Good morning, Ladies and Gentlemen.
Thank you very much for inviting me to join you here this morning – thank you for inviting me here, where we can be together. For eighty years, whenever we came up to this castle we stumbled through ruins. The building we are now in is a sign that we have left that era behind us. Sándor Demján used to say something that even without him we might have realised ourselves: there is no success without self-respect. And this is true not only in the life of a businessperson, but also in the life of a country: if a country does not have self-respect, it cannot be successful.
In addition to those who invited me, I also extend a warm welcome to “Lidike”, the widow of Sándor Demján. Thank you for being here with us. The name of the man whose idea this was has already been mentioned several times. This is fitting, because the truth is that without him this anniversary would not have happened. It is also true that – in accordance with the laws or fashions of the modern age – he and I had a child together: the Széchenyi Card. Well, nothing is impossible, and perhaps they are right after all. When we used to meet and talk in the evenings, between ourselves we called it an “Etyek-Felcsút pact”. Some people don’t know this, so for their benefit I will say that Sándor and I were country lads from neighbouring villages. I knew him – or remembered him – from my primary school days. And when I became Prime Minister I was happy to be able to conclude a major agreement with him on a serious matter. As was the custom in those days, it was fine to confirm this with a simple handshake, and everyone knew what they would need to do over the next ten years or so. From the founder we also learned that the impossible is what is most worth undertaking, and that anything less is not very exciting. So Sándor Demján only undertook impossible tasks. He sought partners in this, and thus he lured me into establishing the card.
Courage – this is also what we learned from him; and also, perhaps, that you can never be clever enough on your own. This is the most important lesson that I have carried with me ever since. It is as true in my work as it is for an ambitious entrepreneur that, although you can be very clever on your own, you can never be clever enough: there will always be someone smarter than you. And if you do not have people you can rely on from whom to get the ideas you need to succeed, it will only be a matter of time before you are left behind.
It has also been said here that the ratio for lending is shifting towards the provinces: 75 per cent outside the capital, and so 25 per cent in Budapest. This is a good illustration of the prejudices in our heads, because this is not a shift towards the provinces: if you look at this country, you see that it is proportionate. This is more or less how we look: at least 75 per cent outside Budapest. And this is also very important, because obviously the big foreign investments are aimed at urban centres, and Hungary cannot be successful without big foreign investments. But if there are no successful Hungarian businesses alongside them, what will make Hungary a Hungarian country? So for us, and I hope for the government of the day – not just for the current one, but also for whatever one is in office at any given time – it will be a necessity, a guiding principle, that alongside large foreign companies there must always be a broad, strong, solidly based layer of Hungarian businesses. And here we can compete with foreigners not in terms of capital, or capital strength, because for various reasons they are stronger than us, but in terms of numbers. So in order for the Hungarian economy to remain a Hungarian economy, a few large foreign investments must be balanced by the many Hungarian small and medium-sized enterprises.
Ladies and Gentlemen,
Here I would also like to share a few figures with you. I understand from the Minister of Finance that this year we have supported this programme – this entire Széchenyi universe, this Széchenyi Card universe – with 130 billion forints from the budget; and next year we will support it with 290 billion forints. You heard correctly: next year the Hungarian budget will support this programme package with 290 billion forints. Of course I can say that we are not doing this out of good will, as interest rates have risen, and so interest relief – because we are providing interest relief for this programme – will automatically rise. But everyone knows that we are facing a difficult year, and given the situation we could have decided not to invest such a large amount in the Széchenyi Card scheme. There could have been a host of arguments in support of that. But we did not do that, and instead decided – remember that we are facing a crisis year – to more than double the support that the Hungarian government is putting behind the Széchenyi Card scheme to support Hungarian small and medium-sized enterprises: from 130 billion forints to 290 billion forints.
Ladies and Gentlemen,
We are gathered here today to celebrate your persevering work and the fruits of your labour. I would like to congratulate the award-winning entrepreneurs in advance and thank those who made it possible for these businesses to receive support under the Széchenyi Card Programme. Congratulations, and thank you! But this is an occasion, if you will allow me, not only to say a few words of appreciation, but – as we live in exciting times and face important decisions – to also say a few words about the progress of our work, the work of assembling the economic scaffolding for the coming year.
