quite simply a matter of giving people jobs instead of welfare benefits, so that they can support themselves and their families with a reasonable degree of self-respect. This is extremely important! They should be honoured and thanked for their willingness to take part in meaningful work instead of protesting for benefits, and to provide work in return for the money they receive there in wages for public works. So it’s not a reserve. We have geographical reserves. It’s no coincidence that if you look at our major industrial development investments, you’ll see that we’re concentrating on Eastern Hungary. So we’re targeting the Debrecen-Nyíregyháza-Miskolc triangle, and we’re channelling investment there as much as we can. Debrecen will soon be full, as will Nyíregyháza in a year’s time. Miskolc is a more difficult case, but we’ll see. Békés county is in preparation. Békés county is in preparation, and there are still reserves there. So we need to structure the economy and economic policy regionally in order to be able to fill the 500,000 job vacancies from internal reserves, and to direct investment to places that are mobilising internal reserves. The first aspect is internal reserves.
Photo: Fischer Zoltán
The second aspect is that we don’t just have an economy based in Hungary, but a Hungarian economy. The difference is clear, isn’t it? So one’s smaller and the other’s bigger, one might say. The current political climate in the European Union is based on cooperation, it favours regional cooperation. This is the spirit of the age, this is the direction of the European Union, and we can make good use of this: this helps us to maintain relations with Hungarian minorities living beyond our borders, especially in building economic relations. So if we can take advantage of this, there are labour reserves over there that we can mobilise. If you look at the proportion of guest workers working in Hungary, you’ll find that many are from Serbia and Romania. A large proportion of them are Hungarians – not exclusively, but a lot are Hungarians. So we have reserves in a regional context. If we think not only in terms of the Hungary-based economy, but also the Hungarian economy, then we still have reserves. By the way, I’m not even counting the essentially Hungarian workers from Ukraine and Serbia as guest workers, because they’re part of the Hungarian economy, not the Hungary-based economy. They’re part of the Hungarian economy. And after that, we can move on to guest workers. Here, too, we need to be very careful. The proportions are very important. My apologies to you, but just because some employers believe that guest workers imported from certain populations are better workers than the reserve that still exists here, the Hungarian reserve, we must not and cannot allow them to be brought here instead of Hungarians. So Hungary belongs to Hungarians, jobs here also belong primarily to Hungarians, and the Hungarian economy must provide jobs first and foremost to Hungarians; only after that can everyone else come in. Here we must avoid a trap, a Western European trap – which will be very difficult, and will require coordinated action with the Chamber. Because in Western Europe there are also guest workers who go there because the locals – let’s say the natives – are no longer willing to do certain types of work. Now, we cannot afford that luxury! If we bring in foreign workers for our convenience, and who knows how many of them will stay here, then – just like the West – we’ll be undermining our own lives in a cultural sense without realising it. This cannot be allowed! Hungary must be a country that is capable of ensuring that every job that needs to be done is done by a Hungarian. And if it’s inconvenient, difficult or whatever, then we’ll have to pay more for it. We mustn’t give foreigners an advantage over Hungarians. This is very important! And when we’ve exhausted all these reserves, well, then we can talk about guest workers. They’ll only be able to stay for a fixed period of time, and if necessary their contracts can be terminated for reasons of public safety or other considerations. Otherwise we’ll lose our security. That’s how it is. Therefore the labour force issue and finding another 500,000 people must be the outcome of a complex, coordinated process and policy. Here I’m counting on the Chamber, and I’d like to avoid the trap that Western Europe is in.
