Katalin Nagy: Prime Minister Viktor Orbán is in the studio. Good morning.
When you were last here, five weeks ago, the Government had yet to be formed. Since then, this week the budget for 2023 was submitted to Parliament. In such an extremely uncertain economic and geopolitical situation, how is it possible to plan so that this budget doesn’t collapse? How do you see this?
First of all, I have an excuse for not being on your programme over the past five weeks: a government had to be formed. That’s a very demanding job that prevents one from thinking in both directions – both inward and outward. To form a government one needs to think inward, and that’s why I couldn’t come here. But I’m glad to be here again – although it’s true that we have to start with the difficult question of how to plan and budget in such a situation of uncertainty and anxiety. The first thing is that one has to think about next year – so that was the Government’s task. And we had a three-day presidency – sorry, government – meeting in Sopronbánfalva, where we mainly talked about what 2023 would be like. We concluded that the chances are high that this will be a prolonged war, and that 2023 will also be uncertain and full of anxieties. So the world will be plagued by the war and its economic consequences. Even if we manage to stay out of this war – and I believe that we Hungarians will stay out of it – we cannot completely escape its consequences, one of the most important of which is inflation. This is tormenting the whole of Europe, and now even the Americans. It is wartime inflation. One sees a different kind of problem when inflation emerges or strikes an economy in peacetime. This time it’s linked to war. It’s partly due to the fact that the war itself is driving up energy prices, and partly to the fact that we in the West have reacted to the war with sanctions that are triggering further price increases. The Government’s conclusion was that this will continue into next year, and so we’ve adopted a budget that’s capable of dealing with wartime inflation. Our second insight was that, in addition to inflation, the economic crisis that’s appearing across Europe is also related to the war; and so the budget must deal with a wartime economic crisis. This is why we’ve decided on the creation of two funds. There will be a defence fund, enabling us to defend the country and get our army – our defence forces – into a condition in which they’re effective and capable of action in times of need. We’ll also have a fund for protecting the reductions in household utility bills, which is in fact synonymous with protecting families’ circumstances and standard of living. In Hungary, utility charges draw on – or consume – a much larger proportion of monthly income than they do in Western European countries. This is why we had difficult negotiations – or battles – with Brussels over the oil issue. For them utility bills are less of a burden than they are for Hungarian families: they earn more, and the amounts spent on subsistence, on utilities, represent a smaller amount or proportion of their total income than is the case in Hungary. For us utility charges are a big problem, and they have to be dealt with. It’s no accident that since the early 2010s reductions in household utility bills have been synonymous with the protection of families, and have been central to it. We shall protect what we made a commitment to when we formed the Government: we shall protect pensions; this budget will protect full employment; this budget will protect the family support system; and it will protect the reductions in household utility bills. Now, today or tomorrow, I’ll have to issue a decree containing the new rules, the detailed rules related to the reductions in household utility bills. It’s important that when we introduced it we did so to protect families, but the rules also included around 100,000 very small businesses – those with consumption below a certain level. The big question was whether or not we could continue protecting them in the future, whether or not we could keep them in the system. Now I see that today or tomorrow I can issue a decree with this type of content, so that they’ll remain in it. This means that around 100,000 small businesses will continue to receive energy supply at a reduced rate, within the budget protecting reductions in utility bills. Finally these ideas combined to form a budget, the Finance Minister then collated them according to the logic of financial language, and we submitted this to Parliament.
It would be a great thing if 100,000 small businesses could stay afloat, because I have friends who have told me that they’ve just calculated that they need to pay three times more for electricity, and their business is one that needs electricity.
Well, they were in when we started. Then when things were going well in the economy we expanded the scope of the reductions in utility bills. We cannot sustain it in that form now, so we have to go back to our starting point. We can protect families, and we can protect the very small businesses that were in the original plans for reductions in utility bills. I – or, more precisely, our experts – calculate that this also means 100,000 small businesses.