The first thing one needs to decide is what one really has an appetite for. In good times this question does not arise, because one is in a good mood, upbeat and optimistic. In hard times it is not so clear – even if one can see the inner workings of difficult situations. From Ede Teller we learned that a pessimist is a person who is right, but derives no joy from that fact. The fact that we are right is not in doubt, but the question is how to pull ourselves out of this situation. We were right that the war should never have started in the first place. We were right that, whether they like it or not, those who have been supplying arms are drifting ever closer to war, training the troops of one of the belligerents, and now providing it with full financing. We were also right that sanctions would convulse the European economy. And we were again right when we said that energy sanctions would bring inflation everywhere. If this is the pessimistic view, the question is this: what is the optimistic view of the situation, and of life in these times? If Teller’s definition of a pessimist is correct, then surely an optimist is a person who is right and is happy to be right. What we should be looking for is what kind of truth we will see in the coming year that will bring us joy. I have been thinking a lot, but on that question my list is much shorter than my collection of evidence related to pessimists.
First of all, we can be pleased to be right when we say that we can stay out of recession next year. In a year’s time we will discuss whether we have managed to do that, but we can be pleased at the idea that it is possible to stay out of the European recession, and so it is worth working to stay out of it. We can also be pleased that we can stay out of the war. Another source of joy can be that we are able to aim to have single-digit inflation by the end of 2023, calculated on a December-to-December basis. We can also take pleasure from the fact that even in such a situation we are targeting the protection of families from huge utility bills, and finding it possible to do that. I would like to say a few words about that later. When we presented the 250,000th Széchenyi Card, one of the themes, or sub-themes, of the speeches was how the market and the state should cooperate. I have never believed that the market is sacrosanct. It has its own laws, so you have to be careful when handling it, touching it and intervening in it; but I have never thought that it is untouchable – and certainly not that there is an “invisible hand” behind the market that can arrange matters in a positive way for the benefit of society without the involvement of the state. There may be such an invisible hand in times of consolidation, although we may have doubts about that; but I am quite sure that in extraordinary situations it is certainly not true that someone arranges things for the common good of us all, in the manner of an invisible hand. That was not true during the financial crisis, during the foreign-currency loans crisis or during the COVID crisis, when state intervention was needed; and the same applies now, amidst sanctions-induced surcharges and sanctions-induced inflation. Without the state, without cooperation between the state and businesses, in such extraordinary situations this invisible hand will deliver a slap in the face to businesses that is big enough to land them flat on their backs. I have never shared the view that the state, government and the market are enemies of one another. Rather, I would say – and we said this in 2017 – that you cannot have one without the other. I do not believe that an economy can function well without a secure framework provided by the state; and I believe that a strong state cannot exist without a well-functioning economy, with the state respecting the laws of the economy.
Ladies and Gentlemen,
We are facing a year in which we will certainly need this cooperation: without a strong state that acts in a timely and correct manner, the Hungarian economy will not be successful in 2023; and without such cooperation many entrepreneurs and businesses will not survive. We are in an energy crisis that threatens to rapidly degrade the whole of Europe’s industry. At first sight this may sound like an exaggeration; but if you read the economic analyses of countries that are richer and stronger than us, you will see that the most important issue today – for example in Germany, but also in other countries to the west of us – is whether or not this current energy crisis will bring with it a rapid decline in European industry. Moreover, this challenge and threat comes at a time when we, the European economies, are experiencing a prolonged period of loss of competitiveness. To put this in figures, in 1990 the European Union’s total GDP accounted for 24 per cent of the world economy. In 1990! Twenty years later, in 2010, this had fallen to 21 per cent. And now, in 2022, it is only 16 per cent – and the trend is downwards. Projections suggest that in the next decade the EU’s growth prospects could be less than half of what they were in past decades.
And here we are faced with a big intellectual puzzle. Of course this is most of all confronting European leaders, political leaders. The European economy used to have a structure for which the axis was cooperation with Russia. Within the framework of this we were able to bring cheap energy and almost unlimited raw materials from the East into the European economy, and in return we took technology to Russia. This led to dependence, or rather interdependence, and to balance and overall economic growth in Europe. That is now at an end. It has fallen apart, it has been smashed, it has been severed – call it what you like, that model is gone. But it is not gone while being replaced with another model which is thoroughly considered and well thought-out: we have done away with one model, but we do not know what will come next. So now, looking ahead to 2023, we are in a position in which the whole of Europe needs to figure out what new system it wants to replace the European economic structure that has been dismantled this year. And as if this were not enough, as if this picture were not gloomy enough, I would also like to mention the debates that are currently taking place on whether economic relations between Europe and China should be loosened or curbed. Now, even if this puts a strain on the European economies, there is no question that it will be difficult to find a new model which is good for the European Union, but in which there are neither Russians nor Chinese.
