Banking Policy of Hungary

636
DOI: 10.20542/0131-2227-2019-63-4-22-28

A. Betmakaev (btmkv@yandex.ru),
Altai State University, 61, Prosp. Lenina, Barnaul, 656049, Russian Federation;
I. Yudina (ijudina@yandex.ru),
Barnaul Branch of Financial University under the Government of the Russian Federation, 54, Prosp. Lenina, Barnaul, 656038, Russian Federation



Abstract

The article discusses banking policy in a political system that can be described as “illiberal democracy” (a term coined by Fareed Zakaria), i. e., a constitutional democracy with an authoritarian leadership style. The economic basis of such regime can be described in terms of re-emerging financial nationalism. It leans on the main three pillars. 1) The nation’s monetary sovereignty is consolidated, its monetary policy is becoming more autonomous and guided by the immediate national interests – in contrast to the situation when the proscriptions of foreign and/or supranational institutions prevail and the national government loses control over the monetary policy; 2) distancing of the national government and the Central Bank from the policies of the international organizations that impose credit terms unprofitable for the country; 3) discrimination of foreign actors operating in the country and mobilization of domestic sources for financing the economic development. The authors analyze the case of Hungarian banking policy since 2010 in the context of the concept of financial nationalism. The activities of current Viktor Orban’s government are aimed at expanding interventionism in the operations of the local banking system. Higher taxes levied on nonresident banks made their local transactions unprofitable and resulted in re-establishment of the national control over this system (now more than 60 percent of total banking assets belong to Hungarian entities). There may be some benefit for the economic development in the short term. However, there may be major long-term negative effects of such policy. The fact that the Hungarian National Bank (Central Bank) became less independent in terms of its monetary policy means a significant change from the institutional point of view. The continuing authoritarian trend in the national political and economic governance bears the hazards of increased corruption, slower economic dynamics and decreased international competitiveness of Hungary.


Keywords

illiberal democracy, financial nationalism, Viktor Orban, Central Bank, banking system


REFERENCES

1. Nemzeti Valasztasi Iroda. Orszaggyűlesi kepviselők valasztasa 2018. aprilis. 8 – Az orszaggyűles osszetetele. Available at: http://www.valasztas.hu/dyn/pv18/szavossz/hu/l50.html (accessed 01.06.2018).

2. Orban V. Prime Minister Viktor Orban’s Speech at the 25th Balvanyos Summer Free University and Student Camp, 26 July 2014, Tusnadfurdő (Băile Tuşnad), Romania. Available at: http://www.kormany.hu/en/the-prime-minister/the-prime-ministers-speeches/prime-minister-viktor-orban-s-speech-at-the-25th-balvanyos-summer-free-university-and-student-camp (accessed 01.06.2018).

3. Orban V. Prime Minister Viktor Orban’s Speech at the Conference “Reinvigorating Growth, Competitiveness and Investment – the EU from the Baltics, Through Central Europe, to the Mediterranean”, Budapest, November 10, 2016. Available at: http://www.kormany.hu/en/the-prime-minister/the-prime-minister-s-speeches/prime-minister-viktor-orban-s-speech-at-theconference-reinvigorating-growth-competitiveness-and-investment-the-eu-from-the-baltics-through-central-europe-tothe-mediterranean (accessed 01.06.2018).

4. Zakaria F. The Rise of Illiberal Democracy. Foreign Affairs, 1997, vol. 76, no. 6, pp. 22-43. DOI:10.2307/20048274.

5. Kornai J. Hungary’s U-Turn: Retreating from Democracy. Journal of Democracy, 2015, vol. 26, no. 3, pp. 35-48. DOI:10.1353/jod.2015.0046

6. Bustikova L., Guasti P. The Illiberal Turn or Swerve in Central Europe? Politics and Governance, 2017, vol. 5, no. 4, pp. 166-176. DOI:10.17645/pag.v5i4.1156

7. Freedom House. Nations in Transit 2017. Hungary Profile. Available at: https://freedomhouse.org/report/nationstransit/2017/hungary (accessed 01.06.2018).

