Hungarian parliament rejects motion on adoption of the euro

On Tuesday, Hungary’s parliament voted against a motion brought forward by independent MP Zsuzsanna Szelényi calling on the government to begin the formal process of replacing the forint with the euro as the country’s currency. The goal of Ms. Szelényi’s motion was to express that parliament is committed to adopting the euro and confirming that “the time had come to join the Eurozone.” Moreover, the motion called on the Minister of the National Economy to request an invitation to the meetings of Eurozone finance ministers.

Even if Fidesz MPs were willing to contemplate a motion that commits them to adopting the euro, the wording of Ms. Szelényi’s motion was unacceptable to government parliamentarians, as it included a thinly veiled criticism of the regime. The motion called for an economic plan that would also guarantee predictability and the rule of law, as well as the breaking up of monopolies that have close connections to the governing party. Moroever, the motion made reference to fighting corruption and a demand that priority of resources be given to improvements in the fields of public education and research.

Zsuzsanna Szelényi speaking in Budapest, where there has been increased talk recently about Hungary joining the Eurozone, including at a conference organized by Political Capital. 

All Fidesz-KDNP MPs present for the vote, except for János Pócs, voted against the motion. Jobbik MPs decided to abstain, while a majority of Socialists supported the motion. The only exceptions within MSZP were Tamás Harangozó, Zoltán Gőgös and László Szakács, all of whom voted against a commitment to the adoption of the euro. Most of the Politics Can Be Different (LMP) caucus was not present for the vote, while parliamentarians affiliated with the Democratic Coalition did not vote. (DK MPs have been boycotting much of parliament’s work.)

One of the arguments made by many pro-democracy opposition politicians, activists and thinkers is that joining the Eurozone would bolster anti-corruption initiatives and rule of law in Hungary. But this line of logic, which assumes that the ruling Fidesz party would have to turn away from its practice of state capture as a member of the Eurozone, seems to resemble the earlier belief that membership in the European Union would serve as a guarantee of democracy and rule of law in member states. We see how little the EU can or is willing to do about violations, once a country is already a member state. Trusting that things would be different if Hungary were to adopt the euro and that the government would be forced to chart a more transparent and democratic path seems overly hopeful.

17 Comments

  1. Glad to see that Hungarian politicians are able to maintain some common sense. I know many ordinary Hungarians would welcome the Euro, thinking that it will simply make things easier for their own personal lives, but in terms of Hungary’s economy, it is far better to have one’s own well-managed currency, which now Hungary finally has thanks to sensible economic policies, such as drastically reducing the amount of FX debt at consumer and government levels, deficits consistently under 3%/GDP. Besides, I don’t think the Euro still has more than a decade of life left. It would be a shame for Hungary to join such a dysfunctional and failing project, then be left holding the bag, together with all other Euro currency members. It would be the economic equivalent of masochism.

    • Peter

      “well managed currency … sensible economic policies … drastically reducing the amount of FX debt at … gov levels … (budget) deficits consistently under 3% GDP”

      What are up talking about?

      The EUR/HUF tumbled from 270’to 310 right away,
      The FX reserves of the MNB from EUR 34 bil to 24 under Matolcsy.
      The amount of GGD went from HUF 22 000 bil to over 30 bil, but we don’t know the truth, because the gov uses only the December 30 (doctored) figure which is different on the rest 364 days.
      The GGD/GDP has officially dropped from 81% to 74%, but the gov swallowed 2500 bil in 2012, i.e. the GGD would be 84%.

      The 3% budget deficit is achieved by emaciating the health, education and pension areas, e.f. the gov doesn’t contribute to the pension funds “saving” another 2%, i.e. the deficit would be 5%.

      And finally, the anemic economic performance is squarely blamed on the “policies” of corruption, business and legal instability, low productivity, etc.

      • Can you ever be honest? Yes it initially tumbled, because before 2010 it was kept steady artificially and unsustainable through very high interest rates, which was chocking the economy. That is not the cause of Fidesz policies, but the result of the mess they inherited. This is just an example of the distortions you are serving up here.

