Budapest, 23 January 2017
We have heard English and Chinese spoken here today, so the time has come for a presentation in Hungarian.
Honourable Governor, Honoured Conference Guests,
I thought a great deal about whether to accept the invitation to this conference. There was no question that in itself the invitation was an hszeonour, but recent events in world politics – some of which have already been mentioned here, such as Brexit, a new US president, and all their attendant consequences – are of such wide-ranging impact that one cannot speak meaningfully about the future without referring to their political significance. This approach comes with risks, and indeed it may steer the conference away from its customary harmony. So this was what I had to consider. But eventually I accepted the invitation. Firstly, this was because here in Hungary ever since the nineteen-eighties we have been following Mr. Larosière’s thoughts; and so we are here with a true legend, with whom it is an honour simply to share the same table. Also here is Mr. Tian Guoli, who has been our friend for many years, but is a particular friend of ours in the policy of eastward opening. In our regular meetings he reduces our over-inflated sense of European pride to the correct size by supplying us with figures such as those you have also heard just now. So we are also grateful to him, and today it is an honour to be in his company.
Furthermore, China’s rise draws our attention here, in Europe, to a psychological problem. There is a saying which goes roughly like this: “whatever exists is possible”. Europeans do not understand this – at least they do not understand it when it comes to China. Instead of trying to learn from what is happening in China, we invest a considerable amount of energy in explaining that what exists in China is not really there. Or if it is, then it is only temporary and without foundations: this pace cannot be sustained, we say, and the internal tensions in Chinese society are such that eventually the whole thing will fail politically. So instead of learning, and understanding that whatever exists is possible, we want to explain to ourselves that this is not really the case. This is because everything that exists in China and is possible pushes us further down the rankings; and instead of accepting this fact and wanting to learn, we are busy trying to prove the opposite. Therefore meeting Chairman Guoli can perhaps shield us Hungarians from this European problem.
Ladies and Gentlemen,
The ultimate reason I finally accepted the invitation, however, was Professor Lámfalussy himself. This is because, as M. Larosière has already pointed out, today we are remembering a great man, who was a great friend of our country – and continued to be, even after the communists forced him to flee Hungary and escape as far as Belgium. Despite this, he remained a Hungarian and a good friend of Hungary throughout. He was able to distinguish between the political regime and his homeland – and this is a virtue which we should honour. He was also a good man, as you may have heard. In our culture there is a core principle: “…on earth peace, good will toward men”; Professor Lámfalussy was a man of good will, and therefore he received peace, love and respect from us all in return. If this were not enough in itself, I should also tell you that he was a colleague of mine. Forgive me this boast, but he worked with me as an advisor, and he was my supervisor, in an intellectual sense. He regularly warned me against my youthful excesses with these words of caution: “This will cause trouble, Viktor”. He was also our emissary and scrutineer in the Western financial world, so we owe him nothing but gratitude. We can also learn from him, and it is well worth taking certain aspects from his life as examples for ours. He was an open-minded man, and this has special significance in Western democracy. As Hungarians – or perhaps we can also say as Central Europeans – our mind-set is that good democracy is based on reasoning; we therefore support such a vision of democracy. This, however, requires open-minded people: it requires an open spirit and a forthright character. And Professor Lámfalussy had both an open spirit and a forthright character. We could say that he was one of us, and he embodied the Hungarian people’s best traits. I had the chance to learn from him that in the end it is always character that counts – these may well have been his very words. There are difficult intellectual questions which must be considered, and for which a brain is very important. Incidentally, you can even buy brains – especially if you are prime minister – as you can hire the smartest people. And there you are: you have a brain. That is how simple it is in our line of business – easier than in other jobs. So you have the brain, and you have the difficult questions, and you have the intellectual challenge. But at the end of the day, Professor Lámfalussy said, when one has to make a decision it always comes down to one’s character: “So Dear Viktor”, he continued, “ once a year you should go out for a week-long walk in the wilderness, just like I do”. And this was the case: as long as his physical condition permitted, the dear Professor always kept to this habit. But the most important thing I learnt from him was the result of a provocative situation. The more mature among you may remember that at the beginning of the nineteen-nineties there were fierce – almost cut-throat – ideological battles about what the character of the post-communist political system should be: whether it should be liberal, Christian, or whatever. These were difficult times, full of provocation. On one occasion when the Professor, who was widely known to be a Christian, came home to Hungary, he could not have foreseen that an ill-mannered rude journalist would ask him if he was a Christian. This was a flagrant breach of the Christian rule that we don’t ask each other such a question. Nevertheless he was asked this question, and I think his answer was the right one, and one which I have kept close to my heart ever since. With an air of perfect calm he said: “I try, but I don’t always succeed”.
