Prime Minister Viktor Orbán on the Kossuth Radio programme “Good Morning Hungary”
Zsolt Törőcsik: Ninety-two per cent of Hungarians would immediately put an end to the Russo-Ukrainian war and bring the parties involved to the negotiating table; this is the main conclusion of a recent survey by the think tank Századvég, which also shows that ever more people here in Hungary are expressing negative opinions about pro-war politicians. Indeed the Wall Street Journal, citing survey results from a French research institute, has reported a significant fall in the proportion of people in France and Germany who support sanctions against Moscow. Our guest in the studio is Prime Minister Viktor Orbán. Good morning.
A week ago you were in Brussels. At that summit of heads of state and government, could you sense the mood that seems to be felt in societies across Europe?
Perhaps it was evident in the sense that everyone was more on edge than usual. So in the Brussels conference room one could feel that for every country tensions at home are rising, that everyone is in trouble and that something needs to be done. And sooner or later common sense will prevail. Everyone thinks that if there’s a war that should never have been started, the consequences of which are huge numbers of lives sacrificed, and even – through the economy – increased difficulty in our own lives; and so common sense dictates that it would be better for this not to be happening. And the way to end a war is to get the opposing sides to agree, to get a ceasefire, and to get peace talks going. There are voices promoting the position that the war must be carried through to the end, that it must end with a victory for one of the sides, and that the war can end like that; but everyone knows that such a course would mean war in Europe’s neighbourhood for many, many years to come. Therefore I expect that, as in recent months, the voice of public opinion in favour of a ceasefire and peace negotiations will grow stronger in all European countries. In Hungary – and sensible people live here – this was the basic viewpoint from the outset.
Despite this, both Washington and Brussels continue full steam ahead in funding Ukraine. Just before the news, we were talking about the fact that there’s a credit facility equivalent to 3.6 trillion forints that the EU is making available to Ukraine; this is roughly the amount the Ukrainian government will need every month in order to finance itself in the upcoming period.
The relationship between Brussels and this money is chaotic and difficult to apprehend. When they give a figure, no one should unquestioningly accept that this really does mean that much money. In Brussels they often say that they’ll give you a certain amount that will unlock ten times as much money; and then this turns out to mean that there wasn’t even a tenth as much money as they said there would be at the beginning. So I’d be careful when it comes to numbers. But the starting point that you’ve raised exists, because when it comes to Ukraine there are three big items of expenditure; and someone – and that someone can only be the West, which supports this war – has to finance these. One item of expenditure is the cost of the war: weapons, equipment, and the economic expenditure that goes with the war. That’s one of the big items. The European Union has a financial framework from which it finances this type of expenditure. This is included in the EU’s regular budget, and it doesnt require any additional payments from the Member States. It’s a significant amount of money: we’re talking about approximately 9 billion euros. This is over and above what some Member States are giving individually in the form of military equipment. The second major item – which we don’t know anything about at the moment, but which is a faint dot emerging on the horizon – is the question of reconstruction when the war is over: who will rebuild which parts of Ukraine, how, and what financial resources the West can make available for this. These are unfathomably large numbers, and it’s not worth speculating about them now, but they will be a major burden on European countries if they want to participate in the reconstruction of Ukraine through donations. And the third and most painful question at the moment is the amount of money needed to enable Ukraine to function. This is not about the war, it’s not about reconstruction, it’s simply about enabling Ukraine to function. Ukraine is a non-functioning state, and so it cannot run its own economy. It couldn’t run its economy before the war, and during the war it’s even less able to generate the money needed for the Ukrainian people’s everyday lives: pensions, public security, education, health care and so on. But this is a huge amount of money, something like 5 billion euros a month, which the Ukrainian state needs to prevent its collapse. And the question is who will provide this money. Negotiations are taking place on how the burden is to be shared between Europe and America; and if Europe is to take on some of the burden, how the burden is to be shared between the Member States, and whether or not everyone wants to participate in such financial aid. Hungary will also have to decide on whether we want to participate in this, whether we have money to give to the Ukrainians – and if so, in what form: together with the others, separately, as a donation, or as a loan. These are a lot of unclear questions. I think we’ll see this clearly in the next two or three months of EU negotiations. Hungary is facing some difficult choices.