    • Peter

      Distortions my foot. Read the stats.

      The HUF tumbled only in August after the idiotic staments of Kosa and Szijjàrto about the situation being worse than Greece, while Orban was telling the German business that the Bajnai government stabilized the economy.
      Not so idiotic in hindsight, because they wanted to weaken the forint, but the MNB wouldn’t oblige, hence the intensive personal attacks on the MNB President Simor to force his resignation. The budding mafia state was showing.

  2. What Hungarian economy? The National Bank has not enough reserves for emergencies. The economy is driven by foreign factories, EU investments and the money Hungarians send home. Sensible is something different….

    • The EU subsidies were 6.5% GDP (2014,2015), add transfers estimated at 1.3% GDP totaling 7.8% injection into the economy. The growth for the period was 3.8% p.a.
      The Mèszaros & co wealth grew 300%.
      Vilàgos?

      • Don’t forget to also include the costs of EU membership. East European countries are for instance the only developing countries on this planet which are expected to reduce their CO2 emissions. How much do you figure that is costing these countries in terms of growth? It is no wonder that similar developing nations around the world are clocking in growth rates in the 5-6%, while in the Eastern Europe region, it is more like 3% on average.

      • Peter
        BS again, read the stats.
        Hun was one of the greatest net beneficiaries of the EU cohesion and agri subsidies. Despite this all EEuro countries grew/grow faster (except Croatia), the 2010-14 Orban rule clocked up just above 1%, repeat ONE %.

        • 2010-2014 all of EU was in stagnation, while Hungary entered the period on IMF life suport. Turning its back on IMF BTW was one of the best moves, because it freed Hungary to take other measures. Here is a stat for you! Romania, the IMF’s “good student”, currently pays 4.3% interest on its ten year notes. Hungary borrows cheaper at just under 2.7%. This within the context of Hungary’s debt/GDP being over 80% in 2010, while Romania’s was about 20%. The lower interest rate saves Hungary about $1.5 billion/year in interest costs, only if we are to assume that without that move it would have to pay same interest as Romania. Although in my view it would be much higher, because Hungary was in much deeper mess than Romania in 2010.

          Keep spinning it!

        • Peter
          You keep changing the subject and I don’t want spend unlimited time refuting your statements. Hun has been falling behind all EEuropean countries over the last 8 years. Period.

      • And btw, Hun was net seller of CO2 quotas, so it actually benefited financially from the system.

  3. Finally, it doesn’t take a scientist to see that there’s not going to be Euro while the Orbàn mafia rules here. No EU prosecution office either. Too much control and restrictions on their shannanigans and corruption.

  4. Common sense tells you that they refused it simply because than they would have to follow ECB rules, now they make all those rules.

    Beside, the MNB is the central bank of Hungary. Owned and controlled by the government.
    It is NOT one of those banks that freely compete with all other private banks ,or internationally with the investor’s and depositors’ money.

    The MNB issues its own notes, backed by the securities it may hold. But that is the entire national wealth.

    Normally banks greatly influence the over all economy. The MNB may not be independent enough to do that?
    That is the draw-back of government’s hand in the economy.

    • Bende
      Your impression re the motives are ok, but better check the status and functions of the MNB, e.g. it is formally independent from the government in the performance of its monetary policies, the gov bonds are not backed by securities, it has limited tools to influence the economy.

      The reality in Hun today is very different, e.g. the omnipotent PM has literally “his right hand” in the MNB and we know what a thief’s hand is doing.

  5. So, which one is the case Observer?
    Is the MNB independent from the government, OR the “omnipotent PM has literally his right hand in the MNB…” ???

    • In theory MNB should be independent, in practice (like in most dictatorships) nothing and nobody is independent, a puppet of the ruler runs the MNB.

  6. Hey, wake up. NO government in the world does backup its’ bonds with any securities.

    The only security is the taxing power of the government. Any government.
    That they have the power to collect taxes and pay back the money.
    Just where did you learn finance ?

Leave a Reply

Your email address will not be published. Required fields are marked *