Orbán and the wind from the east

„Turning to the economy, the Viktor Orbán prime minister readily agrees with the suggestion that success in macro-economic stabilisation has not been matched by progress on the micro-economic agenda: debureaucratisation, labour-market reform and particularly the black economy. He puts some of the blame on the European Union, both for low growth and for failing to disburse structural funds more quickly.

That is not terribly convincing. Other countries are growing a lot faster than Hungary and have done so by paying careful attention to the nitty-gritty problems facing small and medium-sized enterprises. He concedes that mentality is the biggest barrier to growth: »The main problem is lack of trust after 20 years of „post-communism”. We have to convince managers and entrepreneurs that the state is not their enemy, that the changes we are making are not temporary. It takes time.«

Perhaps. But as Hungary wrestles with ingrained national cynicism, the outside world is moving on. It is striking that Commerzbank has decided to preserve its lending in Poland, but in no other European market outside Germany. Had this crisis happened ten or 15 years ago, Poland would have been seen as the first casualty, and Hungary as the foreigners' darling.

The task for labour market reform is daunting. Hungary, with only 56% of the working-age population in the labour force, is the worst in the EU after Malta, he says. The EU average is 65%. »We want it to be 75%, like America«. So far, his government has abolished early retirement and cut social benefits for those fit to work. Of 10m people in Hungary, he notes, only 4m have jobs, and (until his reforms) 1m of those didn’t pay tax. Hungary's new flat tax, he says, is unique in that it is both flat and family-friendly. Money needed to bring up children is tax-exempt.”