National Economy Minister Mihály Varga ordered an investigation of the National Tax and Customs Authority (NAV) as to why it did not inform NAV leader András Tállai of an inquiry being launched in the case brought up by OLAF, which said it suspects officials of embezzling anti-corruption funds, Hungarian online daily index.hu reported on January 25.
1,000 demonstrate against ‘state of terror emergency’ law
Former Economics Minister Lajos Bokros speaks as approximately 1,000 people demonstrate on January 24 against the government’s plan to change the fundamental law so that it can declare a special ‘state of terror emergency’. Bokros and his Movement for a Modern Hungary (MoMa) opposition party organized the demonstration. The party said it believes that this new state of emergency law is dangerous in that it could authorize the government to introduce curfews, takeover the media, limit ownership rights and suspend other laws, according to reports. Hungary’s governing Fidesz party held negotiations with other parties in the Parliament on January 12 about the proposed changes. Although the opposition Socialists did not attend the negotiations, green party LMP said it objected to the proposal raised by Fidesz, while the far-right radical Jobbik said it agreed with some parts of the proposal. (Photo: MTI/Zsolt Szigetváry)
National Economy Minister Mihály Varga ordered an investigation of the National Tax and Customs Authority (NAV) as to why it did not inform NAV leader András Tállai of an inquiry being launched in the case brought up by OLAF, which said it suspects officials of embezzling anti-corruption funds, Hungarian online daily index.hu reported on January 25. The office in charge of coordinating with OLAF operates within NAV, and yet Tállai was not informed about the investigation under the jurisdiction of Chief Prosecutor Péter Polt, a press statement issued by the ministry says. The online daily said Varga has called for an immediate and expedient investigation of the issue. During its four-year investigation, OLAF said the office found fraudulent invoices and cash payments made by a consultant subcontracting for the former national development agency NFÜ, hvg.hu reported on Sunday. OLAF said the EU provided the money that was allegedly mishandled to monitor whether public procurement procedures were carried out in a legal manner. According to OLAF, the case may involve top Hungarian officials responsible for handling EU funds.
The government’s planned reorganization or phasing out of more than 70 state-supported institutions and centrally financed agencies in “the spirit of reducing bureaucracy” could lead to 20% layoffs this year and another 10% next year, affecting approximately 6,000 individuals employed by the state, according to a draft proposal index.hu acquired from unnamed sources. Cabinet Chief János Lázár announced on January 21 that the government is considering terminating some 72-73 institutions and not providing a legal successor. According to index.hu, although the final decision was to be made by Hungary’s Prime Minister Viktor Orbán, Lázár has already come up with a strict proposal that would give him more leverage during negotiations. The first governmental meeting on the topic is scheduled for February 10, index.hu reported. According to the daily, by the end of February at the latest, the decision regarding all institutions will be reached. Although ministers involved in the fate of the 73 institutions were surprised when Lázár mentioned the planned move last week, top officials were convinced not all institutions mentioned by Lázár would be closed, index.hu reported, citing unnamed sources. The daily added that many of these institutions are expected to be reorganized and will see layoffs.
The Hungarian Banking Association filed a court appeal against the HUF 4 billion fine the country’s Competition Office (GVH) issued the association on charges of cartel activity, Levente Kovács, chief secretary of the professional body, said on January 25, according to Hungarian news agency MTI. The association is asking the court to change the competition office’s decision and to declare that no infringement of rules and regulations took place. The association also asked the court to suspend the payment of the fine. The competition office fined the Hungarian Banking Association HUF 4 bln and the International Banker Training Center a further HUF 15 million for charges of cartel activity on January 12. The competition office fined the association for a database it operated with the involvement of the training center, allowing banks to share business secrets for a period of 12 years, which GVH considers provided too much information, and violated both Hungarian and European Union competition rules. When the competition office’s decision was published, the association said it would appeal, “using all available domestic and international legal recourse”, MTI reported on January 26. The association called the decision “legally and professionally incomprehensible” and said it was based on “mistaken assumptions and conclusions that disregard the operation of market competition”, MTI reported.
The Hungarian National Chamber of Agriculture (NAK) and the Croatian Chamber of Economy (CCE) signed a cooperation agreement on January 21, NAK said. The agreement aims to strengthen Hungarian-Croatian trade and economic ties and further develop the bilateral relationship in the areas of agriculture, food industry and forestry. The agreement covers organizing business forums and providing recommendations for fairs, exhibitions, conferences, seminars and other events.
