Orban hints at windfall taxes on foreign retailers and further rifts with EU

Orban hints at windfall taxes on foreign retailers and further rifts with EU
"We will not be pious losers," Orban said, which is widely seen as a threat of vetoing major issues if EU funds are withheld.
By bne IntelliNews April 7, 2022

Hungarian Prime Minister Vikor Orban has ruled out austerity measures to narrow the budget gap, while saying he would break EU solidarity by paying for Russian oil in roubles, during a rare international press conference on April 6.

Speaking three days after his fourth landslide victory, the Hungarian PM attributed his party’s success to strong economic growth, tax cuts, and low unemployment, while Hungarians backed the political force that provided a bigger guarantee for peace. He labelled his opponents, the six-party alliance running on a joint list for the first time, as the "coalition for power".

The ruling party and government believe in the concept of the nation-state and see the country's future in the European Union and Nato, he stressed.

On the subject of Hungary-Poland relations, which have been strained over Hungary’s quasi-neutral stance in the conflict, Orban acknowledged differences on some foreign policy issues, such as extending sanctions on Russia, but said cooperation should be active in the area where it can be most successful and that is "self-defence" within the EU.

He signalled that reinforcing Hungary's ties with Poland was paramount when he was asked about the EU's rule of law conditionality mechanism against Hungary, which was launched on Tuesday. The European Court of Justice in February dismissed challenges by Hungary and Poland on the issue.

Orban said he had not received the EU’s notification of the start of the procedure.

Such decisions by the European Commission and the European Parliament could "usually be explained by leftist political motivations" aimed at helping their "Hungarian comrades".

The EU faces serious decisions that cannot be passed without Hungary. "We will not be pious losers," he said, which is widely seen as a threat of vetoing major issues if EU funds are withheld.

Orban also gave some hints about what policies he would pursue in his fourth term, having fought an election campaign that was policy-free, instead focusing on the danger of the threat of Hungary being dragged into the war in Ukraine, as well as the EU's alleged plan to allow gender reassignment for infants, on which a state referendum fell below the required threshold.

Hungary’s new government will be formed by May, and a cabinet reshuffle is not out of the question. Former cabinet chief Janos Lazar, who beat the opposition’s prime ministerial candidate and mayor of Hodmezovasarhely Peter Marki-Zay in his hometown on Sunday, could make a return.

Fielding a question on Lazar, the prime minister did not rule out measures against the retail sector, such as special taxes on multinational companies and others, similar to the ones introduced in 2010.

In 2020 December, Lazar called for an openly protectionist policy to crowd out multinational retailers as the government seeks to boost the share of domestic ownership over 50% in this strategic industry, similar to banking, energy, and the media.

When asked about the government's planned measures, Orban said the government would give priority to maintaining financial stability, but ruled out austerity measures that could negatively affect households.

Keeping the country's GDP growth over the EU average is another goal, he said, adding that the government would take further measures to improve demography figures.  

The central bank has lowered its growth forecast to 2.5-4.5% from 4-5% in its latest report. Orban did not give estimates on the government’s growth target but noted that the government would seek to extend price caps on some food staples and fuel to protect families from prices inflation. These measures shaved off 3-4pp off headline inflation in February, which hit a 15-year high at 8.3%. Negotiations with fuel traders, banks, food producers, and retailers are underway.

Orban said he saw a chance of maintaining price caps on utilities introduced in 2010, adding that such measures would depend on the EU’s ability to halt energy price rises.

These are the consequence of the war in Ukraine and will remain so as long as the war continues; he also proposed suspending "the complicated system of taxing fossil energy" and the scheme of attaching the price of electricity to that of natural gas. Finally, he proposed scrapping the requirement to blend biofuel additives into fuels.

The Hungarian premier said a serious economic crisis is unfolding for a number of reasons, with the major one being the sanctions applied on Russia. "We are going to pay the price of it," he said.

Orban held telephone talks with Russian President Vladimir Putin on Wednesday and proposed an immediate ceasefire in the Russia-Ukraine war.

Putin's response had been positive, but he also quoted the Russian president as saying that Russia had certain conditions for a ceasefire, which he should first discuss with his Ukrainian counterpart.

Orban said Hungary said it was prepared to pay with roubles for Russian gas, breaking ranks with the European Union which sought a united front in opposing Moscow's demand for payment in the currency.

The Hungarian premier did not categorically deny that Hungary is paying the same price as other countries for Russian gas but said it is calculated using a complicated  formula, and the new 15-year gas contract signed in October is more "favourable" than the old one. 

"Our priority is not to have cheaper gas, but to ensure that there is always a long-term supply."