8. Freedom House. Freedom in the World 2018. Hungary Profile. Available at: https://freedomhouse.org/report/freedomworld/2018/hungary (accessed 01.06.2018).

9. V-Dem Institute. V-Dem Annual Report 2017 . Democracy at Dusk? Available at: https://www.v-dem.net/media/filer_public/b0/79/b079aa5a-eb3b-4e27-abdb-604b11ecd3db/v-dem_annualreport2017_v2.pdf (accessed 01.06.2018).

10. Pappas T. S. Populist Democracies: Post-Authoritarian Greece and Post-Communist Hungary. Government and Opposition, 2014, vol. 49, no. 1, pp. 1-23. DOI:10.1017/gov.2013.21

11. Agh A. De-Europeanization and De-Democratization Trends in ECE: from the Potemkin Democracy to the Elected Autocracy in Hungary. Journal of Comparative Politics, 2015, vol. 8, no. 2, pp. 4-26.

12. Magyar B. Post-Communist Mafia State: the Case of Hungary. Budapest, Central European University Press, 2016. 311 p.

13. Csillag T., Szelenyi I. Drifting from Liberal Democracy. Traditionalist/Neo-Conservative Ideology of Managed Illiberal Democratic Capitalism. Intersections, 2015, vol. 1, no. 1, pp. 18-48. DOI:10.17356/ieejsp.v1i1.28

14. Bozoki A., Hegedűs D. A kivulről korlatozott hibrid rendszer – Az Orban-rezsim a rendszertipologia tukreben.

Politikatudomanyi Szemle, 2017, vol. XXVI, no. 2, pp. 7-32.

15. Magyar B., Vasarhelyi J., eds. Twenty-Five Sides of a Post-Communist Mafia State. Budapest, New York, CEU Press, 2017. 662 p.

16. Batory A. Populists in Government? Hungary’s “System of National Cooperation”. Democratization, 2016, vol. 23, no. 2, pp. 283-303. DOI:10.1080/13510347.2015.1076214

17. Ballange A. Post-Democracy: Principles and Ambiguities. French Politics, 2017, vol. 15, no. 1, pp. 128-145. DOI:10.1057/s41253-016-0024-3

18. Vainshtein G. I. Evropeiskii populizm v kontse 2010-kh [European Populism in the Late 2010s]. Mirovaya ekonomika i mezhdunarodnye otnosheniya, 2018, vol. 62, no. 3, pp. 29-38. DOI:10.20542/0131-2227-2018-62-3-29-38

19. Muller J.-W. What Is Populism? Philadelphia, University of Pennsylvania Press, 2016. 123 p.

20. Eichengreen B.J. The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era. New York, Oxford University Press, 2018. 272 p.

21. Havlik V. Populism as a Threat to Liberal Democracy in East Central Europe. Challenges to Democracies in East Central Europe. Holzer J. at al, eds. London, Routledge, 2016, pp. 36-55.

22. Pap A.L. Democratic Decline in Hungary: Law and Society in an Illiberal Democracy. London, Routledge, 2017. 172 p.

23. Argentieri F. Hungary: from Post-Communism to Populist Nationalism. Central and East European Politics: from Communism to Democracy. Wolchik S.L et al, eds. Lanham, Rowman and Littlefield, 2015, pp. 293-316.

24. Bozoki A. The Illusion of Inclusion: Configurations of Populism in Hungary. Thinking through Transition: Liberal Democracy, Authoritarian Pasts, and Intellectual History in East Central Europe after 1989. Kopeček M. et al, eds. Budapest, Central European University Press, 2015, pp. 275-311.

