Op-Ed: Will Hungary prove austerity wrong?

2014-03-28 15:14:36
Matthew Turner
Digital Journal
The only questions that remains is whether the Budapest model can mark the beginning of a larger paradigm shift in Europe.

„Through its economic policies, it seems Hungary has managed to strike a balance between pleasing European leaders and the electorate, without resorting to the type of populism that is running amok in several core countries. According to the average of five polls, the ruling FIDESZ coalition is credited with an average of 49% backing among decided voters, compared with just 26% for the opposition coalition.

This is hardly surprising. Opposition parties agreed on a common platform only a few months ago, too late in the electoral process to effectively change its outcome. Worse, Gabor Simon, the deputy head of the biggest opposition party, was arrested earlier this month after failing to explain the origins of a substantial bank account he held in Austria. The account contained the hefty sum of €770,000.

Financial strategists expect Viktor Orbán to win by a landslide. According to Phoenix Kalen and Benoit Anne of the Societe Generale, quoted by Bloomberg, »our base-case scenario (for Hungary) is now a supermajority Fidesz win«.

So what’s in store next for Budapest? In a speech held in March, Orbán outlined his plans for structurally changing the Hungarian economy, gearing it towards becoming the most industrialized nation in the Union. This is not a far off goal, since the industrial sector already contributes to 23% of GDP, compared to 26% for Germany. To achieve this, Orbán needs to increase the competitiveness of the country’s exports, a feat that will be fulfilled by further reducing electricity prices for consumers and industrial producers alike.

But the real snippet of his speech was that Hungary shouldn’t copy the economic policy staples of the core, »developed« European Union states. This statement echoes a deeper truth: that each country should search for its own way, develop a path that best suits its geography, comparative advantage and economic potential. Even if Orbán’s policies are deemed unorthodox by some, as long as they deliver healthy results while staying inside the macroeconomic targets agreed upon on European level, can we really insist they be changed?

The only questions that remains is whether the Budapest model can mark the beginning of a larger paradigm shift in Europe, with pundits and markets seeming more and more ready to accept non-austerity driven policies.”
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