Ladies and Gentlemen,
These are the memories, therefore, which I believe it is fitting to evoke at a Lámfalussy Conference. I do not believe, however, that these are the reason that this award has been named after Sándor Lámfalussy. Perhaps a more likely explanation is that in Hungary he is seen as the father of the euro. Once, when I nominated him for a state decoration, my supporting argument was that his global fame was not only known about in Hungary, but also around the world. Perhaps our guests do not quite understand what I was getting at, but I think we Hungarians understand. He was the Hungarian who was not only called “world-famous” in Hungary, and this was probably because of the role he played in the creation of the euro. I am not sure he would have agreed that this award should be named after him, because he did not see himself as the father of the euro. When I spoke to him about this, he said that naturally a great variety of work had to be done, but for the adoption of the euro, the skills of an economist were not the primary need; these were helpful, of course, but a strong political will was more important. Therefore, he said, one should not seek the father – or founders – of the euro among economists, but among the politicians of the time; and in this department, France and Germany were particularly distinguished. I asked him how he found the courage to tell politicians that they should create a monetary union without a fiscal and political union to back it up: whether he felt the risks involved were too great. His answer shocked me, because he said that in the end politicians will realise that it is necessary to create a fiscal and political union to back up the monetary union. This shocked me, because it is rather risky to entrust an enterprise of such historic proportions to the wisdom of politicians. Thus far, the intervening period has not proved the Professor right: it has rather vindicated my – or our – doubts. In essence, President Larosière’s presentation was also centred on this doubt: whether European decision-makers will have the wisdom to make the decisions necessary for the survival of monetary union. I do not know the answer to this question – all I know is that this is the biggest question for the future, the biggest question for the future of Europe. The conclusion I can draw from all this is the following: we also learnt from Professor Lámfalussy that the basis of successful economic policy is politics, and its stability.
Ladies and Gentlemen,
A pre-condition for a strong economy – and we also learnt this from the Professor – is that financial and political actors should pull the cart in the same direction. If we look at the recent history of the National Bank of Hungary, we can see that time has vindicated this view: we can reasonably conclude that when the National Bank of Hungary was in opposition to the Government, politics and finance were heading in two distinctly different directions. We can remember this, as it was not so long ago, and the result was that Hungary went through a great deal of unnecessary suffering. Since the national bank stopped being in opposition and started seeking cooperation with the political leadership of the day we have observed economic growth: spectacular economic growth, which has also been mentioned by previous speakers.
Ladies and Gentlemen,
I should now talk about the situation since 2008, and what, if I understood correctly, our French guest referred to as the “wake-up call” we received. Since the 2008 financial crisis the world economy and world politics have experienced a paradigm change, and today the success of European countries is measured by how rapidly they have been able to implement this change: which ones responded immediately, which ones reacted more slowly, and which ones are still only in the process of waking up. The message of this change of paradigm – a somewhat pretentious term, of course, but it makes sense – is that the world had an old system, an old paradigm. Within this we framed our thoughts, and within this we had to find a place for them. And – to use another elegant linguistic innovation – after 1990 this paradigm was called “the unipolar world”. This was a world order with a single centre, a single centre of power; and we lived in this world for almost twenty years. The world’s lines of force were arranged in a system around a single centre of power. The essence of the new paradigm is that there are multiple centres; I would rather not use the term “multiple poles”, because in the Hungarian language that mean two: a northern and a southern. That is not the same as what I am talking about, because here there will be more than two poles, and it is perhaps more accurate to use the term “multiple centres”: multiple centres of power. A necessary consequence of this change of paradigm is that there is no consensus about it: among European political leaders today there is no consensus on whether it even exists, and whether the crisis afflicting Europe after 2008 is a cyclical on or a structural one related to competitiveness. If you were to interview the 27 EU prime ministers, you would see that there is no consensus on this. In other words, a necessary concomitant of any change of paradigm – today, just as in the past – is that the followers of the old order must engage in fierce debate with the followers of the new order. We Hungarians could talk about this at length, in relation to our economic policy since 2010.