I think it’s important – and you can be sure of this – for us to keep the tax level low. When the Government was formed in 2010, Sándor Csányi gave me one of the most useful ideas, when he said that we shouldn’t impose new taxes, but collect those that have already been imposed. This advice was only partially successful, because we did impose a bank tax, but on the whole this is the right direction to take. So I think that this is a very important lesson for left-wing governments, which – instead of investing energy in efficient tax collection – make do with collecting half or a third of existing taxes and supplement this by imposing new taxes. This always places the biggest burden on the most productive sections in society, because it’s always possible to take from them, the high-performance sections, from where money can be taken through new taxes. This proves the truth of Csányi’s thesis, if I may put it like that: we should not impose new taxes, but collect the existing taxes that have already been levied. In his slide the Finance Minister has shown us quite convincingly how we can proceed with this. There’s issue of the global minimum tax, where the Government – after a long, long fight – finally managed to get a slightly better draw than the one offered by the Black Knight [in Monty Python and the Holy Grail], if you know what I mean. Because, after all, we have a paper – signed and stamped by the European Union – to the effect that local business tax can be included when Hungary sets the rates resulting from the introduction of the global minimum tax. This will, almost without exception, protect large Hungarian companies. So for them, the introduction of the global minimum tax won’t impose an additional tax burden. As I see it now, here the expectations of Mihály [the Finance Minister] are of course the really important thing: that the additional burden will fall on the shoulders of foreigners, and not on Hungarians. And it was only when the European Union gave us this guarantee that we backed down from our position of vetoing the global minimum tax. So this won’t bring any change, any substantial change for you.
Someone – perhaps the Finance Minister – said that foreign investment in higher education integrates foreign investment, with foreign investors being drawn into a kind of Hungarian ecosystem. This is because, in cooperation with universities, they’re building the human infrastructure. I think this is true, and it’s a good trend. Therefore it’s very important that we continue to place higher education among the most important issues, among the most important economic issues. So we’re not just talking about a question of education: we’re talking about the quality of the economy. Linking universities to actual economic activity remains a key issue, no matter how dirtily the European Union plays – as it’s doing now with Erasmus, Horizon and whatever else. Because, lest we misunderstand the situation, it’s true that now the competitive advantage is being taken away from Hungarian universities – not from the Government, but from Hungarian universities; because the reorganised, foundation-run universities are directly involved in government decision-making through the state secretaries and ministers. This isn’t important for the Government or for the people who sit on the boards, but for the universities themselves. Such direct involvement is the biggest competitive advantage we had compared to the West. This is why it was cut: to rob us of this competitive advantage. So in essence the decision doesn’t risk harming the Hungarian government, but the competitiveness of the Hungarian economy and the competitiveness of Hungarian universities. This is something we must not accept. It may be that the boards of trustees need to be changed, and perhaps we’ve already changed them; but we must not give up the advantage of being linked in, of direct communication, and of Hungarian universities being an integral part of economic development. The quality of this, which gives a competitive advantage, must be maintained through a different mechanism. Therefore, even if we cannot reach an agreement with the EU, although I believe that we will be able to, the Erasmus programme will still exist: in the worst case scenario it will be financed from the Hungarian budget. If the EU doesn’t give them research funds, Hungarian universities will receive more than that from the Hungarian budget, so that they can build up their own international research network. We shall not allow Hungarian universities and their links to the Hungarian economy to be damaged – however minimally. Those are my comments on that.