Youve mentioned inflation, which doesn’t usually stop at the border. To what extent can the price freezes introduced by the Hungarian government reduce this staggering rate of inflation?
According to the ministers responsible for economic affairs, by 5 to 6 per cent. So, if it weren’t for the cap on petrol prices, the food price freeze and the reductions in utility bills, inflation in Hungary would be at 15 to 16 per cent, instead of 10 per cent. Furthermore, the situation doesn’t look good because, since this is wartime inflation, Hungary can’t curb it alone. Inflation will continue to rise for as long as the European Union continues to finance and prolong this conflict. So the simplest way to bring down wartime inflation is peace, and the Hungarian government is almost the only government in the whole of Europe that isn’t talking about sanctions and war, but about the fact that we need peace, and that we should finance peace, not war. I think that the European Union will soon need to change its strategy, because if this continues we’ll destroy ourselves with wartime inflation; and it’s in no one’s interest for the whole of Europe to be destroyed. If now they introduce – or seek to introduce – a gas embargo after the oil embargo, we’ll wreck the entire European economy. In my opinion we need to think differently about the whole Russo-Ukrainian conflict. I repeat, we need to fund peace, not war and not warmongers, who need to be reined in. Well, now it’s completely obvious that there are business circles that have an interest in war, and they’re symbolised by George Soros. He talks openly about the need to prolong the war, that it needs to be extended. These are warmongers who want to make money out of war, while we’re being ruined by it, while the whole of Europe is being ruined by it.
While it’s absolutely clear that price freezes can curb inflation, we can see that the European Commission is now attacking the Hungarian petrol price freeze, saying that it’s discriminatory for the discount to be available only to those with cars registered in Hungary. What action can be taken in this matter? Because infringement proceedings will be launched again.
Well, the truth is that there’s logic in what they say. So it’s not a black-and-white situation. After all, the whole European Union is built upon the premise that certain things are uniform and you mustn’t differentiate between them on a national basis. And I think that in peacetime that’s a blessing and a good rule. The question now – and here our opinion differs from that of the Commission – is this: Are we now in a situation that’s normal or everyday? We don’t think we are, because there’s a war. Of course Brussels is further from the Ukrainian border than Hungary is. If you look at the map of inflation rates, you’ll see that for the most part there’s higher inflation in the areas of Europe that are geographically closer to Ukraine. So the circumstances here are different from those in Brussels or Paris. This is why I’m trying to convince them that here we’re faced with an extraordinary situation; and in an extraordinary situation you have to do what the situation requires. An extraordinary situation requires extraordinary measures. And in such a situation it’s also permissible – and I think it’s even imperative – to deviate from general rules. We couldn’t protect the interests of Hungarians without a price cap on petrol, because otherwise the price of petrol would be somewhere between seven hundred and nine hundred forints per litre. By contrast, the price is now capped at 480 forints. And this is immediately passed on, the rise in the price of fuel is immediately passed on to the price of other products. Consequently, we’re asking the EU to accept that we’re in an exceptional situation. So we’re asking the bureaucrats in Brussels not to follow the logic of “one size fits all”, but to understand that in countries closer to the war zone exceptional measures may be necessary – such as differentiating on a national basis between registration plates, or vehicles.
There’s worldwide acknowledgement that Hungary has achieved a great success on the issue of the oil embargo, because our country’s been exempted from the ban on imports of Russian oil through pipelines. As a result, not only is Hungary benefiting from this measure, but also Slovakia and the Czech Republic. But the following question arises: how long can we enjoy this exemption? Because there’s been no mention of how long it will be valid for, and we’ve heard – at least from the press – that the European Commission’s seeking to impose an import duty in order to make things more difficult for us and for those receiving their oil through pipelines.