Ladies and Gentlemen,
When one speaks at a conference such as this, the first question to be straightforwardly and openly asked is how to interpret the global situation in which the conference itself is taking place. And a corresponding attempt must be made to answer it this question. In addition to the economic figures which we heard earlier, the decisive element is, of course, the new president of the world’s largest military power, the United States, his inauguration, and the policies that he is proposing. I have been listening to analysts and commentators: the followers of the old paradigm, if you like. Despite the fact that we have had Brexit, this US presidential election result and a referendum in Italy, they continually try to convince us that there is less to this than meets the eye, and that you cannot possibly bring about the sort of changes that the US president is aiming for, or that we usually permit US presidents to realise. I would like to point out that this is foolish. Whatever exists is possible – and this is true not only of China, but also of the United States. Naturally it is still too early to gauge the changes – their extent and magnitude – which the current shift in the character of the Western world will bring about. I would advise all of us – myself included – to exercise caution, but I think that last week we heard a key sentence, and we must take this key phrase seriously. If we understand this correctly, we shall understand everything that follows. This key phrase is not the one quoted by most people – “America First” – but this: “it is the right of all nations to put their own interests first”. This represents a great change. These words could not have come from an earlier US president, but now they have come from this president. This means that the era of multilateralism is at an end, and the era of bilateral relations is upon us. For us this is good news, because it is an unnatural state of affairs when, influenced by external pressure, one dare not state that one’s own country comes first when governing, making decisions, or considering what the central bank should do. This unnatural state of affairs is at an end, and we have been given permission, if you like, from the world’s highest secular position, that we, too, can place our own interests first. This is a great thing, it is a great freedom and a great gift.
Ladies and Gentlemen,
I am convinced that the distinction between unipolar and multipolar systems necessarily means that in the world economy a single pole offers a single model, while multiple poles offer multiple models. One can see that it is very difficult to arrange a number of different models into a single system with multilateral agreements, and therefore new opportunities will emerge for bilateral agreements – including in military policy and economic policy issues. I am convinced about this. It follows that there is no single “one size fits all” economic policy which would be equally successful for nations which are extremely diverse. In fact today the world economy is growing – or at least this is my understanding, or the conclusion I drew from our Chinese speaker’s presentation – and economic growth is being sustained around the world precisely because there are different models, and because there are different approaches to economic policy. If China were to imitate us, I find it hard to believe that the world economy would grow at its current rate. Consequently, we should welcome the rise of new poles or new centres, rather than see them as a threat. This is a decisive issue, because logically today’s world leaders –we westerners, I mean – might perceive this as a threat, as a loss of status, and as a risk. If this is how we relate to the rise of multiple new centres, however, I am convinced that we shall doom ourselves to failure.