Having said that, I’d like to share some of the thoughts I’ve been preparing. So perhaps the most important question is whether we can finance the economic strategy that Minister Márton Nagy has outlined. We have two difficulties. One is that the price of energy has increased. And we have an industrial policy – and I can see no other realistic, viable alternative – which emphasises investment and industry. This isn’t exclusively industrial, but it’s weighted towards industry. This is energy intensive, however. I don’t see any economic strategy – or if so, only on paper – from pullover-wearing economists, from alternative thinkers, who claim that it’s possible to run an economy by developing something other than industry. Now it may be possible to build an economy in general terms by developing something else, but the economy is based on given features, and we have industrial capabilities. We have skilled workers with outstanding skills. They’re responsible for the excellent operation of the world’s most advanced factories. We have excellent engineers – fewer than we should have, but we have them. We have outstanding computer scientists. We have business leaders who are increasingly gaining international respect. This is what we’re good at. Now you can invent some other kind of Hungarian economy instead of this, but the Hungarian economy – or any economy – is culturally made up of human skills. We can do what we know how to do. And this is what we’re good at. We know how to run an industry-focused, investment-focused, industry-linked economic system. And this is what you’re good at. Of course, because the Hungarian economy is very complex, we certainly have good capabilities outside industry, but this is where the focus remains. So manufacturing, industry and production will remain the key and the centre of gravity of the Hungarian economy. And, since we need energy, and you’ve seen the terawatt figures here, it also follows that as we go from 43 to 68, we’ll have to produce it. Therefore the most important policy of the next one or two years – led by Csaba Lantos – has been identified as the creation of these energy capacities. You can get energy from two places: you can import it, which is extremely uncertain, and of course you have to connect to international networks to be able to import; or you have to produce it. In Hungary we cannot produce from anywhere else – because of course we’re doing the alternatives: solar; maybe now there will be some wind; and of course there’s some geothermal energy, and we might get to the level at which it will produce an economically viable amount of energy nationwide. We haven’t reached that stage yet, so we’re left with gas. We’ll build gas power stations to serve the big industrial centres. The decisions on this have already been taken. The EU isn’t banning them because, in the current situation, gas isn’t the enemy. It used to be an enemy, but now it no longer is. Earlier, green was the friend, nuclear was unwelcome, and gas was the enemy. Now it’s written on the board that green is a friend, nuclear is neutral and gas isn’t the enemy – at the moment. This could last eight to ten years. So in the coming period we need to take advantage of our ability to build gas plants relatively quickly. Whether these will be built by the state or with private capital is for Minister Lantos to decide, but we need to build two or three high-capacity plants here to supply energy to the industrial developments now taking place in the eastern half of the country. And if the EU gives money for this, as it should, then we’ll use EU money for it; and if it doesn’t, then we’ll use other forms of money, because for this purpose investors from all over the world will gladly come to us. If we have to use funds from abroad, then the question will be how we can give an opportunity to Hungarians. One of the biggest developments over the next eighteen months to two years will be the creation of energy production capacities that can lay the foundations for the industrial policy forming the basis for the figures you’ve seen here. But we have to finance it – that is our first problem.
Photo: Fischer Zoltán
The second problem is the rising interest burden on public debt, which we have to finance. We’ve not shown you these figures, because we didn’t want to ruin your mood, but after 2010 we managed to inject a lot of new resources into the Hungarian economy because – thanks to the promise of successful economic policy – we were able to replace the high-interest loans taken out by left-wing governments with lower-interest credit on the international market. We were able to put the resulting savings into the economy. This was György Matolcsy’s strategy, he carried it out flawlessly, and it worked. We owe him our thanks for that. So there we had access to funding, because of a reduction in the interest burden. Now we’re on the opposite track, because high inflation in Europe has led to high interest rates everywhere. So we have to renew the low-interest borrowing that we used to have with higher-interest borrowing – not only in relation to the international money market, but also to the general public. Whereas we used to pay 4, 5 or 6 per cent on government bonds bought by private individuals, now we have to pay 10, 12 or 13 per cent. This will create financing problems, as the yield on redeemed bonds has to be paid, and then we’ll have to pay the higher interest rates on the subsequent ones. This is a very big challenge for Hungarian monetary policy. I hope that the gentlemen there will be able to find a solution to this. There’s no immediate threat from this problem for the time being, given that in 2023 and 2024 the large amounts, the earlier bonds that are maturing, form a relatively small proportion. Thanks to the Finance Minister, we subsequently – and wisely – took on debt that’s more likely to be a significant repayment burden only later on, when we hope that interest rates will have normalised and we’ll be able to borrow again here at low rates. So I think we have a good chance of the Finance Minister being able to successfully schedule borrowing from the international money market and the retail bond market.
