7 May 2015, Budapest

Good morning, Ladies and Gentlemen, Your Excellency, Mr. President, Honourable Hosts, Members of the Chamber,

I was going to talk about a lot of interesting things; that was my plan. The Honourable President told me that less is sometimes more. How true! Therefore, if you will allow me, I shall instead attempt to concentrate on a few important thoughts. For a Hungarian to speak before an audience of Germans is never easy, but it is particularly difficult these days. It is never easy because Hungarians tend to enjoy different things in a conversation to Germans. For a Hungarian, conversations flowing without bounds, containing few specifics but all the more enthusiasm, are the truly exciting conversations; a German may well find such conversations irritating, and would hardly know at the end what exactly we were talking about. In other words, there is a cultural difference here which we must reckon with. And if you think that this is a mere intellectual remark without consequences, you are wrong. This cultural difference does have a practical consequence, a positive implication. It is quite obvious that only people like us are capable of giving humanity inventions that may at first sight appear to be foolish or senseless, such as: the ballpoint pen, which was invented by a Hungarian; or the punch card computer, which was also invented by a Hungarian; or an absurd invention which channels hot steam through coffee, namely the espresso machine. Things like this can only be conceived in the brain of a Hungarian. But on the other hand, this cultural difference also has a downside, as it would appear that the Germans have always preferred the well-trodden path to unusual solutions. If I wanted to summarise in a single sentence the way the Hungarians are now perceived on the European stage, it would be this: the Hungarians always do everything differently. Surely, a nation such as the Germans – who are used to order, discipline and thorough consideration – find it hard to understand this. What is the point of doing everything differently?

Well now, Ladies and Gentlemen,

Beyond the sheer fact that it feels good for a Hungarian to do everything differently, the era that we live in compels us to seek out new ways, as the 2008 financial crisis showed us that we can no longer regulate this new era with the old methods; we cannot be successful with the old methods in the new era. Consequently, the Hungarian approach of “doing everything differently” may well prove to be advantageous at this time in history. The dilemma which I have just described is clearly reflected in the doubts that are voiced in Brussels, where they cannot decide whether to look upon Hungary as a black sheep or as a success story. Of course, if we take a look at the numbers, we may clearly talk about a success story: whether you look at the budget, the sovereign debt figures, economic growth or falling unemployment. Whichever figure you choose, in each and every department we did far better than the European average. Yet the method by which we have achieved these results has provoked criticism on a number of scores. However, there is one thing seen as being to our credit which no one denies, in particular the Germans: at least we have managed to succeed without resorting to German money. There are a great many people who envisage the future of Europe by drawing on the Germans’ money, one way or another, to get out of the macro-economic trouble they are in. To justify this, some inventive solutions have been conceived with the aid of spectacular linguistic artifice – “communal effort”, and some other expressions that are hard to construe – the essence of which may be summed up in every instance as drawing on the Germans’ money as part of our joint responsibility. We Hungarians, however, do not share this mentality. The Honourable Ambassador’s sentence about Hungary being an adherent of fiscal discipline is not only about the fact that we are indeed an adherent of that policy (because we believe Chancellor Merkel, who says that sooner or later we must work for every penny we spend), but it also means that we do not like to live off other people’s money, because sooner or later this will lead to the loss of our dignity, the evaporation of respect for our nation and a degree of subordination; this is something that the Hungarians do not tolerate well.

Ladies and Gentlemen, I must say that on the whole we speak in an era when it is not easy to understand one another; yet, if we limit the topics of our conversation and chiefly concentrate on the actual economic events and economic results, a positive picture will unfold. More or less the picture that unfolds if you read the Chamber’s appropriately solid publication, which you may all be familiar with. A clear indication of the well-founded nature of this evaluation is that at its meeting yesterday the Government approved a budget for next year on which Parliament will vote on 1 July. Therefore, if there is predictability, if there is ample scope for planning, it will become a part of our lives in 2016, as the budget for next year will be announced on 1 July 2015.