25. Buzogany A. Illiberal Democracy in Hungary: Authoritarian Diffusion or Domestic Causation? Democratization, 2017, vol. 24, no. 7, pp. 1307-1325. DOI:10.1080/13510347.2017.1328676

26. Balcer A. Beneath the Surface of Illiberalism: the Recurring Temptation of ‘national Democracy’ in Poland and Hungary. Available at: https://pl.boell.org/sites/default/files/beneath_the_surface_illiberalism_national_democracy_poland_hungary.pdf (accessed 01.06.2018).

27. Haselmann R. Credit Institutions, Ownership and Bank Lending in Transition Economies. The Palgrave Handbook of European Banking. Beck T. et al, eds. New York, Macmillan Publishers, 2016, pp. 623-643.

28. Szanyi M. Impacts of the Crisis on the FDI–Led Development Model in Hungary: Emergence of Economic Patriotism or Shift from the Competition State to Patronage? Economics of European Crises and Emerging Markets. Havlik P. et al, eds. Singapore, Springer Singapore, 2017, pp. 149-170.

29. Korosenyi A., Patkos V. Variations for Inspirational Leadership: the Incumbency of Berlusconi and Orban. Parliamentary Affairs, 2017, vol. 70, no. 3, pp. 611-632. DOI:10.1093/pa/gsx0041

30. Johnson J., Barnes A. Financial Nationalism and Its International Enablers: the Hungarian Experience. Review of International Political Economy, 2015, vol. 22, no. 3, pp. 535-569. DOI:10.1080/09692290.2014.919336

31. Yurasova L. A. Politika vengerskogo suvereniteta [The politics of Hungarian sovereignty]. Vestnik MGIMO Universiteta, 2016, no. 4(49), pp. 99-116.

32. Černohorska L., Pilyavskyy A., Aaronson W. Comparative Performance of the Visegrad Group Banks for the Period 2009–2013. E+M Ekonomie a management, 2017, vol. 20, no. 2, pp. 175-187. DOI:10.15240/tul/001/2017-2-013

33. Epstein R. A. Central and East European Bank Responses to the Financial ‘Crisis’: Do Domestic Banks Perform Better in a Crisis than Their Foreign-Owned Counterparts? Europe-Asia Studies, 2013, vol. 65, no. 3, pp. 528-547. DOI:10.1080/09668136.2013.779453

34. Varhegyi E. The Banks of the Mafia State. Twenty-Five Sides of a Post-Communist Mafia State. Magyar B. et al, eds. Budapest, New York, CEU Press, 2017, pp. 295-309.

35. Merő K., Piroska D. Banking Union and Banking Nationalism – Explaining Opt-Out Choices of Hungary, Poland and the Czech Republic. Policy and Society, 2016, vol. 35, no. 3, pp. 215-226. DOI:10.1016/j.polsoc.2016.10.001

36. Johnson J. Priests of Prosperity: How Central Bankers Transformed the Postcommunist World. Ithaca, Cornell University Press, 2016. 292 p.

37. Goodhart C., Lastra R. Populism and Central Bank Independence. Open Economies Review, 2018, vol. 29, no. 1, pp. 49-68. DOI:10.1007/s11079-017-9447-y

38. Donmez P. E., Zemandl E. J. Crisis of Capitalism and (De-)Politicisation of Monetary Policymaking: Reflections from Hungary and Turkey. New Political Economy, 2018, vol. 47, no. 23, pp. 1-19. DOI:10.1080/13563467.2017.1421624

39. Spendzharova A. Regulating Banks in Central and Eastern Europe: Through Crisis and Boom. London, Palgrave Macmillan UK, 2014. 162 p.

40. OECD Economic Surveys: Hungary 2016. Paris, OECD Publishing, 2016. 128 p.

41. Harmes A. The Rise of Neoliberal Nationalism. Review of International Political Economy, 2012, vol. 19, no. 1, pp. 59-86. DOI:10.1080/09692290.2010.507132

42. Clift B., Woll C. Economic Patriotism: Reinventing Control over Open Markets. Journal of European Public Policy, 2012, vol. 19, no. 3, pp. 307-323. DOI:10.1080/13501763.2011.638117

43. Pinkova A. Corruption and Democracy in East Central Europe. Challenges to Democracies in East Central Europe. Holzer J. et al, eds. London, Routledge, 2016, pp. 91-111.