Well, perhaps the last part is fake news: I don’t think that the Commission wants to retroactively reshape an agreement with such rules. We’re talking about bureaucrats, and one ought to be prepared for anything, but I don’t think that the political class in Europe would stomach that. So I won’t pay any attention to that, or pay any more attention to it. What is true is that Hungary has firmly stood its ground. I won’t recount the more difficult moments when I had to fight there alone, but parenthetically I’d note that although our Czech and Slovak friends are enjoying the benefit of this, when I needed to fight I didn’t see anyone standing alongside me. In the end we got what we wanted, common sense prevailed, and I managed to convince them – so we didn’t have to force the issue. I managed to convince my prime ministerial counterparts, and they realised that a completely different set of rules needed to be devised for a country to which oil cannot be transported by sea, but only through pipelines, in comparison with the rules for countries that can get oil by sea from anywhere in the world. How long will this last? Well, we’re still in discussions with the Commission on how the oil coming in by pipeline can be replaced. This won’t happen quickly, and it will cost a huge amount of money.
Gas embargo. What’s your view on the fact that, in the same way, no one will stand alongside the Hungarian government, but in the background they may be rubbing their hands in anticipation, letting Viktor Orbán fight it out there in the European Council?
Well, it isn’t a matter of double-dealing or cowardice. Very few countries are in a political situation which is as stable as Hungary’s. We’ve just had an election, and we’ve received a renewed mandate. It’s perhaps not surprising to hear that I think the Hungarian electorate made the right choice in the election in April. Now I’m looking at the proposals from the Left, and it’s absolutely clear that they’d have accepted the oil embargo. They’re constantly attacking our price-containment measures, so if the election hadn’t gone the way it did, we’d be like the rest of Europe, with petrol prices at seven, eight or nine hundred forints per litre, no oil coming from Russia, and the prospect of further wartime increases in inflation. The price caps would have been abolished and the reductions in household utility bills couldn’t be protected – and perhaps they wouldn’t want to protect them. So the Hungarian government’s position is stable, because now we’ve received a renewed mandate. Of course I don’t underestimate the strength of the Left, and I also show due respect to my fellow Members of Parliament who sit in opposition. But this isn’t their time, and so in political terms the Government’s scope for action is wider than usual, because we have the backing of this renewed mandate. That’s the first. Secondly, we’ve won a two-thirds victory, so our majority position in Parliament is very stable, and the positions of the Prime Minister and the Government are very stable. In addition there’s a wartime situation, and we’ve been given emergency powers to enable the Government to make rapid decisions, allowing us to bypass parliamentary procedures when necessary and make decisions more quickly than we’d be able to in normal peacetime mode. Even the French president is in a similar position, because there’s been an election, the French president won by a large margin that was reassuring for him, and so he also has relatively wide scope for action. All the other countries have coalitions, small parliamentary majorities and are facing elections, and so it’s very difficult for them to take up positions that bear certain costs. This is because if you take a stand against, say, the oil embargo, you’ll be attacked by everyone who’s a warmonger, who has an interest in the war, who has a different view of this whole war, and who has an economic interest precisely in stopping Russian oil from coming in – because they want to import oil from elsewhere. And then you’ll have to stand there, without shelter in the eye of the storm of attacks. That’s not an enviable situation, and my counterparts don’t usually volunteer for the opportunity to experience it. So that’s where we stand. Now oil began in the same way as gas, with people first spreading the word that perhaps it was time to deal with energy, and so let’s try it out with oil. Then the Germans said that oil was out of the question, because the German economy would be ruined. For two weeks they were pummelled, let’s say, by the mainstream liberal media, by internal coalition debates, and by benevolent American opinions. And finally, all of a sudden I hear the Germans’ boss saying that Germany not only supports the oil embargo, but also wants to be at the forefront of it and implement its most radical version. Now again with gas we’re in a situation where there are some people, including the Germans, for whom this is important and who have announced that it’s out of the question. But at the moment one cannot know whether or not we’ll end up alone again, or whether some of us will hold out. In the gas battle I’d now like to use a different argument, because it’s no longer just a question of whether Hungary has alternative supply options, but of whether we’ll now be destroying the whole of Europe. So a gas embargo isn’t simply a problem for Hungary: it isn’t a rational European policy. This will be a different kind of debate. Before any debate I trust that common sense will prevail in the end.