Ladies and Gentlemen,

I would like to thank the Chamber, which has also done a great deal for the prosperous development of Hungarian-German economic cooperation in areas beyond the economy. The stipulation in the Chamber’s Statutes, whereby the Chamber is to promote economic relations in both directions, has been fully honoured in the last few years. I wish to congratulate you on this, and I wish to thank the Honourable President on behalf of the Hungarian government. Naturally, we cannot dispense with citing the figures, even if all of you present are thoroughly familiar with them. There are 6,000 companies established fully or partly with German capital operational in Hungary, which provide jobs for more than 300,000 people. Based on the Hungarian family model calculation, this provides for some one million two hundred thousand people: this many Hungarians live off money earned in jobs created by Germans. In 2014 Germany’s share in Hungary’s exports exceeded 27% (i.e. more than 27% of all Hungarian exports went to Germany), and more than 25% of imports coming to Hungary originated from Germany. On the whole, when we look at the total Hungarian foreign trade figures, Germany’s share is in excess of 26%. These are fantastic figures, and demonstrate a strong symbiosis. If we look at the dynamics of these figures, we see that exports from Hungary to Germany increased by 10.5% and reached EUR 23 billion in a single year. At the same time, imports increased by 5.7% and reached EUR 19.7, almost HUF 20 billion.

Ladies and Gentlemen,

Based on these figures, we may conclude that the 3.5% Hungarian economic growth rate attained last year would not have been possible without the significant contribution of the German companies operating here. For this, too, I would like to thank you on behalf of the Hungarian government.

Ladies and Gentlemen,

After this, allow me to say a few words about the situation of Hungary and Germany in a broader European context. If you follow the international debates and studies on Europe and Germany as part of it, you may see that there are several sharply diverging views. For my part, I approve of the refusal to deny the painful fact that Europe’s share in world trade and in total global production is continuously declining, year on year. There is no point in deceiving ourselves; we must face up to the fact that, as regards the most significant processes in the world economy, Europe’s competitiveness is declining continuously. At the same time, I do not share the view of those who observe this with apprehensive pessimism and believe that this must inevitably be the case. A number of books have been published which claim that we should not seek an explanation as to why we are today less competitive than earlier, but argue that we should regard as exceptional the two to three centuries in world history when we were dominant in the world economy, in spite of our demographic and other features. I do not share this approach; I would rather say that one can look on the 2008 financial crisis – something which has undoubtedly shaken us – in one of two ways. It may be seen as a visitation of God, but it may also be seen as an opportunity. I am convinced that the reason we on the European stage have in recent years been unable to exploit the opportunities inherent in the crisis is that we tend to see the crisis as some kind of a blow, rather than as an opportunity. Those who see the crisis as a blow seek to find ways to avert it, and to somehow return to the world which we had before the crisis. Those, however, who see an opportunity in the crisis seek to find out what we should do differently and what we could do differently – what it is that would make us better than we were before the crisis. And while Hungary was struggling for survival, Ladies and Gentlemen, after 2010, in addition to managing the crisis we never lost sight of this other approach, which sees an opportunity in the crisis. I believe that this is what we should also do at a European level.

When we closely examine the times when Europe, and Germany within it, was able to be the world’s leading economic power, the obvious conclusion is that those periods were usually associated with industrial revolutions. We Hungarians were also raised to the level which we still proudly remember by the second industrial revolution. However, after World War II, the capital, talent and innovation necessary for an industrial revolution disappeared from Europe. Europe’s fate was not decided by the Europeans, but by the Russians to our right and the Americans to our left; consequently, the third industrial revolution, to use this technical term, was not induced in Europe but started from overseas and then spread to us. I am convinced that if Europe is unable to implement a significant revival – an industrial innovation similar in its scale to the former industrial revolutions – it will not be able to recapture the initiative and will continue to play a subordinate role in the whole of the world economy in the decades to come. Naturally, politicians cannot undertake to define the content of this industrial revolution and cannot tell what the new industrial revolution could entail, as this knowledge is not available within governments. We must look to the economy for the knowledge which can make sense of what is unfolding before us, what new needs have emerged, and what technological advances have emerged with the capacity to renew  industrial sectors. It is there that the content of the new industrial revolution must be defined, which must then be incorporated into the programmes of government policies.