And in the next two or three months we’ll also see whether there’s enough gas in Europe, because there are many who are desperately going from country to country in the Middle East to obtain as much gas as possible. From this point of view, how do you assess Europe’s security of supply? Because it seems that the sanctions are being felt in the short term, they’re being felt immediately; but it seems as if the measures that mitigate them – even in terms of security of supply – are longer-term projects.
When we talk about energy in Europe, we’re talking about two questions: is there energy – and, if so, how much does it cost? When it comes to energy supply, overall less energy – and in particular less gas – is coming into the European Union nowadays than we normally consume in a year. This is the starting point. There are two ideas on how to make up for the shortfall: one is to consume less, and then the shortfall will be smaller; the other is to import energy – mainly gas – from elsewhere to replace the Russian energy that’s subject to sanctions and being lost. But there are physical limits to this; because if we import gas from elsewhere, say from America, which seems the most obvious solution at the moment, the gas is first compressed, liquefied, put onto ships, brought to us, converted back into gas and piped to its destination. The other day President Macron said that it’s not a sign of friendship for the Americans to give us this kind of gas at four times the price they pay for it at home. So it’s clear that everyone’s taking advantage – trying to take advantage – of Europe’s predicament. The way it is in the market – in a market economy – is that if there’s a shortage of something, its price goes up. So the only solution to high energy prices in Europe is to supply Europe with as much energy and as much gas as possible; and that will bring prices down. There’s a temporary calm at the moment, and the reason for this is that in the summer we stored a large amount of Europe’s gas consumption provision for the winter, when we need to consume more of it. We’ve been filling up the reservoirs; everyone’s filled up the reservoirs, and so now there’s enough gas in Europe for a few months. When in the winter we draw off the quantities that we stored up earlier, then we’ll have less again, and then we should expect prices to go up again. As far as Hungary’s concerned, it’s possible that the whole of Europe has and will have less gas than it needs. But that doesn’t apply to Hungary: Hungary has concluded contracts, long-term contracts, which guarantee that Hungary’s gas supply is as it should be. The contracts are with Russia, and the gas comes from Russia through pipelines. The Nord Stream pipeline has been destroyed in acts of terrorism, but the pipeline from the south – through Turkey – is still operating, and I hope it will operate. Hungary will defend its interests linked to this pipeline, and we won’t allow anyone to destroy it as happened in the north. And if we’re able to do this, and we’ve agreed with the Serbs that we will be able to do this, then gas will continue to flow to Hungary and there won’t be a shortfall in supply. We need heating in the winter, and industry needs to function. The conditions for this are in place today. The price is another issue, because the price of gas from Russia is also linked to the price on the European exchange; so if prices in Europe are high, this will automatically affect the price of gas consumed in Hungary.
Let’s talk a little more about this, because it seems to be having an impact on inflation throughout Europe. So we’re seeing a dramatic increase in prices everywhere, and at European Union level various ideas on bringing them down are also being tabled. One of its ideas is the collective procurement of gas, but it also has the idea of the price cap, the gas price cap. After last week’s EU summit you said that a battle had been won, and indeed the ideas of a gas price cap or joint procurement weren’t even put on the agenda. And Péter Szijjártó has confirmed that Hungary won’t be involved in any gas procurement. What’s the reason for this? Because Brussels is arguing that this would reduce the price.
