Rumania worries over Transylvania

The Hungarian foreign ministry requested a year ago that Hungary should open two new consulates in the Transylvanian cities Nagyvárad (“Oradea” in Rumanian) and Marosvásárhely (“Targu Mures” in Rumanian) where significant Hungarian communities live. Like most of my readers must know, Transylvania (“Erdély” in Hungarian) was part of the Hungarian Kingdom from its founding in AD 1000 until the Dictat of Trianon in 1920.

 

Rumanian foreign minister Titus Corlatean‘s initial reactions about the Hungarian request were positive and he still made very positive remarks recently concerning the relations between  Hungary and Rumania.

Today it’s been revealed that Rumania has rejected Hungary’s request for opening these new consulates, without giving any explanation.

I’m particularly surprised and disappointed because the Rumanian foreign minister signalled repeatedly how gladly he would invite me to Bucharest and he would want to hold talks about improving and maintaining our relations.  I believe this act sharply contradicts his earlier sentences.

said Hungarian foreign minister Tibor Navrasics today in response.  He added that Hungary has never ever prevented other countries from opening consulates in Hungary.  He remarked that today’s Rumanian decision is going to have consequences and he has also summoned Rumania’s ambassador to Budapest immediately.

Only the traditional/historical anti-Hungarian stance of  Rumanian politics, coupled with their guilt-ridden worries over Erdély, can be  the only viable explanation for Rumania’s decision.   So much about the so-called “European thought”…

 

 

 

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Orbán and Horthy

Orban is a rare political leader in Europe. He is quite popular, but he is in a balancing act. To his left are the Europeanists, who see all his actions as a repudiation of liberal democracy. On the right is a fascist party that won 20 percent in the last election. Between these two forces, Hungary could tear itself apart. It is in precisely this situation that Weimar Germany failed. Caught between left and right, the center was too weak to hold. Orban is trying to do what Horthy did: strengthen his power over the state and the state’s power over society. He is attacked from the left for violating the principles of liberal democracy and Europe. He is attacked from the right for remaining a tool of the European Union and the Jews. The left believes he is secretly of the right and his protestations are simply a cover. The right believes he is secretly a Europeanist and that his protestations are simply a cover.

Now we add to this the fact that Hungary must make decisions concerning Ukraine. Orban knows that Hungary is not in a position to make decisions by itself. He has therefore made a range of statements, including condemning Russia, opposing sanctions and proposing that the Ukrainian region directly east of Hungary, and once Hungarian, be granted more autonomy. In the end, these statements are unimportant. They do not affect the international system but allow him to balance a bit.

Orban knows what Horthy did as well. Hungary, going up against both Germany and Russia, needs to be very subtle. Hungary is already facing Germany’s policy toward liberal integration within the European Union, which fundamentally contradicts Hungary’s concept of an independent state economy. Hungary is already facing Germany’s policies that undermine Hungary’s economic and social well-being. Orban’s strategy is to create an economy with maximum distance from Europe without breaking with it, and one in which the state exerts its power. This is not what the Germans want to see.

Now, Hungary is also facing a Germany that is not in a position to support Hungary against Russia. He is potentially facing a Russia that will return to Hungary’s eastern border. He is also faced with a growing domestic right wing and a declining but vocal left. It is much like Horthy’s problem. Domestically, he has strong support and powerful institutions. He can exercise power domestically. But Hungary has only 9 million people, and external forces can easily overwhelm it. His room for maneuvering is limited.

I think Orban anticipated this as he saw the European Union flounder earlier in the decade. He saw the fragmentation and the rise of bitterness on all sides. He constructed a regime that appalled the left, which thought that without Orban, it would all return to the way it was before, rather than realizing that it might open the door to the further right. He constructed a regime that would limit the right’s sense of exclusion without giving it real power.

Russia’s re-emergence followed from this. Here, Orban has no neat solution. Even if Hungary were to join a Polish-Romanian alliance, he would have no confidence that this could block Russian power. For that to happen, a major power must lend its support. With Germany out of the game, that leaves the United States. But if the United States enters the fray, it will not happen soon, and it will be even later before its role is decisive. Therefore he must be flexible. And the more international flexibility he must show, the more internal pressures there will be.

For Horthy, the international pressure finally overwhelmed him, and the German occupation led to a catastrophe that unleashed the right, devastated the Jews and led to a Russian invasion and occupation that lasted half a century. But how many lives did Horthy save by collaborating with Germany? He bought time, if nothing else.

