European News and Poland Thread - part 5

Hungary is not part of the Eurozone, so lack of access to hard currency leads to a rapid erosion of the Forint's purchasing power.

This is important, because Hungary is dependent on imports across nearly every sector of the economy.

Hungary needs Euros and Dollars to buy the things it needs. Less Euros/Dollars, means you gotta print more Forints to buy those Euros/Dollars (huge oversimplification, but impossible to explain in a short post).

Energy is another huge structural component of their rapid rise in inflation. During an almost ten year long period, through a populist move, Hungary's government capped energy prices for retail customers. In 2022 they partially lifted these caps - because maintaining them would have killed the economy - and prices for electricity doubled almost overnight in Hungary. So... that's a big piece of the story too.

-//-

For what it's worth, Poland was not much better under PiS. The EU also punished PiS, and this nearly tanked the economy, but allowed Tusk to returns

Polish inflation over the period, is not much better than Hungary's.

Same story - Zloty weakness, and energy prices.

@Bobko▲ 0▼ 0

Thank you for the information Proffessor Bobko. I have one more question, why would printing forints if they are exclusively used outside of the country, to buy euros, increase inflation in comparison if the euros were 'given' by the european union. The net effect of the money supply in the country is the same?

Is there some money printing statistic/tracker used by banking/trading elite to determine the inflation rate? ;)

@amiga500▲ 0▼ 0

First of all, they are not used "exclusively outside the country".

The suppliers of the Euros would more typically be Hungarian banks, businesses, and persons.

The Forints don't disappear anywhere. They end up in higher bank reserves, which leads to lower interest rates, and more credit creation, and in the balances of businesses and persons.

People and institutions may end up holding more Forints than they may necessarily want.

The price of the Forint goes down, relative to the Euros that are needed, as entities and people begin to offer more forints for less euros.

-//-

If the reverse happens, and the EU (for example) injects $20B into Hungary - then the following happens.

The money lands in the accounts of the Hungarian government.

To spend it, they need to convert it into Forints (to pay wages, pay contractors, etc).

This does two things simultaneously:

1) Increases Forint demand

2) Increases Euro supply in the FX market

It's a straightforward process. Euros are sold and the Forint strengthens directly.

This is not always good, to have a stronger currency. So the Hungarian Central Bank may choose to absorb more of this mass of hard currency by squirreling it away into reserves, and keeping it out of the markets.


No conspiracies and no "elite" inside info. The Hungarian National Bank publishes all the stats on their website for all to access. But to really understand what's happening, all you need to do is look at the fx rate trends - and then you can get guess at what is done in terms of monetary policy.

@Bobko▲ 0▼ 0

I personally doubt it. It may explain some, but not "a large part."
EU funds aren't some kind of magic wand that will fix your economy.
Also, I remember that over the years Polish media were complaining that, unlike PiS, Orban had some charm and class that allowed him to wiggle out Hungary out of trouble with the EU and not getting the funds blocked.


€17 billion to be exact.


xD

I'm not an expert, but I think that was one of the main reasons.

Whenever I saw stats from Eurostat popping up Hungary was often either the worse or one the worst countries on the list in different aspects, not only economy. Whatever happened to Hungarian society during the 16 years of Orban's rule - it clearly wasn't good...


xD

Sorry, Bobko, but EU funds don't have such great power lol They can't save or tank the economy. The biggest factors, imho, are what the government and the society is doing. Another major factors are outside factors over which we don't have any influence. Poland's inflation rose a bit after the pandemic and then shot up greatly in and after 2022. Now tell me, what happened in 2022 - could you remind us all? 🤔

Btw, the only time when inflation was higher in Poland than after 2022 was in the 1990s.

@Paulina▲ 0▼ 0

At least three prominent figures with Orban's government have gone under the radar since the election...

Peter Szijjarto (FM of the 'anything you want, Mr Lavrov, sir!' tapes)

Sandor Pinter (IM, long reputed to have ties to russian organized crime)

Lorince Meszaros (richest man in Hungary, supposedly a businessman despite being severely undereducated and unable to string three sentences of standard Hungarian together... an longtime friend of Orban). His private jet took off yesterday as polls closed and went off radar.