Yes, but that’s also what the experts say, those who work in the energy sector: whether they’re German or French, everyone says that this would be madness, because Europe would be shooting itself in the foot. And experience bears this out. What happened with the oil embargo? Has the Russian military operation come to a halt? It hasn’t stopped, but they’ve announced victory, that now they’ve finally entered into a big deal with China. So it hasn’t achieved its objective.
This is a difficult matter, and indeed the energy issue cannot be seen in isolation from the whole context of the military conflict. It cannot be denied, however, that Ukraine has the right to defend itself, and a country still has the right to fight if it decides to – even if the bookmakers’ odds are against it. The Ukrainians cannot be denied that. The question isn’t about what they’re doing, because they’re doing what they want to do and what they see as being right – and they’re fighting heroically. The real question is this: What are we Europeans, Westerners – and here I’ll include the Americans – doing? What do we want, what do we want to finance? Do we want to contribute to a protracted war, or will we use the means at our disposal and say: “Well, gentlemen, there’s been a war so far, and now we’ll make proposals on how to make peace, with an immediate ceasefire and peace negotiations.” The problem is that, apart from myself, apart from the Hungarians, there are very few people in Europe today – almost none – who are speaking with the voice of peace. “Sanctions, sanctions, this is how one side must lose, and this is how victory must be won!” I understand that these are all important views, but they’re causing wartime inflation and plunging the whole of Europe into a wartime economic crisis. We need to speak with the voice of peace. I hope that when we start this will be the position of one or two of my colleagues, that there will be two or three of us and I won’t be alone – and that in the end perhaps this voice will be shared by the majority. But there will never be peace if someone doesn’t start, if Hungary doesn’t start speaking with this voice, and no one speaks with the voice of peace.
Youve mentioned that it’s very important that we have a stable budget and that you make sure that there are no holes in the budget. The Government wants to use the tax on windfall or extra profits for this purpose. The idea was that there are eight sectors that are already calculating how much they’ll pay into the budget. But the Hungarian Banking Association, for example, doesn’t support this measure. We’ve also heard that a lower amount of tax should be paid, while some airlines have said fair enough, they’ll pass this particular tax directly on to their passengers. The Left always argues that the reason they don’t support the Government’s idea on this is that the tax will be passed on to the public.
Well, if it were so easy to pass it on, then those paying it wouldn’t be protesting. But they’re protesting against it because they know that it can’t be passed on – and certainly not in its entirety. And we in the Government aren’t simpletons who would just look on if such things happened: we’d do something about it. This is why they’re objecting to the introduction of the tax. We need to understand this, because they’re business people. So, as the English say, this is profit blown by the wind: they call it “windfall profit”, rather than “extra profit”; the wind has blown in a much bigger profit than expected, and now the question is what to do about it. And they want to keep as much of it as possible. I understand that. Fortunately we have good memories, memories shared with the companies that are now subject to the windfall profit tax. At the beginning of the 2010s, when we inherited the bankruptcy left by the Gyurcsány government, the left-wing government, we had to put the country back on track. Then we didn’t need to impose a windfall tax, but crisis management taxes on banks, energy companies and so on. And back then we accepted that of course it would hurt everyone, it would hurt the big companies, but in a year or two it would fix the Hungarian economy, and they’d see that they’d be able to make even more profit than before. And that’s what has happened. And that’s what I’m also telling them now. We’re now in a wartime situation, and this must be resolved; and so they’ll have to shoulder more of the burden than they normally do, because Hungarian families cannot pay the price for this. And in two or three years, depending on the length of the war, they’ll see that the Hungarian economy, as a restructured economy, will be one of the most competitive in Europe, and business opportunities will open up for them again. At the same time, however, in this matter I like to use the word “moderation”, because the companies that we’re taxing now and the banks are right to say that there’s no profit without work. So it isn’t worth talking about extra profits as if they were just blown in by the wind, as the English say, because the basic activity, the basic work had to be done, it had to be worked for: the work is more profitable now, but that work still had to be done. So we tried to follow this principle in the government meeting when we determined the level of windfall profits. About one third of the windfall profits should be kept by these companies, as they should be motivated to work well. The remaining two thirds should be deducted in roughly equal amounts to contribute to the fund for protection of reductions in utility bills and the fund for defence. This is difficult to decide exactly, but this was in essence the guiding direction I followed – or we followed. I would like to thank the banks and the companies who will be paying this, and who – apart from a few minor tricks – won’t be passing it on. The electorate will weather this, together we’ll weather this difficult phase, and in two or three years’ time the Hungarian economy will be back on track.