A world order with multiple centres has a great many inherent opportunities to offer. Here is China, which we’ve already spoken about. We can clearly conclude that it is not a comet, but a fixed star, that will have a determining role in the world economy for many decades at least. To bring up a light issue – an easy, safe topic – here is Russia. We have Russia, which – let us be honest – has survived Western attempts to quarantine it and attempts at regime change. It has survived low oil prices, it has survived sanctions, and it has survived the free, non-partisan, internal activities of NGOs – which can hardly be described as pro-government, and which obviously came about without external interference! It has survived all that, and there it is. It is therefore unreasonable – and particularly unreasonable in Europe – to ignore the power and the opportunity that Russia represents. This would naturally require more European self-confidence, and we should be able to honestly claim – but probably the reason we don’t is because it’s not true – that we Europeans can defend ourselves militarily, without external assistance. But we don’t have the courage to say that, because it’s not true. I would like to come back to this later, in connection with something one of our other speakers said. For now I would just like to observe – and here I apologise for interfering in France’s internal affairs – that we have good reason to welcome the fact that a man who is visiting Berlin today or tomorrow, and who I hope will be the next President of the French Republic, has stated that the most important issue he will raise in Berlin will be that of a common European defence alliance. This would be something that could open the way to self-confidence; and after self-confidence, to the ability to engage in talks as equal partners with everyone – including Russia. Perhaps this is not why we’re here today, but we have not even mentioned India – which still has plenty in reserve, and which is performing at the highest global level in areas which will have a major impact on the world economy over the next twenty years.
Ladies and Gentlemen,
New centres are therefore emerging, and long-forgotten trade routes are coming back to life. With due respect we should mention that in 2013 it was President Xi Jinping who launched the One Belt, One Road initiative, which was the first in a series which I believe will follow in the period ahead. In a presentation such as this the second question we should touch upon is how Europe is perceived from a Central European perspective. The answer can be summed up in a single utterance: we can barely recognise it.
Europe is struggling with four major crises at once, and recently it has been unable to respond to any of them satisfactorily. It has a growth crisis – or, more precisely, a competitiveness crisis; it has a demographic crisis; it has a security or terrorism crisis; and it has a foreign policy crisis, illustrated by the simple fact that we are unable to exert any influence whatsoever over events in the regions that directly affect our lives here. Here we could mention Syria, but equally we could mention Ukraine. This is a foreign policy crisis.
Europe is drowning in debt. Perhaps there is no need for me to quote the figures here, as you know them better than I do: the countries which form the European Union generate a deficit of some one thousand million euros every single day. As we’ve heard from Mr. Larosière, economic growth is slower than slow: over the past decade it has averaged just over one per cent annually, with the eurozone’s rate being under one per cent; and since 2008 six million jobs have disappeared from the European labour market as a whole. Today I increasingly hear voices of resignation, as if experts – but decision-makers may slowly follow suit as well – were saying that also in the decade ahead European growth will barely exceed one – or perhaps two – per cent. Europe is now nowhere near as safe as it once was. Living alongside us are hundreds of thousands of people from outside, but we do not know what they are doing here, why they came here, or exactly what they want. The following may sound uncharitable, but it is true all the same, and, rather than imagining what we would like to see, we must face up to a harsh reality. We must face up to the harsh reality that wherever immigrants have settled down in Europe in large numbers, crime rates have increased immediately: not later, but immediately. And we must take account of the consequences. In summary, the European continent is becoming ever weaker: it has been reduced from a global player to a regional player, and soon it will be forced to struggle even for the status of a regional player.
Ladies and Gentlemen,
In a presentation like this – and in particular when we talk about Lámfalussy and democracy based on open argument – we cannot avoid the question of how this could happen. Why is this so? There are as many answers as there are people. For my part, I do not demand that anyone accepts my answer as the only possible one – I would rather just contribute to the debate. I am convinced that Europe set some itself ambitious goals, and has failed to achieve a single one of them. I was Prime Minister for the first time back in 1998, when we had to make preparations for EU accession talks. So I have the advantage – or disadvantage – of remembering those talks with the heads of government at that time. Chirac and Kohl sat with us at the negotiating table, and we made grand plans for the euro to become the world’s second reserve currency, alongside the dollar. That plan has failed. We said that we should create an independent European security policy. That plan has also failed. And we then set out to create a Eurasian economic zone, which, we said, should extend all the way from Lisbon to Vladivostok. That is now completely off the agenda, so that plan has failed as well. So in trying to identify the reasons I am not talking about some general decline, about which we would become involved in a never-ending debate on civilisation, but about the failure to achieve specific goals.