Today a government plane seemed to be heading toward the Agean coast of Turkey....

x.com/SzabadonMagyar/status/2043620184380854603

@mafketis▲ 0▼ 0

The dust hasn't even settled yet, and dirty laundry has already started to come out about the new head of the Hungarian government.

Is Magyar responsible for domestic abuse and an abuser of women?

slobodnadalmacija.hr/vijesti/svijet/novi-madarski-lider-razveo-se-od-orbanove-ministrice-prica-je-mucna-izdajica-gurnuo-me-trudnu-hodao-s-nozem-1549742

@Crnogorac3▲ 0▼ 0

According to the translation of this article it was allegedly "psychological/emotional" abuse, not physical.

For context - his wife was the Minister of Justice in Orban's government and she singed a pardon for a clerk who was helping a paed0phile - it resulted in a scandal and she had to resign:

wiadomosci.wp.pl/triumf-magyara-co-zarzucala-mu-zona-7274742924855488a

I'd divorce her too o_O 🤮

Btw, I forgot to add how happy I am that Orban lost! Finally some good news in this world... Big congrats to Hungary! :)))) 🫂

HUNGARY IS BACK, YEAH!!!! 🥳🎊🎉 🇭🇺 ❤️💪



@Paulina▲ 0▼ 0

Don't kid yourself.

$20B in a country the size of Hungary, easily generates full percentages of added GDP growth.

It could make the difference between a recession, and what would qualify as "decent" growth.

In all countries, even in America, state spending is a powerful economic stimulus.

It can yield multiplicative effects, if spent wisely.

@Bobko▲ 0▼ 0

Putler must be seething.

He's always got Fico. For now.

@jon357▲ 0▼ 0

So will you remind us what happened in 2022??? :)))


Magyar's first foreign visit will to be to Poland 😁 🇵🇱❤️🇭🇺



@Paulina▲ 0▼ 0

Not sure I understand what you mean.

@Bobko▲ 0▼ 0

@Bobko, you and amiga500 were discussing inflation in Hungary. You linked it to the EU blocking the funds for Hungary. In another comment you went even further and you claimed that the EU withholding funds for Poland under PiS "nearly tanked the economy" (which is not true).

You wrote that "Polish inflation over the period, is not much better than Hungary's".

So I pointed out that inflation in Poland rose somewhat during the pandemic and increased a lot during and after 2022.

You also wrote: "Same story - Zloty weakness, and energy prices."

Now, could you remind us when and why energy prices increased in Poland and what happened in 2022??? :)))


I mean that you have an agenda and you're manipulating. You're trying to blame inflation and economic problems of both Hungary and Poland on "the EU blocking funds."

@Paulina▲ 0▼ 0

I'm not "trying" anything. It's a simple fact.

It's not the only reason - as I laid out, energy shocks also account for big piece of the story.

A quote from an NPR interview at the time:

"The EU has refused to give Poland COVID stimulus funds worth around $35 billion and is now threatening to withhold $75 billion more in cohesion funds unless Poland's government reverses the changes it's made to the judiciary. The total potential hit is worth a fifth of Poland's GDP."

Source: npr.org/2022/11/14/1136617250/eu-refuses-to-give-poland-money-after-changes-limiting-the-judiciarys-independen

You would have to be delusional not to think that's a huge deal. Normal, non-EU countries, could never dream of 20% of GDP falling into their lap from the sky. For Russia, that would represent $600B worth of "free money". That's an absolutely mammoth amount of capital. Less than we have spent on the war in Ukraine in four years.

PiS and their ally in Hungary both got hammered by the EU (for different reasons).

The Zloty weakness, that resulted from a relative lack of hard currency reserves - was one of the major drivers of inflation.

Tusk came - unlocked the money - and Poland's economy became once again turbocharged, basically overnight.