Ladies and Gentlemen,
As far as we Hungarians are concerned, in this European context the biggest task we are currently engaged in together with the Finance Minister is the 2023 budget. Hungary has a budget for 2023, because the Parliament adopted it in the usual way by 1 July. Since 1 July, however, there have been some changes in the Hungarian and European economies, and so we have to use emergency legislation to adapt the budget to the current situation. The guiding principle that we are now following is the notion that with no new European economic structure there is a search for a way forward, and therefore we cannot rely on anyone but ourselves. So we have to find our own lifeboat for 2023. If we were to sit back and wait, to expect others to invent a new European economic structure in place of the present one with its severed ties and its meagre – but perceptible – economic growth, and if then we tried to deduce from that what we Hungarians should do, then that path would certainly lead to us losing in 2023. And it is very rare for someone else to come up with a good programme for us which is based on our interests.
So we have to depend on our own lifeboat, or we have to build our own lifeboat for Hungary, for the Hungarian economy: a lifeboat that is both able to protect the population from escalating energy and food prices, and is able to keep Hungarian companies viable. The good news, as we look for the economic guiding line for 2023, is that between 2015 and 2021 we regularly managed to achieve a growth rate more than double that of the European Union. So there is dynamism in the Hungarian economy: if I take the European Union average as a comparison, there is dynamism in the Hungarian economy. If an economy is able to grow twice as fast as the world around it, the larger single market of which it is part, then that economy has dynamism.
The bad news, however, is that we Hungarians, too, will be hit by three things: the cost of energy, inflation and interest rates. Energy is the biggest issue and the most difficult challenge. To give you an idea of the social gravity of this, in today’s already amended system of household utility cost relief, the Hungarian budget is giving each household an average of 180,000 forints every month. An average always masks differences, but this is still a useful figure. Imagine if we paid this out in cash – what a fantastic thing that would be! But that is not what is happening; the fact is that we are giving 180,000 forints in the sense that without relief, on average the energy bill of every Hungarian family would be that much higher. This is a historical problem for Hungary, because if we try to understand the last twelve years not only from an economic point of view, but also from a social point of view, for Hungary the greatest benefit of these twelve years has been that those in the bottom four tenths – people in those deciles – have seen opportunities opening up for them to join the middle class. In the language of numbers, this means that if we look at how much Hungarians in the bottom four deciles in 2010 had to spend on essentials – including food and energy – and how much that took out of their salaries, and compare it with how much it is taking now, we are in a much better position than we were around ten years ago. But if we cannot protect these families from high utility bills, we will fall back to where we were in 2010. And the opportunity for the lower middle class to get ahead – for which we have worked hard for twelve years – will disappear. One can debate whether economically it is right to maintain such a system of subsidies; but while it is debatable economically, it is not debatable socially. Therefore the starting point for next year’s budget is also that we must maintain this capacity, this support, and we must provide it. The financial consequences of this are extremely serious. I do not want to overburden you, but I will just give you some figures. In 2021, the total energy imports for Hungarian life – for households and the economy together, because the Hungarian economy needs energy imports – was 7 billion euros. In 2021! In 2022 this went up to 17 billion euros. And next year it will be somewhere between 17 and 20 billion euros. This means that this year alone we will have to find 10 billion euros from somewhere. Using a rate of 400 forints, which in the current climate is an optimistic calculation, this is 4,000 billion forints. We are giving 290 billion forints to the Széchenyi Card next year, and we are talking about the Hungarian economy losing 4,000 billion forints through no fault of its own – simply because the price of energy has risen. In the coming year the same amount of energy of the same quality will cost us 10 billion euros – or 4,000 billion forints – more than it cost us in 2021. And this will not improve in 2023 – indeed it will be a great help if the situation does not worsen. Part of this huge financial burden will have to be borne by the economy, and the other part by the budget. This is why all kinds of legitimate demands for the distribution of money in the coming year can only be considered by us with extreme restraint. Every forint that is created has to go into the household utility bill reduction fund, because there we have to generate about 2,000 billion forints – which is 2,000 billion forints more than last year. I understand, for example, the suggestion you made in the minimum wage negotiations, when you said that you could reach an agreement with workers on the minimum wage if we also reduced social security contributions. But I cannot reduce it, we cannot reduce social security contributions, because on that we have run out of road, and there is nowhere further left to go. In 2023 it will be impossible for the Hungarian budget to manage any reduction in contributions while at the same time maintaining the measures for protection of reductions in household utility bills. Financially that simply cannot work. So, when planning for 2023, I ask everyone to expect a Hungarian budget that focuses all its energies on protecting the middle class – especially the lower middle class – from the inhuman energy and inflationary economic consequences that have developed in Europe.