My explanation is that Brussels has become enslaved to a utopia, and the name of that utopia is a supranational Europe. Recently we have discovered that this is an illusion. There is no European people: there are only European peoples. And if there is no European people, you cannot build a system of European institutions on the foundations of such a non-existent European people. You have to accept the fact that in Europe there are nations, and a pan-European system can only be built upon the policies, intentions, will and cooperation of the nations. We got all this wrong. In recent times this distinction has been lost. Perhaps those with more experience than me can back up my view that if we look to the European continent’s successful periods, we can see that Europe was never strong – or at least, not over an extended period – when it was directed from a single centre of power. We were strong when multiple centres of power existed within Europe. And today it is the policy of Brussels to transform these centres of power into a single centre of power. This, I believe, answers the question of how we got to where we are today.
And now, Ladies and Gentlemen, we must ask one last question. If things stand as they do, how can we make Europe competitive again? Mr. Larosière gave us an appealing and ambitious answer to this question. For my part, I shall also try to give an answer: a humble one, at the level of political reality. In my view, for Europe to be made competitive it must first abandon the illusion of federalism. We have been walking on the edge of a precipice, the ground under our feet has run out, and the world’s fifth largest economy has left the European Union. This process will not stop if we carry on like this. So we must abandon the illusion of federalism. From this it follows that Europe itself must also be made multipolar. If you look at what the Visegrád countries are doing in this regard, you can see that we have set exactly that goal for ourselves. As a region the Visegrád countries want to become one of the poles of the European Union; we want to become a strong region that also competes with Europe’s other regions or poles, and that increasingly contributes to Europe’s overall performance.
Another milestone on the road to competitiveness is for us Europeans to enter into new types of cooperation. First of all we should seek a new arrangement with the US, instead of the doomed free trade agreement. There is no point in persisting with that: it’s dead, it doesn’t exist. Perhaps we shouldn’t discard all the results of the work done so far, but nonetheless that agreement will not come into being. So instead we must enter into something different. We should find the appropriate form in which the United States and Europe can come to an agreement. We should develop and conclude an agreement. We should seek out opportunities and come to agreements with China, we should place the issue of Russia back on the agenda, and we should try to engage in a process which today can be described as a competition for concluding agreements – a competition which in the past we Europeans have been continually left out of.
On the path to competitiveness I think it is important for us to reconsider the financing of the individual European national economies. We have just heard an excellent presentation on this issue. I am convinced that we cannot fire up our economies if we have nothing to invest. In this respect Central Europe is not doing badly, as, first of all, I think there is a European bank which can see the right direction. This bank is the EBRD. It would be in our best interests to scale up its activities across the entire continent – but in Central Europe in particular. And we are in an advantageous position, because we have friends – including the Bank of China – who stand by us and support us on issues of financing. And finally, the last milestone I can see on the road to competitiveness is innovation: let us place more emphasis on innovation on a European scale. I would note that Hungary is in a fair position among Central European countries, and we are performing fairly well in terms of the sum our central budget devotes to innovation as a proportion of GDP. I think that this performance is commendable, but it is still not enough, and the amount the Hungarian budget invests in innovation should be increased.
And now, in the style of Mr. Lámfalussy, I would like to refer back to two important thoughts raised by M. Larosière. The first is the question of demography that he raised. Naturally I shall give a political answer, which is by its nature different from the answer of an economist. In my opinion a nation or a community that is unable to reproduce itself does not deserve to exist, and judgement will be passed on that nation in the highest place possible. This cannot be disguised with immigration, with migrants, with guest workers or with cunning tricks, because the problem is more deep-rooted. A community which is unable to sustain itself demographically does not believe in its own future, and therefore renounces its right to exist. This is also the gravest problem that we Hungarians face: our house is on fire, but so too is that of all Europe. I am convinced that if a community is unable to reproduce itself – if a nation cannot independently sustain itself, but seeks assistance and a solution from outside – it must give up its former national identity – in part, or perhaps in full. In such a case that nation is no longer the same nation. This is written in the book of fate – or at least, this is what I as a politician interpret from that book. I am convinced that Europe must find a solution to this, because this is its existential question. Hungary has a family policy which is already producing results, but let me repeat: our house is also on fire. Returning to demography, I say this to President Larosière: the reason I dare to use such forthright language on this matter is that we are a people with extensive experience on this subject: forced relocation, forced settlement, population exchanges, and all their consequences. This knowledge is in our genes. We know precisely that if we resort to such means this will end in a loss of nation, and a loss of our country – we can see this by, for example, looking back in Hungarian history to the period of Turkish occupation. This is why we have the courage to take such a firm stand on an issue that appears to be so theoretically complex; after all, politics is a practical pursuit, not a theoretical one.