Orban lasted longer than PiS, and so the pain was prolonged as well. He hoped that Russia and the United States would replace Brussels for him, but it did not come to be.

You are living in fantasy land if you don't think EU money is the #1 thing that matters for Polish inflation and economic growth.

@Bobko▲ 0▼ 0

The new Hungarian leader said, "Tonight, truth prevailed over lies." That may suggest he will align with Brussels's establishment. Is Poland heading the same way, or will it remain a lone wolf resisting an EU that wants to make individual member states irrelevant?

@Ron2▲ 0▼ 0

Does it?

@jon357▲ 0▼ 0

I don't think that because it's simply not true. Blocking EU funds wasn't the cause of inflation in Poland. The timeline says otherwise. Polish inflation increased due to pandemic and then the same thing happened, but to a much bigger extent, after the RuSSian invasion of Ukraine in 2022.

Of course, EU funds can alleviate the results of inflation, but the inflation itself wasn't caused by lack of EU funds o_O


And you conveniently failed to remind us that those "energy shocks" happened because of RuSSian invasion of Ukraine in 2022 :)

@Paulina▲ 0▼ 0

Somehow missed this.

Are you f-in serious?

It's absolutely true!

"Tanking an economy" doesn't mean the economy imploding, and people going back to some kind of 19th century lifestyle. It means things like:

1) A potential recession

2) A surge in unemployment

3) A loss, in real terms, of people's income

4) Higher inflation

5) Reduction in investment

@Bobko▲ 0▼ 0

I wonder why...



This is a map of which governments supported whom?

This is the first time so far that Trump has succeeded in regime change. 🤔

@Crnogorac3▲ 0▼ 0

Explain in detail then how the EU blocking funds "nearly tanked economy in Poland" :)


Um... but this sounds like Western Europe since the pandemic 🤨


lol

Yes, it looks like Trump's endorsement was a death kiss for Orban xD

@Paulina▲ 0▼ 0

Here you have two Polish articles touching upon why Hungary has been lagging behind other EU countries in our region (including Poland, which was ruled by PiS for 8 years):

money.pl/gospodarka/wegry-daly-sie-wyprzedzic-nawet-bulgarii-tego-wyborcy-moga-mu-nie-darowac-analiza-7273092996466880a.html

"Since 2019, the last year before the COVID-19 outbreak, the economic activity over Balaton measured by GDP increased by 7.3%. Admittedly it's an average result by the EU standards, but poor by Central-Eastern European standards. In comparison in Poland GDP increased during those 6 years by 18% and in Croatia by over 23%."

money.pl/gospodarka/kapitalizm-kolesiow-tak-orban-zatrzymal-rozwoj-wegier-analiza-7228206289497024a.html

Btw, according to Transparency International Hungary is the most corrupt country in the EU.

@Paulina▲ 0▼ 0

I wouldn't go that far, but it shows how out of touch Orban was to think it would help.... any.

Also, it shows that control of traditional media doesn't count for much. I was told by a Hungarian that stories about Orban/Szijjarto recordings with putin and lavrov were not covered at all in the Orban affiliated media (90% or so of what's available) but apparently social media had no such restrictions and everybody knew...

That's probably one reason russia is so determined to limit/shut down the internet and as much as possible follow china's dystopian surveillance model....

@mafketis▲ 0▼ 0

@Paulina

I don't know what you are arguing with me.

I said:

1) Yes, the Fidesz government was corrupt

2) Yes, the suspension of EU funds negatively impacted economic growth, investment, and inflation.

3) Yes, the suspension of cheap energy flows through pipelines transiting Ukraine has further hurt the economy.

All three things can be true at the same time. In economics, nothing is ever simple.

What's important, is the relative weighting of each structural factor to understand its contribution to the wider picture.

In the big picture, not receiving EU funds has by far the most significant effect on Hungary. Now the reason it did not receive funds - is largely because of the corruption and institutional backsliding in Hungary. The two are connected.

