The reduction of public debt represented one of the most prominent policy objectives of the Orbán government after it came to power in 2010, constituting a central element in its “freedom-fight” rhetoric emphasizing the administration’s struggle to liberate Hungary from Western financial domination and thereby regain the country’s national sovereignty.
Hungary’s public debt stood at 19.41 trillion forints, or 82.2pc of GDP, at the end of the first quarter of 2010, the final quarter before the Fidesz–Christian Democratic People’s Party (KDNP) alliance defeated the Hungarian Socialist Party in the April 2010 National Assembly election (see sources for government-debt data at end of article).
The Orbán Government’s War on Public Debt
In his annual State of the State Address in February 2011, Prime Minister Orbán said “In 2011 we are declaring war against government debt. . . . We must and will defeat government debt, which is the source of most of our problems and difficulties today. If we do not overcome it, then it will overcome us once and for all” (source in Hungarian).
On June 21, 2011, Prime Minister Orbán announced that the Government Debt Management Center had used 1.35 trillion forints in relinquished mandatory private pension funds to pay down Hungary’s public debt, declaring “For us Hungarians this is important also because it has been around 20 years since the last soldier of the occupying Soviet army left Hungary and at that time many of us thought . . . that Hungary had thus regained its freedom and independence.” The Hungarian News Agency’s partially paraphrased report on the prime minister’s announcement continued as follows (source in Hungarian):
He added, however, that over the past 20 years “We had to bitterly experience the validity and truth of the old wisdom” that a nation can be subjugated in two ways—with the sword or with debt. Today in Hungary, seven of every ten forints in tax revenue must be used to pay off the government debt and “this cannot be called freedom even with the greatest amount of goodwill.”
Whether the leaders of the country generated this debt out of stupidity or intentionally is a question in connection to which everybody would like to know the truth, which is why the investigative committees that are attempting to uncover these occurrences are so important.
Viktor Orbán stated that government debt is not an economic problem, but an enemy, which if not defeated, “the enemy will defeat us.” He said that he believes we have won the first important battle in this war, since a turning-point has taken place.
On March 2, 2011, National Economy Minister György Matolcsy announced that the government aimed to reduce public debt to between 65 percent and 70 percent of GDP by the year 2014 (source in Hungarian).
In his 2012 State of the State Address, Prime Minister Orbán declared that had the government not taken action to reduce public debt, Hungary would have “permanently lost its independence” just as Greece and that “instead the people’s will, creditors would be ruling in place of us” (source in Hungarian).
The new constitution called the Fundamental Law that National Assembly representatives from the Fidesz-KDNP governing coalition ratified in April 2011 and which came into effect on January 1, 2012 requires that all government budgets reduce Hungary’s public debt as long as this debt remains higher than 50 percent of GDP.
The Progression of Public Debt under the Orbán Government
The Orbán government held public debt in check for two and a half years after coming to power in May 2010. The government reduced public debt to under 20 trillion forints and 80 percent of GDP through the previously mentioned use of just under half of the mandatory private pension funds that Hungarians surrendered to the government in June 2011 in order to stay in the state-pension system. After remaining at around this level throughout 2012, Hungary’s public debt began to increase significantly in 2013, rising above 22 trillion forints and 80 percent of GDP in the latter year to just under 25 trillion forints and over 85 percent of GDP in the election year of 2014 (see quarterly data below).
Hungary’s debt ratio has therefore remained significantly higher than the maximum 60 percent of GDP stipulated in the European Union’s Maastricht criteria for adoption of the euro.
Beating a Silent Retreat
The Orbán government’s quietly discontinued its highly proclaimed “war on debt” in the course of the pre-election year 2013. Prime Minister Orbán did not mention the issue of public debt in his 2014 State of the State Address, nor did he broach this subject during his campaign speeches prior to Hungary’s 2014 National Assembly election (source A and B in Hungarian).
On August 19, 2014, Prime Minister Orbán told a reporter who had asked him why Hungary’s debt was so high: “You must subtract the reserves from the net [debt] and like this it isn’t high” (source in Hungarian).
Quarterly Gross Public Debt Data (in Trillions of Forints and Percentage of GDP)
Q1: 19.41 82.2 (final quarter of Hungarian Socialist Party government)
Q2: 20.47 85.6
Q3: 20.05 83.0
Q4: 20.04 82.2
Q1: 20.81 84.1
Q2: 19.58 79.0 (quarter in which Orbán government used private pension funds to pay down debt)
Q3: 21.07 84.1
Q4: 20.96 82.2
Q1: 20.83 80.7
Q2: 20.62 79.4
Q3: 20.65 79.1
Q4: 20.72 79.9
Q1: 21.69 82.9
Q2: 22.24 81.7
Q3: 22.09 80.4
Q4: 22.00 79.4
Q1: 24.26 84.4
Q2: 24.79 85.1
Q3: 24.72 83.0
Q4: 23.88 77.3
Q1: 24.37 77.2
Q2: 25.07 79.6
Q3: 25.05 78.0
Source in English for gross debt data: Government Debt Management Center statistics on “central government gross debt”; source in Hungarian for gross-debt-as-percentage-of-GDP data: index.hu, table “bruttó és nettó államadósság, 2005–2015.”