Prime Minister Viktor Orbán's Speech at the Hungarian Chamber of Commerce and Industry's Economic Season Opener

Greetings to Everyone, Good Afternoon!

The day after tomorrow is upon us. I'm sure that is the case, but please forgive me for making do with only trying to indicate tomorrow in advance. And especially the 6th of April. This, I feel, is regarded as a forgivable fault by President Parragh [László Parragh, President of the Hungarian Chamber of Commerce and Industry], with which he gives me temporary release from haying to think about the day after tomorrow. But before I too tell you what I believe we have achieved together with the Chamber over the past year, I would like to make a few comments with relation to the images that President Parragh just showed us.

My first observation concerns the rate of growth of the German and Hungarian economies. What I saw between 1998 and 2002, and I believe that what I saw at that time is still valid, was that if the Hungarian economy performs according to its capabilities, then according to the rule of thumb our growth rate is exactly double that of German economic growth. Except that there was meanwhile another period that developed into an economic crisis, and we have forgetten about this fact. I think this is something we must revive and set as an objective so that, just as it once was, the rate of growth of the Hungarian economy during the upcoming period can be twice that of German economic growth, because the Hungarian economy has this capability.

My second observation is related to the slide we saw entitled "The level of public savings and the financial effects of income redistribution and the reduction of utility prices". It included a piece of data from December 2013. Just so that I can convey to you the momentum of these processes, the level of public savings was 1,100 billion forints according to the figure for the end of December, and in comparison it now stands at 1,800 billion forints. With regard to the level of European Union funding that reaches the economy, the two numbers it is worth comparing are that in the seven-year European Union financial period from 2007 to 2013, 16% of available funding made its was into the economy and in comparison our plan for the period 2014 to 2021 – and this is what we are working on, this is the system that is currently under development – is to increase this level from 16 percent to 60 percent.

The only reason I am making a perhaps improper comment with regard to single figure taxes is to provide a historical dimension to today's decision-making regarding a possible single digit income tax. The idea of progressive taxation was first published in the second chapter of the Communist Manifesto. I recommend that you all find a copy and take a look. Until that time, it had never even been considered, Ladies and Gentlemen!

I would also like to say something about the printer, if only because it is worth keeping in mind that it is not always easy for those who must deal with economic policy in the manner or dimension in which President Parragh just has. Because I remember well, and I have been curious ever since and only managed to satisfy my curiosity a few minutes ago, when György Matolcsy [former Minister of National Economy and current Governor of the Hungarian National Bank] wrote about this printer in the Heti Válasz. A culture of 3D printing will soon spread throughout the world. I have wanted to find out what such a 3D printer looks like since then and I had a chance to examine one on the way in a little earlier. But I also remember that Mr. Matolcsy got what historical heroes who are ahead of their time usually get: everyone laughed at him and made fun of him on the internet saying how silly it was to portray some American invention as something that would radically switch the relays of even Hungarian economic policy thinking.

Ladies and Gentlemen,

And now, please allow me to also say a few words about the year we have left behind us. Each year, we and the Chamber attempt to review what we have accomplished, both together and separately. The most exciting of these annual reviews are those that fall within the fourth year of a government term, because these somehow relate to the political elections and at such times both orators and audiences are in the hope that they may come to know something about the future, because after all, something must be said about what the future holds based on what we have learned from the past. And the returning political slogan of the present election campaign is the issue of whether or not there are election manifestos, and if there are, then where are they? I'm going to disappoint you, I'm afraid, because our election manifesto can be summarised in just a single sentence: we will continue what we have been doing. With a little more modesty, it can be summarised in a somewhat longer sentence: we would like to continue what we have been doing. And so in this respect we don't want to present the Hungarian public with a new election programme, but instead we would like to convince people that it is worth continuing what we have begun over the course of the past four years.

Ladies and Gentlemen,

So let's have a look at how I, and how we, view the past four years. If we ask the question, what have we achieved since our last meeting, and we would like to reply in a humble manner, which is the correct approach, then we can state with due modesty, but with pride, that during the past four years we have finally succeeded in putting Hungary back on its feet, back onto its own two feet. What we wanted to achieve was, after all, that the Hungarian economy should become independently viable. We all know that to be able to begin moving forward towards the future, towards the day after tomorrow, and to otherwise be capable of taking any step in the interests of realising our plans, we must first stand up. And the Hungarian economy wasn't standing, and was especially not standing on its own two feet during the previous decade. We believe that 2013 can be entered into the annals of Hungarian economic history as the year in which we succeeded in enabling the Hungarian economy to stand on its feet without external help and without the need for crutches. And in fact we have succeeded in making it stand without wobbling, meaning it is suitably stable, and is in fact capable of making the first steps in the direction it wishes to move under its own steam. I think we can now declare this to be fact.