@Bobko▲ 0▼ 0

I've argued against some of your manipulations, omissions and putting too much weight on blocking of EU funds. You make it sound like it was the main cause of inflation and economic problems both in Hungary and Poland which is simply not true.


How did you arrive at this conclusion? Based on what?

@Paulina▲ 0▼ 0

@Crnogorac3

Nice map, Crno. That was some quality endorsing by Poland, wasn't it? :)

@Torq▲ 0▼ 0

Yeah, by "death kiss" I meant more like "the last nail in the coffin." A cherry on top xD 🍒


Magyar apparently was making many campaign visits around the whole of Hungary. A titanic work at the ground level.


I imagine.

@Paulina▲ 0▼ 0

This is not one of the typical things you can simply Google, and then wave an article in my face - "See Bobko!"

I'm not going to give you a lecture in economics, and I don't even know what I could recommend in terms of some popularly accessible resource like YouTube or Wikipedia....

To understand how EU funds suspension feeds into inflation (through FX, deficits, demand, interest rates) - most popular content is useless.

You need to study a textbook.

I tried as best I could to explain it to Amiga above, and I'm not interested in doing an even deeper dive than that since it's totally pointless.

Suffice it to say, that no serious economist thinks that the Russian energy shock was the main driver behind the surge of inflation, which peaked in 2023. It was an important factor, but not the main one.

Sorry for being curt. I'll think about some good analogy that will explain it accessibly. Will write it up later for you.

@Bobko▲ 0▼ 0

I'm sure EU funds suspension has an impact, obviously, but somehow in all the articles I've ever read written by economists, experts and what not, I've never encountered an opinion, a conclusion, that the main cause for inflation and economic problems in Poland and Hungary was the blocking of EU funds.


It was one of the main drivers all over the EU, not only in Hungary and Poland. It started with pandemic though:

"Inflation in the EU, which peaked at 9.2% in 2022 and has since begun to ease, was primarily driven by the post-pandemic energy crisis, supply chain bottlenecks, and robust demand recovery. Key causes include high energy prices exacerbated by the Russia-Ukraine war, significant supply shortages for goods, and pandemic-era monetary expansion."


You know what, you don't have to write anything by yourself. Just give me a link to a serious article blaming inflation in Poland and Hungary on suspension of EU funds :)

@Paulina▲ 0▼ 0

Yip. PiS printed sh*tloads of money during the pandemic, which obviously caused huge inflation but allowed PiS to direct the money into the sectors that needed it the most (and their own pockets, naturally). We all paid this inflation "tax".

All the EU funds put together during Covid/post-Covid years were typically around 2.5% of our GDP. This is quite large in macro terms but way too small to directly explain cumulative inflation (~50%).

ChatGPT, when pressed for an anwer, claims that inflation was driven primarily by energy shock and disrupted supply chains, but it's just stupid AI, what does it know?

@Torq▲ 0▼ 0

Labor shortages after the pandemic another big issue - a lot of people all over the world decided they quite like the idea of not going to work. Lot of career changes and early retirements meant employers needed to pay more to retain people

@cms neuf▲ 0▼ 0

Notable congratulators -

x.com/i/status/2043426727628534126
"The Hungarian people have taken back their country! Firmly rejected corruption," Alex Soros - the son of George Soros wrote on X.
Elon Musk said on X he believes that now Soros' organization has overtaken control of Hungary.
x.com/i/status/2043458463502876973

x.com/HillaryClinton/status/2043424089277128727
- notorious Hillary

politico.eu/article/ursula-von-der-leyen-uses-hungary-viktor-orban-defeat-to-push-for-end-of-veto-in-eu-foreign-policy/
- Ursula Von der Leyen - "now is the time to rethink the right of veto"

index.hr/mobile/vijesti/clanak/video-poljski-premijer-cestitao-p%C3%A9teru-magyaru-sretniji-sam-od-tebe/2781145.aspx
- Donald Tusk

Everyone is delighted with this Hungarian "rightist"!

@Crnogorac3▲ 0▼ 0