Hungarian pensions

Stabilitás Pension Fund Association is to hand in a petition to the European Parliament to appoint an EU-ombudsman to investigate the pension related measures of the Hungarian government on the basis of the government’s infringe of 3 million pensioners’ constitutional right. At the same time, the funds have indicated that when all the domestic legal remedies are used, they are going to appeal to Strasbourg-based European Court of Human Rights on the basis of discrimination and infringing the ban of law abusing.

http://stabilitas.hu/wp-content/uploads/20101125_Stabilit%C3%A1s_K%C3%B6...

Breaking news (the bill is now online (in Hungarian) http://www.parlament.hu/irom39/01817/01817.pdf): unless they are invalid, abroad or in prison, those who want to stick with their private pension arrangement will have to appear *in person*, upon sending a letter, too, in one of the handful of Pension authority offices, by the end of January. This is bound to cause long queues. In fact, that is likely to be the rationale. Kafkaesque indeed.

Hard as it is to imagine, I actually believe the Government's plans on this are even more sinister than just not believing in a private pension pillar and an easy way to get the deficit in line. In fact, between the extraordinary taxes and the E 10bn from the pension system,the Government is building up a war chest for the next phase in the transformation of the economy: re-nationalization. The Government has made clear it has wanted its own bank, and has targeted MKB. First by substantially weakening the balance sheet of the bank they should be able to get this one or another one cheap. They also would like to get back some of the energy and utility companies. Again, a nice big tax that kills profits should help drive down the price. They also still want I think the Russian's stake in MOL. Anyway, as I imagine it, the new revenues will not just finance the 2010 and 2011 deficits and fund a new expansion of the welfare state, but will instead be used to purchase back assets. What is unclear is whether they intend to really re-nationalize the assets or instead the plan is to allow FIDESZ "friends and family" buy the assets (i.e., really Russian style) and just have the Government with its new bank and the MFB and its new found cash finance these purchases cheaply.
For a bunch of people who so hate communists and communism and socialists and socialism, they certainly learned the strategy and lessons of communism and socialism really well.

You know what the law that confiscates the past 12 years' pension savings is titled? The "Law on the freedom to choose a pension fund"...

Gotta love Mr Matolcsy's orwellian doublespeak. You're free to do whatever you want, it's just if you don't do what we want you to do, you're dead. But you're free to choose, right?

The easiest way to understand the leadership of the ruling party is to think of them as
maffia in power.

They just nominated the old-new Attorney General, a Fidesz Party faithful,
for 9 years for that position again.
(why 9? Well, 4 years of Fidesz rule + 4-5 years of statute of limitations. )
At his previous stint, 2000-2006, he prevented any investigations into Fidesz's financial activities
while in power before 2002.

The other 9 year job they just created is a Media Tzar.
She has absolute power over media, including taking away frequency from
opposition radio and TV stations next Spring.

They changed the laws/constitution to appoint, without the previously required consensus,
the justices of the Constitutional Court, members of the Monetary Council of the Central Bank.

One of their first step was to change the Election Commission to
prevent the opposition from starting public referendums. I do not think
there will be another free and fair election in Hungary for a long time.

Hungary became the first dictatorship in the EU in the new century.
Hungary had the first dictatorship in Europe after WW1, before
Mussolini or Hitler. Let us hope history does not repeat itself.

If you speak Hungarian, you might appreciate this discussion on the country's foremost economics blog: http://eltecon.blog.hu/2010/11/25/argentina_nyugdijrendszer#comments

@M.A.O.D. You should read their campaign materials. "We will protect the private pension funds" was one of the promises. So yes, they did specifally promise this.

Democratically elected does not mean that all rules are changeable and should be tailored to a governments needs Honestly, why was it neccessary to curtail the Constitutional Court's mandate. Only one: it wanted to keep democratic rules upheld. Such as not taxing retroactively (however disrgarceful the golden parachutes may be), such as respecting private property (pensions), equality before law (people staying in the private pension system do not get any state pension, despite paying the 24% tax financing it).

But the real trouble with the "faithful" is that they believe everything the Great Leader says, whatever the facts show. It is a pity that such people have a plurality in Hungary....

@blec: sounds rubbish (provocation?) in the current context. Multinational companies dominate Hungarian markets for 20 years now, but they have nothing to do with the Trianon decision.