44. OECD Country Statistical Profile: Hungary 2018/2. Available at: http://dx.doi.org/10.1787/csp-hun-table-2018-2-en (accessed 14.06.2018).

45. Volotov O.G., Volotov S.O. Vengriya v usloviyakh krizisnykh yavlenii na Zapade [Hungary in conditions of crisis phenomena in the West]. Novaya i noveishaya istoriya, 2017, no. 5, pp. 103-117.


Registered in system SCIENCE INDEX

For citation:
Betmakaev A., Yudina I. Banking Policy of Hungary. Mirovaya ekonomika i mezhdunarodnye otnosheniya, 2019, vol. 63, No 4, pp. 22-28. https://doi.org/10.20542/0131-2227-2019-63-4-22-28



Comments (0)

No comments

Add comment







Indexed
 
Current Issue
2021, vol. 65, No. 2

Topical Themes of the Issue:

  • COVID 19 Pandemic: World Central Banks’ Reactions to Economic Downturn
  • The PRC’s Approach towards the South China Sea Territorial Dispute and Russia’s Foreign Policy
  • SCO and EAEU in the Context of Eurasian Integration
  • Europe: New Realities
  • The Debate about Collective Goods in the Context of Contemporary Issues of Global Governance
View This Issue (2021, vol. 65, No. 2)
Submit an Article
Announcement

Dear readers!
Please note that free access to full-text issues of the Journal is being opened at our WEB-site after 6 months of the date of publications.The work on deepening the open archive of full-text issues will be continued.


Dear colleagues, authors and readers!
We kindly request you to turn to editor-in-chief and executive secretary directly concerning reviewing scientific publications in our journal. Only editor-in-chief takes decision on order and publication the reviews!

Dear readers!
This is to inform the researchers of the Institute of World Economy and International Relations that electronic versions of the I, II, III issues of 2020 of French magazine Politique étrangère are now available. Those who are interested, please personally address to the editorial staff of MEMO Journal (room 18-17) with an electronic media.
NEW SECTION

In response to the challenges of our time the Editorial board continues to open new thematic rubrics:

“World Energy Sector after Pandemic”. We plan to publish articles presenting in-depth analysis of influence of Pandemic on the global energy sector and forecasts of further developments in its various branches.

“Civilization processes of modern development” is a new rubric opened by MEMO Journal in 2020. It will be devoted to the analysis of the influence of civilizational factors and inter-civilizational interactions on the political and socio-economic development of the world at whole, regions and countries.

“Africa today and tomorrow”The rubric devoted to contemporary issues of Africa which is attracting growing interest of the world's leading actors. We plan to publish the articles analyzing the status of statehood, socio-economic and political development of the countries of Black continent, as well as the integration processes between them.

CONTEST!

"World Eсonomy and International Relations" announces a contest for the best joint academic publications of domestic and foreign researchers and experts in topical issues of the world economy and international relations. The winners will be selected according to the results of peer reviewing and discussion at the Editorial Board. The articles will be published in priority order.

SUBSCRIBE TO THE JOURNAL

The print version of “World Economy and International Relations” journal is distributed by advance subscription only, and is not offered for retail sale. To subscribe please address to any post office in Russia by referring to the Federal Postal Service Union Catalogue, section “ARSMI”, the journal index is 70542. The subscription may be made for the whole subscription period or starting from any nearest available month for desired number of issues.

To purchase the full-text electronic version of the journal’s issue/article please address to the WEB portal of Scientific electronic library eLIBRARY.ru or URL: https://press.gaugn.ru/.

In journal
Years
2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 | 1997 |

The author’s opinions may not coincide with the position of editorial