Since Hungary considers its own position to be that we’re more skilful at procuring gas independently than expecting others to do it, there’s no reason for us to give up a capability that we have in exchange for a joint capability that’s hoped for, but that we aren’t at all convinced exists. So today Hungary can supply itself with gas, and those to the West of us cannot. Why should we team up with them to jointly obtain it? That would only be bad for us. So we support the idea that if someone wants to procure it together with others, they should be free to do so – but it should be voluntary and not compulsory. And after we succeeded, the proposal for a resolution on compulsory procurement was changed to voluntary procurement, and so Hungary was exempted from its consequences. That’s acceptable to us. It’s very important to note that the EU has also taken decisions that contribute to the gas shortage and the high gas prices. These are the sanctions. So the reason that energy and gas prices in Europe today are high is because we’ve imposed sanctions. This drove up prices, and that’s why we’re paying a sanctions-induced surcharge on energy throughout Europe today. Hungary is trying to escape the consequences of bad decisions, and in general it’s succeeding in doing so. But we’re still in the same market as all the other European countries, and so if their situation worsens we’ll definitely suffer some of the consequences. This is why we’re against sanctions. The sanctions were about having a plan for how to end the war quickly and how to punish Russia for starting the war: about us putting measures in place, and this energy sanction hurting the Russians more than us and forcing them to end the war. As we say in everyday language here, we came up with a plan to dig a hole for the Russians to fall into, but then we fell into it. And we need to decide what to do. The EU says “let’s keep digging”. That doesnt seem rational. We Hungarians say that if we’ve fallen into the hole that we ourselves have dug, then we should try to climb out of it. This is why these two positions confront each other at every EU summit.
On this issue is the mood changing in Brussels or among EU heads of state and government? Because after all, they’re the ones who have to answer to their electorates back home.
In these debates a huge number of interests are at play: bringing in Norwegian gas, bringing in American gas, building huge new ports, buying huge new tankers. So there’s a lot of money involved, and speculators always appear on the scene. So it’s very difficult to precisely understand who is saying what for what reason, and one needs to be very familiar with the specific situation of each country. But what’s certain is that behind all the debates in every country there are financial speculators who believe that they can gain from this confused situation and make extra profits. All of this contributes to making the atmosphere rather murky and vexatious.
Let’s talk about one more thing that’s also in the EU plans: the solidarity mechanism for gas. This is still only a plan, and it was more widely discussed in the summer, but now Péter Szijjártó has spoken about it again. We’re already familiar with “solidarity” from the debates around illegal migration. Here, we’re talking about distributing the gas that one Member State has to those who might not have it, and who are in distress. How realistic is this plan, and what is Hungary’s position on it?
It comes up every time, and every time so far we’ve succeeded in making it voluntary. So we’re not opposed to any EU Member State entering into agreements with any other Member State on how to help each other out. We’ve also agreed something like that – for example with the Serbs. But don’t make it compulsory! If it were binding, then let’s just imagine that Hungary succeeded in managing its gas supply for the whole year, filled its reservoirs and concluded its contracts, but another country is unable to do so – because, let’s say, they supported the sanctions against Russia. They’re running out of gas, and they say that we, who have acted more skilfully, should now give them “x” per cent of the gas we’ve stored, and whether I – or we Hungarians – want to or not, we have to give it to them. That would be mandatory solidarity. We don’t want any of that, and that’s the truth. “A shared horse will get a badly scarred back.”
What’s more, is Russian gas from Hungary any different from Russian gas from Russia?
In practical terms, this is what we’re talking about here.
Yes. So what I’m trying to say is that in the last thirty years or so – since I first set foot in international politics – I’ve learnt to be suspicious whenever increasingly complex proposals are put on the table. In the simplest way possible I try to decode them to get back to this starting point: exactly who wants what? And ever more complicated proposals come up, which always makes me suspicious. So we always have to sit down with our teams of analysts and look at them; and in the end it always turns out that behind the proposal they’re trying to impose on us – with, let’s say, a sugar-coated term like “solidarity” – there’s a financial interest somewhere in there for some large Member State. What is mandatory in the EU is generally bad for the Hungarians. Therefore, the starting point is that things – even if they look good – should be voluntary rather than mandatory.
Let’s talk a little more about the public mood in Hungary, which we’ve already talked about here. The National Consultation will also be a good indicator of what this is like in Hungary. If points of agreement are reached, will it be possible to come closer to even the annulment of sanctions?