There is one issue that we must by all means make clear. The most general weapon in debates on Hungarian economic policy is the distortion of the facts, when people attempt to interpret a statement within a totally different context, and so one must occasionally clear up certain details. And I would also like to clarify a detail of this nature now. The Hungarian economy has always been and shall remain part of the global economy. We are exposed to effecting mechanisms, and this will remain so in the future. It is among these that we live our lives. We must stand on our own two feet as an integral part of the global economy, because we are of course also part of the European Union, and as an operator within the global economy. So standing on our own two feet, the Hungarian path, the Hungarian model and following national interests is not equivalent to breaking away from the global economy, which would in itself be an irrational and stupid idea. But it is a legitimate principle that as an integral part of the global economy we must be powerful enough to be able to act in our own interests so we can stand on our own two feet.

I will only list the facts that prove that we are now standing on our own two feet in short. The economy is growing, jobs are being created, public debt is decreasing, energy is cheaper, loans are cheaper, inflation is lower and exports are surging. I don't think anyone can argue with these facts today. If there is any debate at all then it is in relation to public debt, because its repayment, the repayment of the annual debt, is not balanced at the moment. For instance, Mihály Varga [Minister for National Economy] took on a loan of 3 billion dollars yesterday. This represents a temporary increase in public debt, but he took on the loan to pay for this year's maturing debts. This means that these debts will have been repaid by the end of the year, in addition to which the interest rate on the maturing debt was higher than that of the new debt. In summary, by the end of the year public debt will be in a better position than it is now. I think that if we take into account these financial details then I can safely say that to all intents and purposes all of the facts that I have just listed for you are practically beyond dispute in today's credible Hungarian economic policy circles, and with a broad gesture I would also include the European Union, because these facts have also been officially reported by the European Union. We have it on paper, if you like, and the European Union may be accused of many things, but that it has agreed to work cheaply as a Fidesz campaign advisor is certainly not one of them. And nevertheless, in its forecasts for 2014 and 2015, the EU recorded these facts with regard to the Hungarian economy, and as such is stated for the first time in many years that the Hungarian economy is not among those in which there is a danger of macroeconomic imbalance. It belongs to a large group of country's whose economies need monitoring, but there is no direct danger of imbalance. This is the first time in a long time that we have been in such a situation.

Ladies and Gentlemen,

We must also make another detour, especially with relation to exports. And, as I think László also touched on in one of his slides, this is the issue of energy, and more precisely the issue of industrial energy and energy prices, which I also mention because this will be one of the issues on the agenda tomorrow in Brussels. Unless the situation in Ukraine sweeps the planned agenda off the table, then the Council of the EU's Prime Ministers will be discussing the issue of energy tomorrow. The price of energy in the United States is about a third of the price in Europe, and according to our forecasts for the day after tomorrow, in addition to labour that is cheap compared to its level of training and expertise, the most important competitive factor in the economy in future will be the price of energy. And in this regard the United States has acquired such an advantage that the European economy will be unable to counterbalance unless it makes radical changes to its thinking with regard to the energy system. And Hungary is endeavouring to ensure that not just the price of household energy, but also the price of the energy required for industrial production should be the lowest here in Hungary, and I will be saying more about this a little later. To put it another way, irrespective of whether Europe is competitive or not, we Hungarians should be able to compete with the energy prices and energy system of the United States.

Ladies and Gentlemen,

It is also important that I saw a few words, not least in view of the country's size, with regard to the environment that surrounds us, because what we have realised also has an international environment. It is worth asking the question: what has been happening in the world over the past year, what processes have been going on and what have they resulted in?

Ladies and Gentlemen,

The past year has been accompanied throughout by the debate that has been open for years concerning the question of whether the crisis that is tormenting the European economy is of a conjunctural or structural nature. Our Government, and as a result Hungary, has always been of the opinion that this crisis isn't a conjunctural one but a structural one. So the situation isn't that there are repeating cycles in accordance with all kinds of global economic theories and we live through alternating periods of growth and recession; that the instruments available to economic policy and the ideas and structures that can be applied by economic policy are in fact constant and this is the nature of the global economy, that there are various cycles which both the markets and state economy management must try to balance. According to our supposition, the current transition is different. The figures that President László Parragh showed us a little earlier with regard to the state of the European economy are not just correct, but may also be supplemented with two further dimensions. One is that while 8 percent of the world's population lives in Europe and we generate 25 percent of the global economy, our share in contributing to global GDP is decreasing, as is our share of global trade, while the level of debt of the European economy grows higher every day. It is clear from this that the issue at hand is not simply the usual ebb and tide of global economic conjuncture but a deep structural crisis of the European economy. I think the measures that the Americans have introduced over the past three or four years have occurred with this in mind. They view the developments as a structural crisis and not as a conjunctural one and have adapted and reacted accordingly. This realisation has not yet occurred in Europe; the debate is still ongoing.