Finally, the last thing I want to talk about here is the economic policy debate. I don’t know whether or not you observe yourselves from the outside. I think it’s a useful way to spend one’s time. If you have done so, over the last five or seven years you may have found that you’ve hardly ever been involved in real economic policy debates, because there have been no major economic policy dilemmas. We had them in 2010, 2011 and 2012, when we restructured the Hungarian economy, when we essentially created a new Hungarian economy. There were debates around that, but it started to work and turned out to be fine. There were low taxes, a lot of investment, a lot of development, no new taxes but the collection of old taxes, and essentially for six, seven or eight years the Hungarian economy developed without any debate about the direction of economic policy. There were debates – which there always are – on the details, on what to finance, on interest rates; but there was no real, major debate on the direction of economic policy. As a consequence, you cannot remember being involved in such a debate. This is interesting, and shows how stable Hungarian economic policy has been. Now we find ourselves in a new situation. There’s no need to be alarmed by this, which is why I’ve brought it up here. Now there is an economic policy debate, for example between the National Bank and the Government, but this isn’t abnormal – it’s just unexpected, compared to the lack of debate over the past seven or eight years. But debates always come up when certain elements of the economy suddenly change – and the last four years have been like that, with COVID starting in 2020. So after 2020, 2021 and 2022, in 2023 we’re in the fourth year of an economic environment which isn’t normal. This isn’t something to be alarmed at, but something that needs to be well thought out in intellectual terms, to be kept within limits, and to be agreed in political and economic policy decisions. It may be unusual for us, but we shouldn’t lose our heads over the fact that, for example, the Governor of the National Bank – who’s a colourful personality, and who can’t be described as a boring speaker – is causing excitement and saying all sorts of things. Of course he is! It’s obvious that the way the National Bank wants to deal with this situation is different from the way the Government wants to deal with it. We talk about this openly among ourselves, and sooner or later we’ll have to come to an agreement so that monetary and fiscal measures don’t cancel each other out. The situation today is indeed that the Central Bank has the idea – which I wouldn’t call shock therapy, but because of the historical background I could give it that name – that inflation should be dealt with by significantly reducing the amount of money in the economy. A logical idea! If it’s true that all inflation is monetary in nature, then it’s a logical idea. But if it’s the case that this inflation is essentially the result – at least in part – of the rise in international energy prices and the sanctions policy that’s been imposed on energy, then it’s not clear that the supply of money in the economy should be reduced by such an amount and at such a rate. We need to discuss this, and we’re discussing this among ourselves. I’m not claiming that we’ve reached a consensus, but this coordination of monetary and fiscal policy is taking place. And in the end it will happen, because if it doesn’t, and the horses run apart from each other, then sooner or later the carriage will end up in the ditch. So coordinating economic policy on this isn’t a possibility, but an obligation. Moreover, I think it’s still mainly my responsibility to somehow bring this to a successful conclusion, and I think this will happen. The reason I think it will happen more easily than anybody thinks is as follows. If the Government’s policy on inflation is successful and inflation comes down in the coming months as the Government’s measures take effect, then in an environment with declining inflation – and I hope I’m not fooling myself, but in the February numbers I see the first signs of a longer-term trend – it will obviously be easier to coordinate the National Bank’s inflation management measures with the Government’s measures. If inflation were to remain stagnant or to rise, it would be very difficult to coordinate the different concepts. But with falling inflation it’s possible. I’d like to reassure you that this coherence of Hungarian economic policy – which I think has been an important element of the successes so far – will be maintained in the period ahead. And we have to accept that debates on economic policy are a platform on which intellectually strong, colourful personalities see an opportunity to perform. I’m no exception to this, as you see: we’re all human and we all operate in the world of politics.
Ladies and Gentlemen,
