Emboldened by a new European Central Bank (ECB) bond-buying plan that has boosted markets across Europe, Hungary’s Prime Minister has hunkered down for a drawn-out fight with the International Monetary Fund (IMF), putting the country back to square one in talks on a new credit line.
Two stormy years in power have seen PM Viktor Orban aggravate banks and the EU, Hillary Clinton and even ex-Soviet Armenia, all in aid of a political path that sets out to appeal to the Hungarians’ sense of pride and independence.
Orban’s favouring of taxes on banks and big business comes as a striking alternative to the sort of liberal orthodoxy on budget cuts that has driven Greece and others into a vicious cycle of recession.
But companies and banking sector economists say the drive has crippled investment and undone some of the best reforms pushed through in the decade after the fall of the Berlin Wall.
Orban’s ability to hold public finances together increasingly depends on the outcome of a poker game with the IMF, Brussels and financial markets over an aid deal the PM insists would only ever be “precautionary”.
By building confidence in the euro zone and its periphery, the ECB move on Thursday reduced the price Hungary and other higher-risk borrowers pay for their debt — and with it the pressure on Orban to give in to the Fund’s demands.
Orban waited only minutes after President Mario Draghi announced the ECB would start buying bonds to say on his Facebook page that conditions set by the IMF for a loan deal were unacceptable.