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Abstract
The expansion of public ownership after 2008 occurred in many European countries as a crisis-management tool. Is the new wave of Hungarian nationalisation a part of this general trend or a component of a unique, ‘unorthodox’ economic policy? The article sums up the main features of recent European nationalisation and reveals similarities and differences in this context. It argues that although current ownership changes in Hungary are outwardly consistent with those that have occurred in other European countries (and in the United States), they in fact reflect the particular agenda of the post-2010 Orbán government. The key peculiarity of the recent Hungarian nationalisations is their embeddedness in a complex system of political and economic changes rather than being aimed at short-term crisis management.
Acknowledgment
This study was prepared for the project ‘Foundations of Higher-Education Services for the Knowledge Industry in South Alföld Region’, TÁMOP-4.2.1.D-15/1/KONV-2015-0002. A version of this article has been published in Külgazdaság, 11–12, 2015. Thanks to Júlia Király, Mihály Laki, Péter Mihályi and Éva Várhegyi for comments on the first draft.
Notes
1 See for instance Mihályi (Citation2014, 2015), Voszka (Citation2013). Certain sectors are analysed by Laki (Citation2015), Hegedüs and Péteri (Citation2015), Király (Citation2016), and chapters in the books edited by Magyar (Citation2013), Magyar and Vásárhelyi (Citation2014).
2 For a summary see, for example, Aharoni (Citation1986), Millward (Citation2011). The account of long-term processes at the start of each section draws on the author’s earlier article (Voszka Citation2017).
3 There are several definitions of nationalisation (and of state ownership or privatisation). The term ‘commercial’ implies that the firm is expected to earn most of its revenue from selling goods and services. Thus this article does not cover major sectors such as education or health care. A similarly broad approach is applied, for instance, by the World Bank (Shirley Citation1983), the OECD (Citation2004), Christiansen (Citation2011).
4 See OECD (Citation2004), Christiansen (Citation2011).
5 See, ‘Annual Financial Accounts for General Government (last updated 25 January 2018)’, Eurostat, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?data-setdataset=gov_10a_ggfa&lang=en, accessed 6 March 2018.
6 The total value follows Megginson (Citation2013, p. 20) and the total US figure in TARP (Citation2013). The EU figure is the author’s estimate and covers only the banks. The nationalisation transactions in the EU also took place in other sectors, as will be shown, but there are no data on this process. For the calculation and more on recent nationalisations in the EU and the US, see Voszka (Citation2017).
7 This is the balance-sheet value of equity capital of MNV. The MNV portfolio includes assets which are held by other state bodies (ministries, state development bank), but does not include local governments’ assets or agricultural land and other real estate. Sixty percent of MNV’s HUF 1.2 trillion assets are concentrated in six firms or branches (Hungarian Post, railway, road transport, electricity grid and wholesale, a pharmaceutical company and 19 forest enterprises). In one third of the firms owned by MNV, the Asset Management Company is a minority shareholder.
8 ‘Top 100’, Figyelő, 30 July 2014, available at: figyelo.hu/letoltes.php?f=upload_cikk/2014/07/30/.../top100, accessed 7 April 2015.
9 The estimated expenditure of HUF 1.601 billion on equity purchases includes indirect growth through purchases by the state development banks or other state-owned firms. To these can be added the HUF 190 billion equity portfolio acquired free of charge through the nationalisation of private pension funds, because the purpose here is not to measure actual expenditures but to examine the extent of nationalisation.
10 ‘Financial Crisis Aid: Used Amount 2008–2013’, European Commission, available at: http://ec.europa.eu/competition/state_aid/scoreboard/financial_economic_crisis_aid_en.html#tables, accessed 11 April 2015. The above figures overstate the change of ownership, as not all capital injections imply nationalisation. According to our estimations, 67–90% of capital raised in the EU banking sector amounted to a move into public hands (Voszka Citation2017).
11 It should be noted that the increase is probably overestimated, as the initial value refers to the firms’ own equity and the change was calculated at market prices (government expenditures).
12 These concern the savings cooperatives and the tobacco retail trade, see later.
13 Calculated with 2008 GDP. The extent of European bank nationalisation is the author’s own estimate. See Voszka (Citation2017).
14 For more details see Voszka (Citation2017).
15 For a sectoral breakdown and full list of nationalisations, see Mihályi (Citation2015). Several cases are described in this article, as well as in Voszka (Citation2013).
16 ‘Részesedést szerzett a magyar állam az Erste Bankban’, Híradó, 20 June 2016, available at: http://www.hirado.hu/2016/06/20/alairtak-az-erste-bank-reszesedes-vasarlasi-szerzodeset/, accessed 1 July 2016.