I also need to talk about the politically controversial issue of the automotive industry. This is described just as a battery issue – but it’s not, it’s a strategic issue. Of course it’s also a green issue related to liveability. Every Hungarian citizen has the right to a liveable environment, and everyone has the right to expect – and indeed can expect, and even force – the Government to ensure that all investments in Hungary are carried out in accordance with the strictest possible environmental rules. Not just in the automotive industry, not just in the battery industry, but in every industry. This is a legitimate expectation, and in Parliament I’ve already made it clear that Hungary will continue to apply the strictest safety standards to all industrial investments – stricter than those that apply in comparable German factories. So if you compare, for example, a German investment in the automotive industry with a Hungarian one, the environmental standards for these investments in Hungary are stricter than those in Germany. This is a competitive disadvantage, but it’s a safety advantage; and so I think that, in exchange for safety, it’s a disadvantage worth paying for. So in Hungary industrial facilities can only be built to the strictest standards. That’s a simple matter of enforcement by the authorities, but what I want to talk about here isn’t that, but an economic strategy question: the question of how we should think about the automotive industry. From the figures you’ve seen, in Hungary around 300,000 families are dependent for their incomes on factories linked to the automotive industry. We’re talking about 300,000 people, 300,000 families! And a technological change is taking place in this field. The European Union has taken a decision which says that after 2035 it will no longer be possible to produce conventionally powered vehicles – that’s to say petrol and fossil fuel vehicles. Now of course it can be argued – and let’s not rule this out, let’s just note it here in the margin – that the economic pressure that the European economy is under, or suffering under, may well change this rule and push back the deadline – or even do away with the rule entirely. That’s also possible, and we’d be back to where we were: the technological era before electromobility. That could happen, but we wouldn’t need to do much, because we already have the factories here that can provide for that. The challenge for us will emerge if there’s a shift in Europe after 2035 to only producing electric cars. And if we can’t produce the crucial vehicle components for electric drive systems in Hungary, and can’t manufacture and assemble them here, then they’ll be manufactured elsewhere, and our traditional car factories will close down one by one. And then we could start thinking about what Győr would look like without the Audi factory, Kecskemét without Mercedes, Debrecen without BMW, or Szentgotthárd without Opel. And anyone who thinks that would be acceptable doesn’t know what they’re talking about, because they’ve never imagined Hungary without these factories. What would it look like? How would people make a living there? How would those cities have an income? These are cities of outstanding quality! How would they maintain all that? So we must at all costs keep the vehicle manufacturing industry we have in Hungary, even if it switches from fossil fuel vehicles to electromobility. We must definitely keep it! And in Hungary we must create the necessary production technologies and new automotive component production lines, from batteries to drive trains, so that these factories can stay here and develop here. These decisions have been made. At the moment, four of the biggest investments in the history of the Hungarian economy are taking place simultaneously. Four of the biggest investments in the history of the Hungarian people – in the entire economic history of the Hungarian people – are taking place simultaneously in Hungary today! Now, of course, we’re talking about problems caused by inflation, but this is a fantastic thing. This isn’t the land of iron and steel of [communist leader] Rákosi’s dreams, this isn’t that story. These are real Western factories being built here in Hungary – two of them, what’s more, in the eastern half of the country. I’m sorry, three east of the Danube, with one in Göd. I don’t know where you’d count that, as it’s almost Budapest, but the other two really are in the eastern part of the country. These are fantastic industrial development achievements of historic proportions, which within a few years will show results in the eastern cities of Hungary, just as has happened in Győr, Kecskemét and Fehérvár.
Finally, I’d like to say a few words reporting on the production records we’ve achieved in the past year. We’ve all talked enough about the problems, financing and difficulties, but we’re Hungarians and we don’t usually talk about the good things. But now I think we should also spend a minute or two on that. I can tell you that last year, in 2022, for the first time the Hungarian automotive industry broke through the 10,000-billion-forint ceiling in terms of production value. We reached a production value of 12,000 billion forints in the automotive industry! It’s never been so high! For the first time, the electronics sector has surpassed 10,000 billion forints. That’s never happened before! Last year – which wasn’t an easy year – was the first in which the food industry went above 6,000 billion forints in production value. The metals industry reached the 4,000-billion mark for the first time. And the pharmaceuticals industry set a new record of 1,000 billion forints. So we have production capacity increases in Hungary that show that while of course there’s inflation, financing problems and many things, the fundamentals are strong – because after all the fundamentals are in the factory, where we work, where value is created. There is Hungarian entrepreneurial spirit, and in the space of three days you helped yourself to all the 700 billion forints that was announced in the Baross Programme – I believe that is correct. It was sold off like hotcakes. This means that there’s plenty of life in the Hungarian economy. Yesterday the Government had to take the decision to increase the capital of Eximbank by 30 billion forints. Yesterday we increased Eximbank’s capital by 30 billion forints, so that Minister Márton Nagy could inject another 300 billion forints or so into the economy for economic development purposes. I think that these are great achievements.