Official: Russia’s financial problems will not impact Paks deal
Russia’s financial difficulties, which are expected to result in the country cancelling new loans according to reports, will not affect its deal with Hungary on the upgrade of the country’s sole nuclear power plant in Paks, government commissioner for the upgrade Attila Aszódi said on January 21, Hungarian news agency MTI reported. During an interview on state-owned all-news channel M1, Aszódi reportedly said that Russia’s finance ministry issued a statement, saying that funding for the project had already been set-aside in 2014. Aszódi noted that the Russian general contractor for the project would choose the sub-contractors, adding that the sides had agreed that 40% would comprise companies already active in Hungary, MTI reported. “The budget is strained, more than strained. I think we are in a situation where we are forced to take a break from issuing new loans,” Deputy Finance Minister Sergei Storchak was quoted by Russian news agency Interfax as saying on January 18. This statement, coupled with the recent announcement that Hungary’s Prime Minister Viktor Orbán has been invited to meet Russia’s President Vladimir Putin in Moscow next month, and the news that American firm GE was asked if it could be involved in the project, led some to suggest that the current plan may be in jeopardy. Under a deal announced about two years ago, while Orbán was in Moscow, Russian nuclear firm Rosatom was to build two new reactors at the Paks plant for €12.5 billion, with €10 bln in financing provided by the Russian state. That deal was awarded without an open bidding process. The European Commission is currently investigating the deal with Rosatom over questions about its competitiveness. EC officials have said that, since it might not be profitable from a market standpoint, the Paks deal could amount to state aid. Hungarian officials have denied this charge.
The government could begin drafting a new law by spring that would entail the introduction of national alcohol stores, similar to those used for the sale of tobacco in Hungary, Hungarian weekly Figyelő wrote, citing unnamed sources. Figyelő anticipates the potential reorganization of the country’s alcohol market would cause one of the largest political conflicts of the coming months. The change is also likely to stir the waters within the governing Fidesz party, the weekly writes. Hungarian online daily index.hu said the website of the Hungarian Parliament revealed that the government is scheduled to amend laws on excise duty by June, and given that there is an excise duty on alcoholic beverages, this announcement could provide further evidence to support Figyelőʼs claim. The Hungarian press has already spoken about the possibility of the Hungarian government introducing a nationalized store structure for alcoholic beverages as it did for tobacco last year; the government, however, has denied such claims.
Commenting on recent discussions about Hungary’s mandatory military service, Prime Minister Viktor Orbán said conscription would not be reinstated in Hungary, Hungarian news agency MTI reported on January 18. In response to a query by state-owned all-news channel M1, the prime minister said that the reintroduction of mandatory military service is not on the parliament’s agenda and it is not willing to readdress the issue, MTI reported. According to House Speaker László Kövér, however, abolishing mandatory military service in Hungary was a “catastrophic mistake”, online daily index.hu reported, citing an interview the speaker made with local daily Új Néplap. Kövér reportedly said that due to terrorism and “illegal migration” it is possible that military service will be reinstated in the “not too distant future”. In response to the channel’s question on whether there was a disagreement within the party on the issue, Orbán said there was no such disagreement, as he believes Kövér “was not speaking about this matter”. Hungary does not need to reinstate conscription, György Bakondi, chief security advisor to the Prime Minister, said on January 11, commenting on news that the Swedish Interior Minister was planning such measures.
Taxi drivers demonstrating against the Hungarian operations of U.S.-based ride-sharing service Uber concluded January 21, after State Secretary for Public Administration Gábor Czepek and State Secretary for Public Transport László Tasó met with representatives to negotiate on the issue, according to reports. “At the end of the talks, the organizers made a promise to end their protests, which have caused traffic restrictions,” MTI reported, citing a statement issued by the National Development Ministry. The ministry reportedly stressed that the government stands on the side of tax paying taxi drivers who abide by the relevant rules, and taxi services may be provided only according to identical conditions laid down in a government decree. The ministry invited taxi drivers to send proposals for the possible changes, and it is scheduled to continue talks next week, MTI reported, although it noted that the government had earlier said that it would not negotiate with Uber on the issue. Hungary’s Prime Minister Viktor Orbán said in his fortnightly interview on state-owned Kossuth radio that “the debate of taxi drivers and Uber is extraordinarily exciting”, as it is interesting to see how modern technology affects traditional business models. The prime minister said people rightfully expect the government to create regulations that apply to everyone, noting that taxi drivers have stricter regulations than any other transport service. He promised that lawmakers would make changes to regulations that will apply to all players in the market, Hungarian online daily origo.hu reported. Taxi drivers demonstrated for four days in Budapest’s busiest junctions, demanding that the government shut down Uber, as the protestors claim the service is illegal and considerably fewer regulations apply to Uber drivers than to taxi drivers, enabling Uber to offer lower prices.