Ladies and Gentlemen,
The interest rate for entrepreneurs applying for a loan within the Széchenyi Card Programme is 5 per cent. Market interest rates are somewhere above ten percent – can one even start around ten? Eighteen, or maybe a number starting with two: they are above 20 per cent. It is completely obvious that in these circumstances we need your talent even more than before. With average talent you can get by when things are going well. In difficult times we can only stay afloat if everyone – including businesses, but also the Government – mobilises all the talent available and has the courage to step up to the plate. So the next year – 2023 – will not only be a measure of our financial capabilities, but also a measure of us personally. It will also challenge you, and the extent of our talent and ability to adapt, redesign and weather difficult times. A country cannot be strong if it does not have a small and medium-sized enterprise sector, it cannot be strong if it does not have a layer of business leaders who can also stand their ground in the international arena, and it cannot be strong if it does not have strong representation of stakeholders’ interests. In the coming year, I expect your cooperation with your economic representatives to be even more serious than ever.
Ladies and Gentlemen,
While we are going to spend 290 billion forints on supporting the Széchenyi Card system, I would also like to remind you that – in addition to this – we will give another 220 billion forints to small and medium-sized enterprises which fall into the so-called “energy-intensive” category. This used to be 3 per cent, but we have now reduced it to 2 per cent – if I remember correctly, or if this regulation has already been published. Thus more people will be able to participate. And of course we also have to announce a factory rescue programme to help Hungarian factories.
So, Ladies and Gentlemen, 2023 will be a period which will demand serious effort from all of us. In relation to you, there is one number that the Government considers particularly important. We may talk less about it in public, but we measure the productivity of Hungarian SMEs against large Hungarian companies. The real challenge facing the Hungarian economy today is that there is a world of large, highly productive businesses, and there is a world of small and medium-sized businesses that are lagging behind in terms of productivity. And if we can narrow the gap between the two, then the Hungarian economy will be on the right track. Over the past decade the productivity of small and medium-sized enterprises – the relative productivity of small and medium-sized enterprises – has improved by 13 percentage points, and has come close to that of large domestic enterprises. This is a fantastic result! The absolute number still doesn’t look good, because our productivity is still below that of small and medium-sized enterprises in Western Europe, but it is now competitive with similar sized enterprises in other countries in our region.
Ladies and Gentlemen,
Finally, in order to give the optimists some slight competitive advantage over the pessimists, I would like to cite a certain ability of Hungarians. The science of national character is a topic that is not recommended for political discourse – although it is our favourite, because it goes deepest and reveals the deepest relationships. So there is something in the character of Hungarians, something I have personally experienced over the past thirty years: when things are going well, Hungarians show disunity; things that were previously tightly managed start to fray, everyone needs a little more space, and so somehow they become disconnected from one another. And when trouble comes, as if by magic everyone suddenly realises that only through working together – only through disciplined cooperation – can we survive the difficult situation. So I believe that the Hungarians have a survival instinct instilled in them by history that helps us to survive difficult times. Look at the decision of the Hungarian government: in difficult times we did not take away all or even part of the money allocated to small and medium-sized enterprises in order to solve our budgetary problems, but we went in the opposite direction, ensuring that there would be allies and partnerships alongside whom and alongside which we could collectively compete and fight in the difficult years ahead. So the Hungarians have some kind of instinct, a world of instinct that we can build on in 2023.
This is where the final thought – which I have borrowed from Széchenyi – fits in. Economists are perhaps less likely to read – or their eyes are less likely to be attracted to – his book Hitel [“Credit”], because everyone basically sees it as an economic work; and it is, after all, about credit. But there are one or two thoughts in it about the social preconditions for credit and the functioning of the economy. I will quote this sentence: “In Credit” – and here Credit is capitalised, referring to the book – “lies something even deeper”, says Széchenyi, “in the broader sense of credit: to believe and be able to believe one another.” This is the survival instinct I am talking about: in times of trouble Hungarians can and must believe one another. As far as the Hungarian government is concerned, we have taken the first steps needed for this. Congratulations once again, and happy birthday!
Thank you very much for inviting me here!