Hungarian history is marked by heroic disasters. The liberal revolutions that failed across Europe in 1848 and failed in Hungary in 1956 were glorious and pointless. Horthy was unwilling to make pointless gestures. The international situation at the moment is far from defined, and the threat to Hungary is unclear, but Orban clearly has no desire to make heroic gestures. Internally he is increasing his power constantly, and that gives him freedom to act internationally. But the one thing he will not grant is clarity. Clarity ties you down, and Hungary has learned to keep its options open.

Orban isn’t Horthy by any means, but their situations are similar. Hungary is a country of enormous cultivation and fury. It is surrounded by disappointments that can become dangers. Europe is not what it promised it would be. Russia is not what Europeans expected it to be. Within and without the country, the best Orban can do is balance, and those who balance survive but are frequently reviled. What Hungary could be in 2005 is not the Hungary it can be today. Any Hungarian leader who wished to avoid disaster would have to face this. Indeed, Europeans across the continent are facing the fact that the world they expected to live in is gone and what has replaced it, inside and outside of their countries, is different and dangerous.

by George Friedman, the Chairman of Stratfor.  The full article can be read here.

 

I don’t agree with everything Friedman writes but certainly it’s a very interesting analysis on Hungary’s situation.

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Orthodox vs. unorthodox, Part Two

Earlier I compared EU/IMF  bad boy Hungary’s economic performance since 2010 to  EU/IMF good boy Portugal.   Now I’m doing the very same comparison between  EU/IMF bad boy Hungary and   EU/IMF good boy Rumania.  Like I tried to point it out then, the previous comparison had its limitations and it wasn’t absolutely conclusive (yet).  This one isn’t going to be “perfect” either.

The population of Rumania  is  about twice that of Hungary’s (20 millions vs. 10 millions) and its present day area is twice as big, too (238,000 square km vs. 93,000 square km).  They are neighbouring countries and both are peripheral to the core economies of Europe.  Neither country belongs to the  Euro zone. Hungary’s currency is called the Hungarian Forint and Rumania’s currency is called the Rumanian Lei.    Rumania belongs to Eastern Europe culturally (though Transylvania may be considered Central Europe due to its history), that is Rumania is the cultural realm of Orthodox (Byzantine) Christianity. Hungary belongs to Central Europe culturally, that is Hungary’s culture is based on Western Christianity (both Catholic and Protestant!)  Rumania’s GDP per capita was  6200 EUR (8500 USD) in 2012 and Hungary’s was  9800 EUR (13400 USD).    Here are a lot more data to compare.

Both countries had Communist dictatorships until 1990. Though Hungary’s was a lot more lax  one than the totalitarian dictatorship Rumania had.  Hungary’s transition to democracy was a negotiated, peaceful one, while Rumania’s dictatorship ended with bloodshed, a revolution which was sparked by the courage of an ethnic Transylvanian Hungarian Protestant priest, László Tőkés.  So there are a lot of similarities and differences between the two countries.

Another difference is that Rumania, just like Portugal did, as I wrote in the first part, chose to follow the EU/IMF economic recipes in 2010 and Hungary chose to rebel against them.

So let’s see the same data  again, let’s see  how those economic figures, and  with special regard to  the ones important for people’s everyday life, have changed in good boy Rumania and in bad boy Hungary since 2010.    First let’s review some basic major figures which are somewhat indicative of how these economies were doing in 2010 and how they are doing now:

Annual GDP growth

Kudos to Rumania, their GDP growth is more robust than Hungary’s

What about the public debt to GDP ratio?

Government debt

Hungary’s public debt seems to have become stagnant, Rumania’s seem to be on the rise. However Rumania’s debt is way much lower than Hungary’s!

A positive trade balance means you sell more than  you buy.  A negative one, like the US has with China, means you get indebted.

Balance of trade

Unlike Hungary which has been having record high trade balance surpluses, Rumania runs a big trade balance deficit.

Now let’s see those figure again which directly affect people’s lives.    As far the the inflation rate figures go, I think it’s all right to call it a draw.

 Inflation rate

Unemployment rate is something which really affects people. Unemployment at a young age and long term unemployment are especially devastating. The situation in both  countries seems to be similar to me.  Well, it’s not particularly good.

Youth unemployment rate

Long term unemployment seems to get somewhat worse in Rumania and it seems to have improved somewhat in Hungary.

Long term unemployment rateThe overall unemployment rate seems to be comparable, and stagnant, in both countries.

Unemployment rate

And what about the wages and the income tax which also directly affect people? The wages are rising in both countries.

Wages

The dynamics of the wage change looks pretty much the same to me.

Rumania introduced a flat rate 16% personal income tax much earlier than Hungary. So now this is the same in both countries.

