The German Love for Hungary
Photo by Aleks/Shutterstock.com
The German corporate love affair with Hungary continues unabated. There are historical links in play, of course (Balaton was the meeting place for East and West Germans separated by the Wall), but the simple truth is that the two economies are very deeply connected.
Hungary, as Minister of Foreign Affairs and Trade Péter Szijjártó is always pointing out, has an extremely open economy. The country has worked hard to spread its commercial links so it is less dependent on any one key partnership, with the “Opening to the East” perhaps the most high profile example. Think of all those official visits to Asia, and the welcoming of numerous Oriental dignitaries here.
But for all that, most of Hungary’s business is still done with the European Union. According to europa.eu, the EU’s official website, intra-EU trade accounts for 81% of Hungary’s exports, by far the biggest share of which (28%) goes to Germany. In terms of imports, 78% come from EU countries (again, the lion’s share, 26%, from Germany).
Much, though not all, of that business is in manufacturing, with the automotive sector the key driver (if you will excuse the pun). When a German carmaker based in Hungary slackens off production, either because of a slump in sales or a change between models, it doesn’t take long for the GDP growth figures to take a hit.
This is not all one way traffic, though. It was noticeable that one of the German experts we spoke to for our Country Focus waned that this year’s Audi Hungaria strike “must not” happen again. It shocked Germans used to the flexibility of the Hungarian workforce. In these days of “just in time” manufacturing, it also stopped production in Audi’s Ingolstadt HQ when it ran out of parts from Győr.
But that aside, German companies seem very happy here. Indeed, according to the annual survey by the German-Hungarian Chamber of Commerce and Industry, some 84% of its members say they would reinvest.
The economic relationship is clearly sound. The political friendship has not fared so well, however. There is a slight disconnect here: the role Hungary played in helping dismantle the Iron Curtain built political trust between the leaders of the two countries; money and German knowhow followed that trust.
There does not appear to be much trust today between Prime Minister Viktor Orbán and Chancellor Angela Merkel, whose views on the future of the EU seem poles apart. That said, Fidesz MEPs did back Ursula von der Leyen, a close Merkel ally, for the role of incoming President of the European Commission. Orbán was due to meet von der Leyen after we went to print but before we published, and Merkel has already said she will stand down in 2021. Perhaps the political relationship will improve then.
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This is the last issue of the print edition of the Budapest Business Journal for a month. As we have done every summer for the past 27 years, the paper takes a break, although the website will continue to be updated and our morning newsletters will go out as usual. The next printed issue will be published on September 6.
Whether you do “the Hungarian thing” and head for a dip in Lake Balaton, or choose to explore some other part of the country, whether you travel somewhere more exotic altogether, or go back to wherever home may be, we wish you a relaxed and relaxing holiday, and look forward to reconnecting with you all, batteries suitably recharged, in the fall.
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