Today is 10 June, and the price freeze will be in force until 1 July. What will happen to these price freezes?
Well, one has to proceed with care, looking at the figures and thoroughly assessing the consequences. Obviously your listeners have better things to do, but if you look at the list of government members, they’ll see that in the present Government the number of ministers dealing with economic issues is greater than it was before. This is because when forming the Government, I – and we – believed that the big challenge facing Hungary in the next few years will come from economic pressures, precisely because of the wartime economic crisis. So now we have a lot of intelligent, authoritative people in government dealing with economic issues. Their task is to make a proposal to the Government on what to do with the measures previously introduced: to extend them or not. I’d like to extend them, but some more consultations will be needed on that.
I’ve read in the press that the leader of MOL [oil and gas corporation] thinks that this petrol price freeze should be gradually phased out after 1 July.
Everything depends on the war. If there’s war, there’s wartime inflation. War destroys, and inflation destroys. If there’s peace, we’ll be able to phase out these measures more quickly; if there’s war, we won’t be able to phase them out – or only very slowly.
We don’t have much time left. What do you think of Frans Timmermans’ carbon tax, which doesn’t seem to have been voted for by the European Parliament first time round? Is this astonishing push for excessive greening yet another factor adding to the unfavourable economic situation that’s developed in the world?
Here we’re talking about two different things – or at least it’s worth separating out our thoughts into two strands: firstly about the proposal itself, and secondly about its timing. Now, in a time of war when prices are surging and the world is teetering on the brink of a world economic crisis – and Europe is perhaps no longer teetering on its brink, but marching into such a crisis – I think that it’s insane to come up with proposals that would obviously place an additional burden on families. So that would be introducing taxes now, at this moment in time, telling people to pay a tax because they have a house and they heat it, or because someone doesn’t have the money to buy an electric car. Buying an electric car isn’t an ordinary person’s hobby, and people of limited means don’t really have that option, so then to say that anyone who drives a petrol or diesel car should be punished with a tax is the kind of insensitivity and departure from reality that’s unacceptable in politics. So it would be better for such people not to make decisions – I mean decisions that affect people’s daily lives. By the way, I don’t have a high opinion of the European Parliament, and so I’m surprised that they’ve stood up straight and finally said that now they’re on the side of the people, and that they won’t accept this. I hope that they’ll stick to this, because this issue is still being pushed by the European left. This is a great achievement! We’ve been saved from having to pay tax on our homes and tax on our cars in the name of climate change. I’ll come to the point about timing, but in my opinion the financing of climate change policies shouldn’t be paid for by the public anyway, but by the big polluters who are the prime contributors to climate change. Their profits must be the source of the sums needed to finance the European economy’s green transition, which I believe is only possible at a much slower rate than the Brussels bureaucrats currently think. It will be a longer process, and the burden will have to be placed in a correspondingly proper and sensible way, spread out over time: not on the shoulders of families, but on the shoulders of polluting companies.
Thank you. You’ve been listening to Prime Minister Viktor Orbán.