A triumph of failed ideas European models of capitalism in ... - Journal

Hungary’s full-blown malaise.................................................................................................................................................................The new round of the crisis has used up the gains of the rebalancingefforts of the 2006–2008 period and sent the economy into a newdecline. This negative turn completely undermined the politicalcredibility of the government and of MSZP in particular, which wasalready in a deep legitimacy crisis due to the economic U-turn after the2006 election and the leaked ‘we were lying day and night’ speech.Finally, the outbreak of a series of corruption scandals further erodedpublic support for MSZP. The relentless opposition of FIDESZ alsohindered the government in making it clear that some of the reformswere necessary and not merely government malevolence.The 2010 elections were won by FIDESZ by an overwhelming majority,while Jobbik (from the party’s original name Jobboldali Ifjúsági Közösségor Right-wing Youth Association), the far right party, won 16.7 per centof the votes with an economic programme directed against the marketeconomy. The MSZP, which four years previously had easily won theelections, gained less than 20 per cent of the votes.3. The crisis and the ‘conservative revolution’The misguided economic policy of the early 2000s also sent false signalsto the population. It seemed that sustainable and rapid economicexpansion, the rapid increase of living standards and the ongoing ‘real’harmonisation with more established EU member states would ensurean ever growing income stream for Hungary. The first Orbán governmentof 1998–2002 initiated a lavish mortgage subsidy programme to boostthe construction industry after it had decided to boost the economy byexpanding government spending in 2000. In 2001, it allowed banks tooffer foreign currency mortgages and loans for Hungarian citizens.Austrian banks pioneered this technique in Hungary and had begun tooffer Swiss franc-based loans to Hungarian citizens to gain market share.Until 2003, the share of Swiss franc-based loans was minimal comparedto forint-based loans. Nonetheless, around 2003, four factors changedthe state of play. After the elections, the Hungarian National Bank(MNB) initiated a policy of raising the base interest rate of the Hungarianforint in response to the government’s public spending-based expansionaryprogramme in order to reduce inflationary pressures. As a consequence,the price of Hungarian forint-based loans shot up, while the value of theforint strengthened against the euro and the Swiss franc. Additionally,A triumph of failed ideas – European models of capitalism in the crisis 145