With the FTSE powering upwards beyond 5350 this morning (largely,would you believe, because banks have escaped more serious levels of stress test and regulation) a little-remarked battle is taking place in eastern Europe.
Ostensibly, it is between the EU/IMF donors of a whopping – and outstanding – loan in 2008, and the recipient of the monies, Hungary. The big boys are telling silly little Hungary that its irresponsibility is taking the country towards another default. In point of fact, they may well be right. But the argument isn’t really about this at all. Hungary’s crime thus far largely consists of telling the power-crazed EU to mind its own business – and planning an enormous tax upon its banks: something of which the IMF doesn’t approve.
Hungary has a history similar to that of Poland – viz, being trampled over and variously invaded by its more powerful neighbours over the centuries. Ordinary people there remark that they can spot a nascent USSR when they see one – and they see one in the EU.
As for the IMF’s view on bank taxes, it has told the Hungarians the measure – which aims to raise nearly US$1 billion in revenue this year – will ‘discourage lending and stifle economic recovery’. That’s an interesting conclusion, given that not doing that in the other EU States has had precisely the effect the IMF claims it wishes to avoid. But it’s not that illogical a suggestion when you consider which community the IMF really represents: bankers, monetarists and US multinational business – see earlier Slogpost re the IMF’s origins.
The plot doesn’t so much thicken as clarify when one considers the underlying strategy Hungary’s Fidesz Government wants to follow: slashing taxes for small business, and going all out for growth as a means of paying off its creditors. Further, State Secretary in the Economy Ministry Zoltan Csefalvay is on the record as calling “all State agencies hopelessly wasteful – especially those of the EU”. He does not “wish to see our old people go hungry while the functionaries get fatter”.
So as you can see, one way and another plucky Hungary is just asking for trouble: it wants the EU to butt out, Big Business and Banking to stump up more towards the running costs, and Brusselcrats to be fired.
I don’t know about you, but I rather like the cut of the Magyars’ jib. Especially as all Lord Mandelson’s former very close friends in Hungary are members of the pro-EU Opposition.