As regards foreign policy, European foreign policy and security policy – as the President suggested – is also a serious question, which we must talk about in the frank style of Professor Lámfalussy. Here the question is the following: can we protect the continent against any – and, I repeat, any – external threat without America? Those who are brave enough to go further could also ask if we can do so without the English-speaking countries altogether. This is the great question for the future. The key to solving this question is something that appears to be the simplest thing in the world: German-French security and military cooperation. I am talking about a common army and a common security system – or whatever we choose to call it. This sounds simple enough, but when you think about it, this is something we have never had. And, despite its simplicity, this amply demonstrates the complexity of the matter. The question is whether we – or those concerned – will be able to create a defence alliance. Well, the talks that I have already mentioned in Berlin today or tomorrow will give us some guidance.
Ladies and Gentlemen,
Finally, standing here before you as the Prime Minister of Hungary, I should also say a few words about Hungary – primarily on account of our friends from China and France. They may find it strange that a country that accounts for just 0.2 per cent of the world’s population – that’s us – states its opinion on issues of world politics in such wide-ranging terms. And I can understand your reservations, because in politics, too, the most important rule is that everyone should know their place. Just as in private life, a country must know its place – based on its defence capabilities, GDP, population and territory. And once it has occupied its appropriate place, it should know exactly which issues it is free to speak about, and which ones it is not free to speak about. So perhaps Hungary volunteering its own ideas on issues such as these requires some explanation. There is a piece of British wisdom, which may sound somewhat awkward when translated into Hungarian: “Nothing succeeds like success”. This explains why the Hungarians have the courage to volunteer their opinions on these issues; if we look at the period from 2010 to 2016 – or to 2017 – we can see that Hungary has turned from a black sheep into a success story. Of course not everyone acknowledges this, but it is important that the facts and the truth be recognised – even when they favour us Hungarians.
Therefore – just to take two minutes of your time – we should recall that in 2010 we had no economic growth: virtually none. State debt had risen to over 85 per cent. Inflation could not be forced below six per cent. The budget deficit had soared to 7 per cent, while unemployment stood at between 11.5 and 12 per cent. Out of ten million Hungarians, fewer than 3.7 – three million, seven hundred thousand people – were in work; of these, only half – one million, eight hundred thousand – were paying taxes. So our revenue was next to zero, while our expenditure was fixed, given that the state, businesses and families were all deeply in debt. It is hardly surprising that the first country to seek a rescue package from the IMF was not Greece, but Hungary. This is where we started from. Today we can say that debt as a ratio of GDP is falling, the annual budget deficit is at a long-term level of around two per cent, the economy is growing by approximately three per cent annually, unemployment stands somewhere around four and a half per cent, and we are very near full employment. Our foreign trade balance also repeatedly ends each year with a large surplus.
At times like this, the question is how this was achieved: how one can turn a country around 180 degrees in six years. Without trying to give advice to anyone, we would like to draw your attention to the following facts. The first and most important thing is political stability: if it is true that politics – stable politics – is the basis of good economic policy, one must create political stability. Without political strength and political stability there can be no successful economic reforms or successful changes in economic policy. Political strength is not always an appealing thing – particularly in intellectual circles. Analysts do not like it at all, and there are also some politically untutored financial experts who believe that the banking sector should have more room for manoeuvre. But the truth is that those who want a predictable business environment always have a vested interest in strong and predictable politics – not to mention 95 per cent of the electorate.