Thogh off-topic, what you are writing is basically correct. The Trianon decision could have been 80% more acceptable for each parties and caused much less of a problem on the long run had it detached about 10% less territories from Hungary. At Trinanon, the HUngarian delegation proposed to apply the ethnical approach, ie suggested not to cut territories that are adjacent to what Hungary is today and have a clear Hungarian ethnic majority. As I say, it wouldn't have been more than 5-10% extra, basically the territories you refer to. I think they never had the opportunity to explain this scheme to any of the leading western powers, in particulat to Clemenceau, leader of the French delegation, and ever since a political swearword in Hungary. Again I may be mistaken, but I think the leader of the HU delegation suicided as a result.

Also, in 1868 Hungary adopted one of the most progressive laws across Europe to support all nationalities in its territory, though implementation admittedly failed to follow.

@Seal Driver: yep, the foreigner took 2/3 of Greater Hungary. But I hope you are aware that included the whole of Croatia (which probably had about 2000 enthnic Hungarians living there), Slovakia, Transylvania (autonomous entity until dualism) and greater Banat. I would reduce the 2/3 to probably 20%: Romania, Slovakia and Serbia took parts from Hungaria's proper that should have been Hungarian (Bacska, South Slovakia, Partium). Transylvania is another story: the population was very mixed (even then majority was formed by Romanians) so either way would have been an injustice.

Maybe Hungarians should have worked a little bit towards improving and not destroing the Empire so that every enthnic group enjoyed the same rights.

+1: Someone quoted Orban stating there is no European state risking people's money at stockmarkets. Now that all assets of private pension funds will be transferred to the HU government, I guess the HU state will become a major gambler in stockmarkets dumping all these assets on jittery markets.

Matolcsy is insane. By and large I am supportive of the lines taken by this party aimed at relaunching the economy by increasing local consumption etc, but this guy would fail any entry exam of a proper economic university. With some goodwill I would say he is someone who should not ever be allowed to try implementing his wild theoretical ideas in practice.

Taking money from the banks is I believe right, Hungarian banking sector was one of the most profitable across Europe. Extending this to other sectors was a mistake and created lots of uncertainty.

I was expecting Fidesz to be populist, but at the same time implementing the right economic measures. I have more and more doubts. Dropping Solyom, elected in 2006 as President of Hungary with Fidesz support, was not elegant, electing instead Pal Schmitt, a mickey mouse in comparison, was pathetic. Making laws with retroactive effects is illegal, even if I hate political cronies taking golden parachutes. Limiting the constitutional court's mandate will have serious consequences over the long run, this was THE most respected of the policial institutions in the country. What they do now with the pension funds is again at least counterprodcutive, the country will pay the price in higher returns over its existing debt.

(((the national bank is full of reserves, around 20-25billion euros, which I see no point why not to use PARTLY for refinancning debt. What they get from the pension scheme is 10billion, so exactly this order of magnitude)))

The real problem lies in that Fidesz supporters are trained to BELIEVE. More or less their economic line is that we define our objectives, and we will implement them whatever it takes. If you go to the actual numbers, I did not see any speeches / docs etc which were not contradictory. If anyone points these out the answer is don't bother, we'll get there.

Head of budget committee (just being exterminated by reducing its operational budget by 98%) was interviewed on TV. He said their economic modells suggest that - making VERY optimistic assumptions - in the next 4 years 100.000 jobs can be created, far from the 1 million promised by the government for the next 10 years. Then he was asked if the gov target cannot be reached in the next 6 years. Can any serious economists answer to that?

In fact, Fidesz did not even get 66% of the votes cast in April 2006. The Orbánistas took 52.7% of the ballots in the first round list vote. Thanks to Hungary's Byzantine election system, this was enough for them to secure 67.9% of the seats in parliament.

Fidesz got 42% in 2006, and lost. The "overwhelming" 2010 victory was just 10.7% better than their losing tally four years earlier. A swing of 11% between elections is nothing. Fidesz knows this, which is why Orbán and his minions will rewrite the election laws to ensure that they cannot lose in 2014 or 2018.

i am from hungary! ESCAPE ME!

@dolphinm

It is very nice of you to suggest that the government pays me for the PR. I think I should take it as a compliment. Unfortunately, it is not so. Were I in this position, I would make sure to have a couple of pro-state/pro-gov. coalition PR guys 'guarding' the good name of the state and government, because it is just way too easy at the moment to run smear campaigns and curse them in public without any consequence to the smearers.

