The forint fell sharply last Thursday after the deputy president of the governing Fidesz party, Lajos Kósa, drew comparisons between Hungary’s financial situation and that of Greece. It then tumbled to its lowest level against the euro in a year the following day when Péter Szíjjártó, spokesman for PM Viktor Orbán, endorsed Kósa’s comments. Szíjjártó told reporters last Friday that the previous government had lied about the state of the economy, and that his colleague’s comments had been no exaggeration. “The moment of truth has already arrived for Greece, it still lies ahead for Hungary,” Szíjjártó told reporters.

Kósa had triggered the forint’s downward spiral the previous day when he told an economic forum that “avoiding state bankruptcy” was the immediate aim of the government. Furthermore, there was only a “narrow chance of avoiding the situation of Greece”, Kósa was quoted as saying on the governing party’s website.

Opposition smells smokescreen

While Szíjjártó was issuing the government’s endorsement of Kósa’s appraisal of Hungary’s finances, opposition Socialist Party politicians Lajos Oláh and Zsolt Zsiros issued a statement blaming Kósa for causing huge economic damage through reckless comments. “It has become clear that Fidesz has cheated the people, and they cannot keep their irresponsible promises,” they told news agency MTI. Oláh and Zsiros accused the government of an attempt to fabricate an excuse for shelving promised tax cuts by blaming the defeated MSZP government for a worse-than-expected economic inheritance.
Fidesz was expecting last weekend the first draft of a report from an economic “fact finding committee” that it set up to go through Hungary’s books shortly after it won a landslide victory over the Socialists in April’s general election. The government has promised a swift policy response to the committee findings. Meanwhile, analysts and some financial media rejected comparisons of the Hungarian economy to that of Greece. Nevertheless, headlines screamed panic online last Friday evening: “Euro Sinks as Hungary Fears Gather Pace” – Wall Street Journal; “Hungary Says Its Books Were Cooked” – The Atlantic; “Hungary’s economy joins the market goulash” – Fortune.

Hungary was 2009’s deficit darling

The interim government led by Gordon Bajnai spent its year in office implementing major spending cuts as demanded by the IMF and the EU in return for a 20-billion-euro bailout in 2008. By the end of last year, Hungary’s budget deficit was down to four per cent of GDP – among the lowest in Europe and less than a third of Greece’s. Orbán’s government, however, has repeatedly spoken of the deficit to slide as high as seven per cent this year, an inevitably consequence, it says, of “skeletons in the closet” left by the outgoing Socialists.

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