Ladies and Gentlemen,

I can, however, tell you two things with absolute certainty, without attempting to define the content of a prospective European industrial revolution – in which department, as I have said, I have no competence. Two things which are necessary for this change and in which governments play a role. It is hard to imagine the emergence of a proactive European economy using energy which is twice as expensive – or sometimes three times as expensive – as the energy used by our greatest technological rival, the United States. If we are unable to eliminate this difference, if industry in Europe is unable to gain access to energy at the same price as – or, horribile dictu, cheaper than – industry in the United States, we shall not be competitive; furthermore, European industrial capacity will even relocate to the United States. We can already observe the first signs of this. It is therefore imperative that we make our politicians understand at a European level – and we are not very far advanced on this, Ladies and Gentlemen – that, while there are many important criteria for outlining the energy system of the future, the question of price should be the number one priority, because otherwise we shall not become truly competitive with our most important rivals. Beyond the simple fact that we Hungarians do everything differently, this is the standpoint from which one can understand why we are implementing nuclear developments while atomic power stations in many places around Europe are being shut down. Given Hungary’s natural attributes, this is how we will be able to generate the cheapest energy for industry in Hungary. And the other thing that I am sure of is that, in addition to cheap energy, the availability of a highly-trained workforce is another prerequisite of a new industrial revolution – a change that is to originate from Europe.

Ladies and Gentlemen,

Her Excellency has already spoken about this, with geometric precision. We must indeed concentrate all our energy on ensuring that young Hungarians leave school with vocational qualifications in their hands and in their heads which on the one hand provide them with a living, and which on the other hand create an opportunity for growth for the industry that operates in Hungary, or for Hungarian industry. The Government took a great risk a year ago when it decided to operate, for the first time in the history of modern Hungarian government – and this is not easy in the light of a tradition of 150 years – a dual educational system instead of a single, united educational system; as part of this it delegated all management and supervision of vocational training – including the definition of its content – to the Ministry of Economy, in cooperation with the foreign chambers operating in Hungary and the Hungarian Chamber of Commerce and Industry. This is a great risk. We have abandoned a well-trodden path for an untrodden one; but we were convinced that the well-trodden path would not lead us to where we want to be. I sincerely hope – and this is also our responsibility, and while most of it lies with us, this responsibility has become a joint responsibility, the joint responsibility of the Hungarian business community, the chambers and the Hungarian government – that time will justify this decision, and we shall all be successful when we seek to find the answer to the question: where can we find Europe’s highest concentration of highly-qualified, disciplined workers who are able to use modern technology?

Ladies and Gentlemen,

Finally, allow me to briefly summarise the economic policy which we shall continue in the years ahead, and which is embodied in the budget which the Government approved and presented to Parliament yesterday. These will be widely-publicised things, but I repeat them because I often hear views that we are not predictable enough. I would like to make it clear that we are predictable when it comes to the important issues, because the foundations upon which we erected the structure of the Hungarian economy will not change in the years to come.

The first such foundation stone is that we remain committed to taxing people not on money they earn but on money they spend. Consequently, we do not want a fiscal regime which conveys the message to the people – even if unintentionally – that it is not worth working more and it is not worth earning more.

We shall also retain the pillar of our economic policy according to which we avoid penalising families for being successful. We shall continue to reject inheritance tax between direct-line relatives in Hungary. After 40 years of communism, during which were there was no scope for the accumulation of family wealth, it is important that successful entrepreneurial families should be able to pass on to the next generation the wealth for which they have worked hard.