PM visits Mongolia
Mongolian President Tsakhiagiin Elbegdorj, right, speaks to Hungarian Prime Minister Viktor Orbán in Ulanbaatar, Mongolia, on January 26. Hungarian and Mongolian businesses have signed contracts valued at approximately $40 million during a visit by Prime Minister Orbán to Mongolia, Hungarian Minister of Foreign Affairs and Trade Péter Szijjártó said on January 25, according to Hungarian news agency MTI. Speaking to journalists in Ulaanbaatar, Szijjártó said Hungarian companies will renovate the countryʼs largest biopharma firm, which produces veterinary vaccines and was built by Hungarian companies several decades earlier, MTI reported. Orbán said at the business forum that both Hungary and Mongolia are among the “successful nations of the world” and the two countries are “facing prosperous futures”, MTI reported. Mongolia’s Prime Minister Chimed Saikhanbileg said his country is rich in mineral resources and Hungary has the necessary technologies, therefore the cooperation of the two countries could be beneficial, MTI added.
The registry court has declined a request by Megapolis Media Zrt. – a company owned by Károly Fonyó – to approve its acquisition of TV2 Media Group Holdings Kft., confirming Yvonne Dederick and Zsolt Simon as the rightful owners at the time they sold TV2, Hungary’s second largest commercial channel, to Andrew G. Vajna, government commissioner for the film industry, according to reports. In a press statement issued on January 25, Dederick and Simon said Budapest’s registry court declined Fonyóʼs request to register his ownership of the company in the first instance, and announced that Magyar Broadcasting Co. Kft., owned by Vajna, is the official owner of the channel. Since Vajna announced his purchase of the channel in mid-October, Fonyó, who is a partner of media mogul Lajos Simicska, has claimed to be the legal owner. He continued to fight last year’s decision by the Competition Authority to clear Vajna’s purchase. Fonyóʼs partner Simicska owns a media empire with several outlets, which provided the government with friendly news coverage up until last year. In February 2015, Simicska had a public falling out with his long-time ally, Prime Minister Viktor Orbán, and since then, Simicska has been losing very lucrative contracts with officialdom. Vajna, who has established a secure position for himself in the government and subsequently won exclusive tenders to run casinos in Hungary, is expected to run more government friendly news coverage, although he insists that his station will stress interesting content over political loyalty.
The municipal council of Budapest on January 26 voted to support the preliminary site choices presented in the application to host the summer Olympic Games in the capital in 2024, Hungarian news agency MTI reported on January 27. The event would be spread across the capital at seven key sites from Óbuda Island in the north of the city to the area near the foot of Rákóczi Bridge on the Pest side, in southern Budapest, MTI added. It was reported in September that Budapest will compete against Hamburg, Los Angeles, Paris and Rome to host the 2024 Olympic Games. A referendum was initiated to halt Budapest’s 2024 Olympics bid, which was challenged by an unnamed person who appealed to block the referendum. This appeal was accepted by the Supreme Court of Hungary (Curia).
The Hungarian government is planning to levy a tax on big retailers, as an attempt to spread the public burden more evenly among businesses, Government Commissioner for Trade Policy Kristóf Szatmáry said in late January. During an interview with Hungarian daily Magyar Idők, the commissioner said that if the outcome of the Polish model of the retail tax is favorable, Hungary could choose to follow the same principle and introduce a new tax or fee on big retailers that would help level the playing field, Hungarian news agency MTI reported on January 27. Polandʼs finance ministry has proposed a progressive tax on retailers with monthly sales of more than PLN 1.5 million, or a little more than HUF 100 mln, MTI said. Szatmáry said that the Hungarian government is currently waiting for Brusselʼs reaction to Polish tax, following the rolling back on an increase in the supermarket oversight fee in Hungary after the European Commission expressed its objections. Commenting on the progressive rate structure of the oversight fee, between 0-6%, the EC said it “provides companies with a low turnover a selective advantage over their competitors, in breach of EU state aid rules.”
Hungary is not likely to experience significant fiscal stress in the short-term, but there could be medium risks in the medium-term, according to the “2015 Fiscal Sustainability Report” published by the European Commission on January 26. The EC report made note of net public debt as well as the net international investment position as posing potential short-term challenges. It also noted that the share of debt denominated in foreign currency, the share of debt owned by foreign investors and the share of non-performing loans in the banking sector could cause vulnerability in the short-term. These risks and currency fluctuations, however, could be mitigated by the conversion of FX retail loans into forint loans among other factors, the report added. “Medium risks appear, on the contrary, in the medium- term from a debt sustainability analysis due to the still moderately high stock of debt at the end of projections (2026), and the sensitivity to possible shocks to nominal growth, interest rates and the government primary balance,” according to the EC. Projections regarding low medium-term risks were caused in large part by positive projected developments on aging. “Overall, Hungary appears to face medium fiscal sustainability risks in the medium-term,” the report noted, adding that there appeared to be no sustainability risks for Hungary in the long-term.