I am standing up for their policies, because my influences are Friedrich List, Alexander Hamilton and other statesmen and economists whom were trying to serve their own countries' long term interests and not some crazy theory or particular interests. My country has nothing to gain - in general terms - in refinancing foreign investors' positions within its borders, nor has it any interest in acquiring any further debt. Every crisis is also an opportunity and I sincerely hope that we'll have strong leadership to guide as out of the desert (yes, 'desert', because the last 20 years were nowhere near to what has been 'promised' to the people in the early '90s). For if we keep on listening to what the current opposition (which was in power for the last 8 years and lead the country into this difficult situation) has to say, we'll end up in Africa or South America in economy terms...

Dear dolphinm,

I am not sure that you read what I wrote: at this very moment about 1.7 M people finance the pension system. So the apocalyptical vision that every worker should pay the pension of two guys in retirement is happening right now. I don`understand why do you fear the future, if you don`t fear the presence? You remember me on a castaway, who swims in a fur coat in the arctic sea, for the case he reaches the shore.

@csomba:

Rebuilding the state pension Ponzi scheme (which due to demographic pressure will surely collapse in a few decades), instead of trying to dismantle it, is the right direction. Yeah, of course. Tell me, are the governmental PR jobs that you and M.A.O.D. do well paid, at least?

I agree to the main points of the article. This government is utterly ruthless. The argumentation of Mr. Matolcsy is cynical and provoking.

Even though, I think that the author has missed some important points. The real question is for me not why to stop the pension reform, but much rather why was it started? Take a closer look at Hungary. There are 10 millions inhabitants, but merely 3.8 M jobs. 2.1 million of them are low paid, they hardly result any tax income. Thus, 1.7 million people pay 70% of the tax revenue. I don’t think that that is the right moment to get worried about the pensions in 30 years. This situation cries out for creating jobs, whatever it costs.
Originally, Mr. Matolcsy wanted an American style job creation: through economical growth even at the cost of higher state deficit. The EU refused this plan, and insisted on a budget deficit level, which is much smaller than that of the most European countries. Cutting state cost sounds got, but that would directly hit those “uncompetitive” domestic entrepreneurs, which still provide the majority of the jobs. Thus, to levy the competitive companies, which have been achieving outstanding revenues for the last decades, seem to be a good decision to me. Furthermore, I don't think that Hungary can afford the budget deficit caused by the pension reform, right now.

All in all, I think that the direction of the government is right, even if some foreign investors don’t like it. Nevertheless, the style of the government endangers seriously their success.

The biggest misfortune for Hungary is that the people virtually have only two choices of politcal stance - populism and socialism. The former in the lower-left corner and the latter in the upper-left corner of the Nolan chart.

I feel sad that I now have to compare Fidesz with PiS. This policy sounds quite patchy and will probably do no good in the long run, because its main purpose seems to postpone cuts on the other items of public spending rather than to reform the country's socioeconomic framework and structure. It is descendants of the current generations that will have to pay the rent.

Desperate times, desperate measures.

Whether it is cheaper or more expensive to take out an IMF loan in times of great need and an uncertain economic prospect than temporarily using pension funds' money to deal with the most urgent matters is an important and difficult question; which cannot be properly addressed and answered in such overtly simplistic and clearly biased articles.

Some might have found the governments actions 'against' private pension funds surprising, but one cannot help wondering why? Mr Orban and his party were quite clear on their opposition of private pension funds to begin with (even during their years in opposition), so I guess the memory of the opposition and their fellow supporters (mostly major foreign investors) must work in a 'clinically' selective way...

I hope our foreign 'investors' (whom had been using their positions in our banking and other finance institutions to suck the country dry of capital and have been behaving in an even more 'naughty' fashion ever since the financial crisis commenced), will not mind my saying: the government is doing its best to protect the state and its people and 'the Greeks should not be surprised that the Trojans wish not to employ their 'assistance' in removing the wooden horse' (IMF).

I wish my fellow compatriots a good time calling their own democratically elected government names in a foreign language (I guess Hungarian media and social networking is just not enough and English is better for smearing the country globally), for I am quite sure that 99% of this article's readers are from the Hungarian opposition anyway...

As for the image of Mr György Matolcsy at the heading of this article, I guess it is quite unprofessional for a journal like The Economist to use such biased and 'sophist' methodology to ridicule Mr Matolcsy by using such an unfortunate photo of him. I would suggest using the following link to acquire a more decent one from here: http://www.google.com/images?q=matolcsy+gy%C3%B6rgy&rls=com.microsoft:hu...