The realisation that sanctions lead to higher energy prices will bring change across Europe. These are sanctions-induced surcharges. And high energy prices are responsible for inflation. So what we call high inflation that everyone in Hungary is suffering under today – but which is plaguing all European countries to varying degrees – is largely due to sanctions. If the price of energy goes up – and sanctions are a factor driving up the price – by a multiplier of, say, two or three, then that will also lead to a doubling or tripling of the inflation rate. So there’s a direct correlation between high energy prices and prices paid in the shops. For example, energy prices are largely – but not exclusively – behind food price inflation. This is because, for example, you have to transport foodstuffs and goods from one place to another, and this makes them more expensive. Or there’s artificial fertiliser, which is, of course, a natural gas issue: in Europe recently the price of fertiliser has doubled or tripled – or risen even more. This is reflected in food prices. So if there were no sanctions, if, say, a fairy were to magically remove them tomorrow morning, we would see prices – and I mean the rate of inflation, the rate of price increases – also falling by at least half, or perhaps even more.
Indeed families are directly experiencing inflation when they use services and when they go to the shops. But companies are also feeling it through skyrocketing energy prices. Who do you think is more at risk now: families or businesses?
The National Consultation was also important to us in order to make everyone aware that we’re all in danger – just in different ways. At the shops we’re endangered, because we have to pay high prices. The Government isn’t looking on at this passively, and we must do everything possible to bring inflation down. Perhaps I’ve said this before: come what may, we must achieve single-digit inflation in Hungary by the end of 2023. This is a government inflation target, and every week we’re working to move in that direction. And companies are endangered because their competitiveness is being eroded by high energy prices. If they’re not competitive they can’t sell their goods, they can’t employ as many people as before, and that will lead to redundancies. So we have to help companies in order to prevent unemployment in Hungary. So nowadays the Government has work to do in relation to every aspect of economic policy. This is why, for example, there’s a price freeze on petrol, there’s price protection related to household utility bills, and there’s a price cap on certain products, food products. And this is why – on an ongoing basis in the coming weeks – we’ll be deciding on adding certain other price-regulated products, on expanding the list of these. There’s always a huge debate around this, and the Government is dealing with it; but there will be new products for which we want to set the price centrally, the maximum price, as we do today for six basic foodstuffs. And what we can do for businesses is the following. If inflation is high, interest rates are high, and businesses basically run on credit. There are two types of loan: fixed rate and variable rate. In the case of a fixed interest rate, a company isn’t affected by the current rapid rises in interest rates; but when the rate is variable, the interest rate on loans already taken out suddenly jumps, with companies being run into the ground, going bankrupt, having to close down and lay people off. This is why, after a very difficult, bitter debate, at the last Cabinet meeting we took a very difficult decision: a decision to protect small and medium-sized enterprises against very high interest rates. And instead of the interest rate on their loans going up to 20 per cent, we’re now drawing a line and stopping it at somewhere between 7.7 per cent and 8 per cent. There’s a cost involved in this, because someone has to pay that difference. We’ve decided that the banks will have to pay it, because we see that high interest rates create profits for the banks. They’ll now have to give up part of those profits and give it to businesses in the form of low interest rates to prevent them going bankrupt. It’s not good when you have to intervene in the complex fabric of the economy in this way; but there are crisis situations when, to avoid a major disaster, you have to do it anyway. This is what the Government decided at its last meeting. We’ve retroactively imposed an interest rate ceiling fixed at the level it was at in June. This will come into effect on 15 November, and will remain in force for at least six months.
It’s estimated that this will affect around 60,000 small and medium-sized enterprises. Why do you think that they’re the ones who should be helped in the first instance? Are they the most vulnerable?
It is always true that the big ones tend to have more financial reserves; and they’re also in a better position in relation to financial institutions, so they have easier access to funds. Banks don’t want to risk their money, and small and medium-sized enterprises are more of a risk than the big companies. So the former need to be looked after. In addition, most people in Hungary aren’t employed by big companies, but by small and medium-sized enterprises. So if first and foremost we want to protect jobs – and we do – we can do that by helping small and medium-sized enterprises. This doesnt mean that we’re not paying attention to big companies, because we’ve unlocked 150 billion forints in a factory rescue programme. This is for the big factories, where we’re supporting investments that will enable them to make energy-saving investments and thus reduce their production costs in a high energy price environment.
Since you’ve mentioned protecting jobs, if necessary, does the Government have any other plans to protect them?
In every drawer.
Thank you very much. Over the past half hour I’ve been asking Prime Minister Viktor Orbán about the EU summit, about sanctions and about the state of the Hungarian economy.