The second important thing that led us to success was strict fiscal policy. All I would say about this now – referring back to the presentation of President Larosière, who said that either it is accepted or not – is that the people must accept that there are times when strict fiscal policy is necessary. My view is that the people will only accept strict fiscal policy if they find it just. A simple statement in a complex sentence. The people accept strict fiscal policy if they perceive it to be just. In this there will be a different recipe for every nation. In Hungary, for instance, it started with a fifty per cent reduction in the political class. We did not introduce strict fiscal measures of any kind until we had reduced the number of politicians by half: a parliament with half as many MPs, and local councils with half as many councillors. This was just one thing, but I could list others as well. All I want to say is that an economic recovery programme based on strict fiscal policy is manageable and possible. This is why I am standing here, and this is why – having put the country’s fiscal affairs in order – we did not lose the elections in 2014. Winning those elections is proof that this is possible; it is possible, but complicated, and should not be approached in a conventional manner. This means that the issue of justness cannot be left out of fiscal policy.
The third thing that could explain Hungary’s success is the creation of a workfare society, instead of a benefit-centred society. Naturally, it is not my place to tease, but I would be intrigued to see the government of a Western European country – say of France – announce that the maximum period for which unemployment benefit can be claimed will be reduced to three months, after which there will be no benefit of any kind. Instead there is public employment: those who work receive a salary, while those who do not receive neither a salary nor benefits – and we wish them the best of luck. This is a very harsh statement to make – one that is almost inconceivable for most Europeans, but which is not far from fairness and justice. The Hungarian people took the view that they do not want their taxes to go towards supporting people who are capable of work, and they accepted that it is the duty of the state to arrange for these people to receive wages rather than benefits. And if the market cannot take care of this, then the state should devise some temporary bridging solutions. But the essence of the matter is that everyone should feel that the taxes they pay are well-spent. Following on from this, it was later possible to reduce taxes. I shall not mention them all, but in Hungary corporation tax is at 9 per cent and we have a flat income tax rate of 15 per cent.
The next path leading to success, and one on which we have a great many battles ahead, is the establishment of a dual training system. This means bringing an education system that is far removed from European economic reality closer to that economic reality. The aim is to ensure that at the end of their studies students do not discover that, while the knowledge we have given our children may well be fine, noble and valuable in theory, in reality it is utterly useless. Europe’s school and higher education systems suffer in this regard. The only way to solve this problem is by descending somewhat from our refined intellectual heights, and bringing the school and training system closer to the oil and sweat of the real economy. This, perhaps, accounts for a major part of the Germans’ success. In other words, jobs instead of benefits: every Hungarian must be given the opportunity to work.
And, finally, the policy of eastward opening also forms part of the Hungarian recipe, the Hungarian model. After 2008 we Hungarians took the view that Europe was unable to grow by itself: there would be no economic growth if we only trade with each other, without opening towards the East. This sounds fine, and it also sounds simple, but there is something here that the Europeans must understand. We cannot simply decide to open economically towards other countries to the East – say towards China – and then every morning proceed to lecture them on human rights. That is not how it works. It is simply untenable to expect the kind of alliance in which we seek access to your market, and we want your economic cooperation, and we also ask you for investment, but we do not at the same time give you the very level of respect that is due to every single independent nation in the world. Such an approach only results in an opening towards the East which exists at the level of rhetoric, but not that of reality. At the heart of eastward opening lies respect, and those who do not accept that respect takes priority over ideology will never be able to open to the East, because they do not understand the peoples of the East. In this respect we are luckier, because we are an eastern people which was infused with Christianity; and this gives us a special perspective, enabling us to understand all that is happening in China. Furthermore, given that we are talking about a disciplined country, we also understand why they do not respond to criticism from the West, which should instead recognise the achievement represented by, say, the success and value of lifting masses of people out of poverty and hopeless economic situations. From a moral point of view, also, this is something which China can cite as the most important argument in its own favour. If we do not accept this, there will be no eastward opening; there will only be trade, which is not the same as eastward opening. Hungary strives to achieve eastward opening.
Ladies and Gentlemen,
The Hungarian model therefore comprises four elements: political stability, strict fiscal policy, a workfare society and eastward opening. With due modesty, but also appropriate self-confidence, this is what we can present to the world for consideration.
Thank you for your attention.