There is likewise no change in the foundation stone of our economic policy which dictates that we only provide benefits for people who are unable to work for reasons of physical or mental incapacity; we offer work to everyone else. We would like to achieve full employment in Hungary by 2018. We have some large industrial regions where this has already been accomplished: Szombathely, Székesfehérvár, Győr and Tatabánya. These are all cities where employment already stands at or below 3%, which effectively means full employment. And as we organise public work schemes for the workforce not absorbed by modern industry, we are continuously making available the funds necessary for public works, adjusted to the numbers of the unemployed. Therefore, in theory, by 2018 there should be no one left in Hungary who is physically and mentally fit, able and willing to work who is unable to obtain employment. This creates the moral grounds for us to tell people applying for unemployment benefits that we do not offer them benefits but would like to offer them work.

The fourth pillar of our economic policy will also be retained, the underlying message of which is this: help businesses and entrepreneurs so that they can help others. Therefore we shall continue to keep the corporation tax of small and medium-sized businesses at 10%, and shall not raise it.

As I have already mentioned, we shall introduce the dual vocational training system.

We shall reduce the sovereign debt – which is now our constitutional obligation – and we shall also keep the budget deficit low. This is the problem of German money: if anyone’s fiscal deficit is over 3%, sooner or later they will have to borrow someone else’s money. It is my intention that our budget deficit next year will be 2–2.4%. There was a moment – and what a joyous moment it was – when I thought that we were going to approve a budget with a zero per cent deficit (a feat that was achieved in Germany). We calculated the consequences of such a budget, and concluded that these would be so drastic socially that a measure like this  could not be undertaken in a single step. Therefore we must also adopt a continuous and gradual approach here, but this is the direction which we shall pursue.

We shall retain sector-specific taxes, Ladies and Gentlemen; this may be injurious for German businesses, but we must keep these taxes in the budget to enable us to keep to our planned deficit and sovereign debt rates.

We shall maintain our child support system, and shall tie an increasingly large proportion of family benefits to employment. There will be more and more family benefits which will only be available to those who work, in addition to raising children.

As part of and in conjunction with this, from 1 September this year we shall provide kindergarten education for every child over the age of three. This will be mandatory, but parents may seek exemption from the local official. However, as a rule of thumb, education and integration in society will begin at the age of three. We have built all the kindergartens we need to enable every Hungarian child to attend kindergarten from the age of three, and have allocated the necessary funds in the budget.

And as our tenth item, Ladies and Gentlemen, we shall also retain our Job Protection Action Plan, which seeks to help Hungarians at risk who are employed in the private sector. The businesses which employ them pay significantly lower contributions for these employees than the average level of contributions. The average rate is 27%, while businesses pay just 12.5% if they employ women raising young children, young people under the age of 25, people over the age of 55 or the long-term unemployed. This measure affects the jobs of some 900,000 people in Hungary; it is a tried and tested tool, and will also be retained in the budgets of the next few years.

Ladies and Gentlemen, this is what we call a workfare economy and a workfare society. I do not claim that every single element of this economic policy favours all German companies operating in Hungary, but I do say that the economic environment created by these decisions is, on the whole, favourable for foreign investors – including German investors – and because these are long-term elements and long-term measures, they will constitute long-term and predictable elements of Hungary’s economic policy for foreigners investing in Hungary, including German investors.

Ladies and Gentlemen,

I would like to finish my speech by briefly saying that an exciting world is unfolding before our eyes. We have reason to observe with concern whether Europe will be able to halt its decline in the face of global economic competition. We have reason to observe with concern the process slowly turning the G8 into the G2. We have reason to observe with concern the development of oil prices on the energy market, including all its geopolitical implications, from the balance of power in the Middle-East all the way to the future of Iran. We have reason to observe with concern the processes, the technological advances and development processes which bring about the drastic, overnight conversion of entire production lines in conventional industry. And we have reason to observe with concern which countries will succeed in adapting to these processes, to this changed world, and which countries will fail.

if we meet again in one, two, three or even in four years’ time, my wish is for both German businesses in Hungary and Hungary itself to be among these countries and businesses to have survived exciting times and to have explored the available opportunities.

I thank you for your attention.

(Prime Minister's Office)