Personal income tax rate

Let’s see the construction output as in the previous post:

Construction output

This looks to be the same, too.

Unfortunately tradingeconomics.com doesn’t have data on the foreign direct investments in Rumania.

The corporate tax rates are identical in both countries:

Corporate tax rate

The comparison with Rumania seems to produce a lot less clear picture than the comparison with Portugal. Rumania is doing better in some respect and Hungary does in some other.  I think it’ll be well worth doing some more comparison, probably also along some other lines, in a year or so.

Orthodox vs. unorthodox

Portugal is comparable to Hungary both in population  (10 million people) and in territory (92,000 and 93000 square km respectively).  Both countries are peripheral to the core economies of Europe.  The differences are significant though. Portugal is a member of the Euro zone and Hungary has its own currency (Hungarian Forints).    Portugal is a Mediterranean country with an Atlantic Ocean shore, Hungary is a land-locked country in Central Europe.  So the culture and the history are very different, too.  Portugal’s GDP per capita was 20,180 USD in 2012 and Hungary’s was only 12,620 USD.     Another difference is that Portugal chose to follow the EU/IMF economic recipes in 2010 but Hungary chose to rebel against them.

Still, let’s see some quick comparisons how some economic figures, and especially the ones important for people’s everyday life, have changed in good boy Portugal and in bad boy Hungary since then.    First let’s review some basic, major figures which are somewhat indicative of how these economies were doing in 2010 and how they are doing now:

GDP growth in Portugal and Hungary

Unlike in Portugal’s,  Hungary’s GDP starts to grow

seems to decline...

Hungary’s external debt seems to decline…

... seems to look worse and worse...

Portugal’s external debt problem seems to get worse…

A positive trade balance means you sell more than  you buy.  Hungary’s trade balance was always negative prior to 2009 but Hungary has been producing big pluses since then.

Balance of trade (exports minus imports)

While Portugal’s trade balance doesn’t show any improvement, Hungary’s balance of trade looks great

Now let’s see those figure which directly affect people’s lives.  While Hungary still had a relatively high inflation in 2010, Portugal had a very low inflation in 2010.  Portugal experienced a peak  in the meantime but  their inflation rate is back to nearly zero  again.  Inflation has  decreased to nearly zero in Hungary  only recently.

Consumer Price Index in Portugal and Hungary

Consumer Price Index in Portugal and Hungary

Unemployment rate is something which really affects people. Unemployment at a young age and long term unemployment are especially devastating.

Young people's unemployment used to be the same, now it's much worse in Portugal than in Hungary

Young people’s unemployment used to be worse in Hungary  in 2010 than in Portugal, now one can put it the other way around

... just like the situation with long term unemployment...

… just like regarding the situation with long term unemployment…

And the overall unemployment rate shows the same picture.

And the overall unemployment rate shows the same picture.

And what about the wages and the income tax which also directly affect people?

I can see some emerging pattern here, too.

I can see some emerging pattern here, too.

Portuguese  income tax up, Hungarian income tax down

Portuguese income tax up,
Hungarian income tax down

Maybe the progress happened at the expense of the business sector in general? Let’s see the construction output

The black line belongs to Portugal

The black line belongs to Portugal

or foreign direct investments:

The blue dotted line belongs to Hungary.

The blue dotted line belongs to Hungary.

or the corporate tax rate:

The constant blue line shows the Hungarian data

The constant blue line shows the Hungarian data

Well, let me not draw the final conclusion yet that the EU/IMF orthodoxy is a complete failure and the Hungarian “unorthodoxy” is a complete success because the jury is still out on this. Let’s regard these charts instead as a report after three years on the progress of a 10-20 year race.  To filter out the effect of Portugal’s having the Euro, which I think is largely responsible for the troubles in Portugal,  and Hungary’s having its own currency, I’ll have to do a similar comparison with ‘good boy’ Romania… and caution will be required there, too.

Britain wants restricted labour market

When other countries join the European Union we should be insisting on longer transitions and perhaps even saying until you reach a proper share of an average European Union GDP you can’t have freedom of movement.
We’re putting in very tough measures and controls but I think in the future we will need to go further.

David Cameron raises his finger

British prime minister David Cameron said.

As a Hungarian citizen, who spent five nice years in Britain as a higher-rate tax-payer, while not being on  benefits for a single day, and someone who did not use  the “famous” British NHS  at all (apart from a few futile visits to the local GPs who were simply unable to distinguish between allergy and flu), I agree with Mr. Cameron.

It goes without saying that  the countries Britain would restrict its labour market for should restrict the movement of capital and access to their markets for British  banks and corporations accordingly.

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