Minister Márton Nagy has spoken about investment records. I’d like to talk about these investments from a perspective that you’re perhaps less used to hearing about. The first and most important thing is to achieve investments with the lowest intensity of support. It’s only in the minds of left-wingers who have never seen the economy that capital is found lying on the street, simply waiting to be invested somewhere. This isn’t the reality. The reality is that capital divides, multiplies and calculates – return ratios and circumstances, for example; it makes countries and sites compete with one another for access to it. So you have to compete for an investment: it’s not thrown at you. The situation next year will be more difficult than it has been so far, because the Westerners will be back in the competition. Up until now European Union rules have prohibited them: the European Union rules have allowed the less developed countries to give government support to investors who come here – to give some kind of support under various headings – in order to attract investment. The most developed countries were excluded from this, or were only allowed to practise it to a lesser extent. Now that there are problems in the West, they’re changing that. The French are being allowed back in, the Germans are being allowed back in, and the Austrians are being allowed back in; so they too will be able to use public funds in the competition for investment. So one must be very appreciative of the investments that one manages to bring in. And here in recent years we’ve managed to bring them in with the lowest intensity of support. So while we’ve attracted the most investment away from our competitors, we’ve done so with a lower intensity of support – 18 per cent – than they’ve offered. This means that with 1 forint of investment support we’ve generated 22 forints of additional revenue and 5 forints of additional added value; and 1 forint of support has generated 2.5 forints of tax revenue. So it’s not just that we have a lot of investments, but that we’ve brought investments here under these conditions. For this we owe a debt of gratitude to [Foreign Minister] Péter Szijjártó, whose name I forgot to include among the economic ministers I listed earlier; because this intensity of support is actually a result of the system that he has built up and is operating.
And now – once again without the presence of the press – I’d also like to say that there’s a difference between Hungarians and non-Hungarians in terms of support intensity. We’re in the European Union, and yet the support intensity for Hungarian companies is one and a half times that of foreign companies. The support intensity for foreigners is 17 per cent, while for Hungarians it’s 24.4 per cent. I think that this is right. But it’s not obvious that it must be like this, and I think that we must appreciate this.
Now I’d like to comment on our position in the international rankings. In terms of population we’re 94th in the world ranking of countries, and for exports we’re 34th in the world ranking. Last year our exports were 142 billion euros, which was 19 per cent higher than a year earlier. So in a very difficult year, in 2022, our exports were up 19 per cent. This makes us the 15th most open economy in the world, with all the risks and all the opportunities brought with that. But – although this is absolutely obvious to you – here I’d also like to say that if Hungary weren’t an open economy, if it weren’t integrated into the world economy through exports and imports, then the standard of living existing in Hungary today would be unattainable. So the standard of living enjoyed by Hungarians today couldn’t be produced by an economy relying on ten million people, relying on its internal market alone. Of course it would be possible if there were oil, gas and other things in the ground. There are countries with that, which therefore have a high standard of living; but we don’t have that. So if we want to maintain – or increase – the standard of living we have now, we must be open-minded and fit into an international economic situation in which others haven’t been affected by forty years of communism, while we have been. Nevertheless, even with such a disadvantage, we must fit into this system, because we can only provide the Hungarian people with a high standard of living through openness and export performance.
To sum up, I can say the following and make the following commitment to you. We shall stay out of the war. We’ll be under great pressure, we’ll be pressed, but – since we don’t have a coalition government – we’re strong enough to stay out of the war. We’ll continue to successfully veto those sanctions which harm Hungary’s interests. We’ll maintain Russian energy supplies. We’ll be able to finance reductions in household energy bills. We’ll be able to protect – and even increase – the 4.7 million jobs in Hungary. We’ll be able to support small and medium-sized enterprises with special programmes – even if the central bank base rate remains high. As you’ve seen, we’ll stimulate investment, we’ll build the energy capacities to do so, and we’ll maintain the strategy of export-oriented growth, while bringing down inflation.
I’d like to thank you for the fact that the players in the Hungarian economy could always be counted on – even in the very difficult years of 2020, 2021, 2022 and 2023 which we’ve been suffering together. I’d also like to thank the Chamber of Commerce and Industry and the President personally for the way in which, in these difficult years, we’ve managed to shape economic policy collectively and together with you. Completely independent of the performance of the Government, without your performance it would have been impossible to manoeuvre and steer Hungary’s ship through the stormy seas of the past three or four years. This was only possible because you did what you did, and we were able to maintain our cooperation with you. Therefore, as regards the future, too, I can only conclude by saying, as we hear in Bánk bán: “You need not fear, all will be well.”
Thank you very much for inviting me.