17 See Gonzalez-Garcia and Grigoli (Citation2013). In 2015 one third of the 100 systemically important financial institutions, supervised by the European Central Bank, was state-owned (including nationalisations after 2008), with 16% of total assets of the group (Shoenmaker & Véron Citation2016).
18 This omits the specialised Hungarian Development Bank (Magyar Fejlesztési Bank) and Eximbank, but includes the whole National Savings Bank (Országos Takarékpénztár—OTP), which accounts for 30% in itself (Király Citation2016). Although 60% of listed OTP equity is foreign-held, the government and most analysts class it as domestic in view of its Hungarian headquarters and senior executives.
19 For more details see Voszka (Citation2017).
20 For instance in 2011 in an Italian referendum 96% of voters opted to overturn the laws facilitating water privatisation (Pigeon et al. Citation2012). Citizens of Hamburg voted in 2013 to buy back the energy grid of the German city. A month later, 80% of the voters in Berlin supported the nationalisation of their grid, but a quorum of 25% was needed and the participation rate fell just short (‘Berlin Energy Grid Nationalisation Fails in Referendum’, BBC News, 4 November 2013, available at: http://www.bbc.com/news/world-europe-24800129, accessed 12 May 2014).
21 Hungary’s new prime minister Viktor Orbán used this phrase at the opening session of the National Assembly (14 May 2010) and when presenting the policy package known as the New Széchenyi Plan (28 July 2010).
22 Having been subject to excess deficit procedures since 2004, Hungary had to present convergence programmes each year and consult regularly with the EU Commission. In October 2008 the country requested international assistance: the IMF, the EU and the World Bank earmarked €20 billion, on the condition of having a say in economic policy. In summer 2013 the government managed to free itself from both forms of external control.
23 See the speeches of Viktor Orbán, available at: www.miniszterelnok.hu/beszedek/, accessed 11 February 2015.
24 The specific measures are discussed in the next section.
25 ‘Gyarapítani kell a nemzeti vagyont’, Portfolio, 25 May 2011, available at: http://www.portfolio.hu/vallalatok/energia/gyarapitani_kell_a_nemzeti_vagyont_szijjarto.150003.html, accessed 12 March 2013.
26 ‘Add el a céged, vagy tönkreteszünk!’, Index, 17 January 2013, available at: http://index.hu/gazdasag/2013/01/17/matolcsy/, accessed 7 March 2013.
27 The author’s interview with a senior National Bank executive, National Bank of Hungary, Budapest, 12 October 2015.
28 ‘Magyarország konvergencia programja 2015–2018’, available at: http://ec.europa.eu/europe2020/pdf/csr2015/cp2015_hungary_hu.pdf, accessed 10 January 2016.
29 For instance, since the early 2010s, the main instrument of family support is tax allowance instead of child benefit in cash. Parents with low or no income cannot take advantage of this opportunity.
30 ‘Így államosították a magánnyugdíjpénztárakat—kronológia’, Origo, 18 August 2011, available at: http://www.origo.hu/gazdasag/hirek/20110818-a-magannyugdijpenztarak-allamositasanak-kronologiaja.html, accessed 10 January 2012.
31 The long-term effect of implicit state debt and an increase in current pension payments in this situation were not considered.
32 This complex story is told in detail in Várhegyi (Citation2014) and Mihályi (Citation2015).
33 Since then, the oil company’s share price has fallen significantly, causing an (unrealised) loss of several hundred billion forints to the state.
34 Mihályi (Citation2016) lists 13 types of special taxes.
35 On special taxes targeted at foreign investors, see in general Várhegyi (Citation2012), Soós (Citation2013) and Mihályi (Citation2015) treat in detail the levies on banking sector.
36 The extra revenues of HUF 1.8 trillion in the 2010–2015 period would alone have covered all nationalisation expenditures if the HUF 190 billion in stocks gained free of charge from the pension funds are deducted from the HUF 1.9 trillion total spending. The tax levied on the banks was double the expenditure on buying up financial institutions.
37 Some of them considered it de facto expropriation (quotation in Várhegyi Citation2012, p. 232).
38 However, the government sometimes paid a high price compared to the depressed value, as a favour to the vendor. According to Brückner (Citation2015) and Mihályi (Citation2015), this occurred with the two big banks, whose owners, Bayerische Landesbank and General Electric, were paid generous prices for foreign-policy reasons or to ensure they continued to maintain other subsidiaries in Hungary.
39 Note that three quarters of the high 2014 figure came from the sale of broadband spectrum, and therefore does not represent re-privatisation of newly acquired assets. See Acts ‘2013. évi CXCIII.törvény a Magyarország 2012. évi központi költségvetéséről szóló 2011. évi CLXXXVIII. törvény végrehajtásáról’, adopted 11 November 2013, available at: https://mkogy.jogtar.hu/jogszabaly?docid=a1300193.TV, accessed 13 March 2018; ‘2014. évi LXII. törvény a Magyarország 2013. évi központi költségvetéséről szóló 2012. évi CCIV. törvény végrehajtásáról’, adopted 11 November 2014, available at: https://mkogy.jogtar.hu/jogszabaly?docid=a1300193.TV, accessed 13 March 2018; ‘2015. évi CLXXII. törvény a Magyarország 2014. évi központi költségvetéséről szóló 2013. évi CCXXX. törvény végrehajtásáról’, adopted 3 November 2015, available at: https://mkogy.jogtar.hu/jogszabaly?docid=A1500172.TV, accessed 13 March 2018; ‘2016. évi CXXII. Törvény a Magyarország 2015. évi központi költségvetéséről szóló 2014. évi C. törvény végrehajtásáról’, adopted 8 November 2016, available at: https://net.jogtar.hu/jogszabaly?docid=A1600122.TV×hift=fffffff4&txtreferer=00000001.TXT, accessed 13 March 2018; ‘2016. évi XC törvény Magyarország 2017. évi központi költségvetéséről’, 16 June 2016, available at: https://net.jogtar.hu/jogszabaly?docid=a1600090.tv, accessed 20 December 2016; ‘2017. évi CLXX. Törvény a Magyarország 2016. évi központi költségvetéséről szóló 2015. évi C. törvény végrehajtásáról’, 11 December 2017, available at: https://net.jogtar.hu/jogszabaly?docid=A1700170.TV#lbj0id10f6, accessed 13 March 2018.
40 ‘2016. évi törvény Magyarország 2017. évi központi költségvetéséről XC/2016’, published 16 June 2016, available at: https://net.jogtar.hu/jogszabaly?docid=a1600090.tv, accessed 20 December 2016.
41 On the airport and G4 frequencies see Mihályi (Citation2015); on the OTP: ‘Kiszáll az állam az OTP-ből’, Napi, 28 October 2015, available at: https://www.napi.hu/tozsdek-piacok/kiszall_az_allam_az_otp-bol.605151.html, accessed 11 January 2016.
42 Under a February 2015 deal with the European Bank for Reconstruction and Development over purchases of minority stakes in Erste Bank, the government undertook not to acquire further shares at systemically important banks, except in special cases of systemic risk, and to sell its majority banking shares within three years. Memorandum of Understanding between the Government of Hungary and European Bank for Reconstruction and Development, 9 February 2015, available at: http://www.kormany.hu/download/f/8e/30000/Appendix%201%20EBRD.pdf, accessed 15 May 2015.
43 One example is the gas trading deal between Hungarian Power Plants and the partly offshore MET Hungary Energy Trading (MET Magyarország Energiakereskedő Zrt). This seems to have earned its private owners several HUF 10 billion profit in 2012 (Jenei Citation2014).
44 The prime minister mentioned reindustrialisation as a governmental goal already in the early 2010s (see for example, ‘Orbán: működik az újraiparosítási program’, MTI, 18 April 2013, available at: http://nepszava.hu/cikk/638807-orban-mukodik-az-ujraiparositasi-program, accessed 10 March 2017. A comprehensive plan was published in 2016 under the heading Irinyi Plan (Irinyi terv): ‘Irinyi Terv, Az innovatív iparfejlesztés irányainak meghatározásáról’, Nemzetgazdasági Minisztérium, February 2016, available at: http://www.kormany.hu/download/d/c1/b0000/Irinyi-terv.pdf, accessed 14 March 2017. The plan lists seven priority sectors as focal points, including the motor vehicle industry, food and defence sector, IT and information communication. One of the main goals is to increase the ratio of industrial output to GDP from 24 to 30% in the years 2016–2020, partially by state subsidies to the selected branches.
45 For more details on strategic partnership agreements see Szanyi (Citation2016).
Additional information
Notes on contributors
Éva Voszka
Éva Voszka, Professor of Economics, University of Szeged, Institute of Finance and International Economic Relations, H–6722 Szeged, Kálvária sugárút 1, Hungary.
Email: voszka@eco.u-szeged.hu