However, Ladies and Gentlemen, deciding this debate is a key issue, because if we say that the crisis is conjunctural in nature, then that means that the ideas and instruments that were valid previously continue to be valid and useable. But if we say that we are in a structural crisis, then the continued application of earlier instruments and the following of previous logic will necessarily lead to this same crisis again and again. And so deciding the nature of the crisis determines the content of the economic policy applied by the various nations. We thought that if this crisis is of a structural nature then it would seem to be a rational enterprise to attempt to establish an economy with a different, new structure. What is happening in Hungary is not mainstream economic policy in the sense that it does not want to influence economic processes but, as our derisive critics say, it is unorthodox, or as we put it, it is innovative with regard to the fact that its objective it to establish a Hungarian economy with a new, different structure. This may also be interpreted and described in the way we saw a little earlier from President Parragh, who described some of our earlier years as – what was the term you used, László? – a transitional loss, and in fact, if we use the language of politics, then we are talking about the establishing of a new structure Hungarian economy, the resulting temporary losses and resulting or possibly resultant long and medium term advantages. I would like to now say a few words about this new structure Hungarian economy. Let's see what exactly we have undertaken here.

One of the most important elements of this new structure Hungarian economy is reindustrialisation. We believe that the ratio of the gross domestic product generated by industry must be increased within the total Hungarian gross national product. This is what we call reindustrialisation. Where do we stand today? In Europe, within the European Union the average contribution of industry to the total European gross national product is 15%; in Hungary it is 23%. There are two countries ahead of us, meaning we are in third place within Europe: the Czechs are in front of us by a nose and the Germans by a head, at 24% and 26%. I believe that if we are able to continue our policies then by 2018 we can reach a stage at which Hungary has the highest ratio of industrial production within its gross national product in the whole of Europe, which we could also describe by saying that Hungary will be the most industrialised country in Europe. This is a realistic objective. Growth trends and figures support this fact, because a significant proportion of our growth is generated by industry.

Ladies and Gentlemen,

The second thing of this nature, the second such element of this new structure economy is that we want to position Hungary differently within the global economy. Since exports play an important part in the growth of the Hungarian economy and this will remain so in the long term because of the country's size, where we imagine our place in the world is a decisive factor. In our view, this is also how we wish to develop our foreign relations, meaning that the content of our foreign economic policy is determined by how in our minds we first position Hungary within the world. As the Chinese say: the tiger must first be hunted in our minds; the rest is just a formality. And this may well be true. What we have come up with here is a break from the traditions of Hungarian foreign policy. We have perhaps not said so openly and in such terms until now, but perhaps the time has come for us to describe it in this way. We do of course not question the results achieved over the past twenty years and which we call integration policy, the fact that Hungary has become integrated into the world to which we otherwise belong because of our cultural roots and according to our fundamental national interests: to NATO with regard to military policy and to the European Union in a political and economy sense. This must not be questioned. We must however ask ourselves the question, how do we wish to develop our economic relations with the world's important countries, including both East and West? Hungarian economic policy is accompanied by an idea, which governments are often held accountable for by the political media, and that is the question of where its affiliations lie. Not where it integrates into, because that is not in question, but where its affiliations lie. The way of thinking of Hungarian foreign policy has a tradition according to which we must become affiliated somewhere. One must imagine Hungary's usual foreign policy as our becoming affiliated somewhere and then validating the facts that stem from that affiliation; because if we become affiliated somewhere, it has consequences. I and the current Government are trying to achieve something completely different. The principle I have set down is that our relations must be developed in such a way that every important participant of the global economy, all of them without exception, must have an interest in Hungary being a successful country. Meaning we must make everyone interested in our achieving success. We shouldn't become affiliated to one and transpose their logic, but we must instead organise things in such a way, and this is intellectually a little more difficult that simply declaring affiliation, but instead while aiming for a dynamic balance we must strive to organise things in such a way that everyone has an interest in things going well here. And we have broken this down country by country. And I would like to say a few things about this now.

The first important thing of this kind is the relationships we have developed with the Germans. Germany has an interest in Hungary being successful, and in fact has an interest in Hungary's reindustrialisation being successful, because we have linked the Hungarian economy to the southern extremity of German industry, primarily through machine manufacturing and the automotive industry. We can be absolutely sure that Germany has an interest in the success of Hungary's reindustrialisation, has an interest in cheap energy, has an interest in our having a highly trained workforce and has an interest in that trained workforce being mobile, and I could continue the list.

With perhaps less weight, but equally important is the fact that we are attempting to forge an alliance with the Japanese using a similar logic. We can by now safely say that the investments of Japanese corporations in Hungary is so large that Japan regards us as a priority partner and treats us with much greater emphasis than our political weight would otherwise deserve because a significant proportion of Japanese industrial capacities operating in Europe can be found here, in Hungary.

We have also tried to establish cooperation with the Americans. We may have our various debates with them, although these are in general of a philosophical and political nature with regard to what national interests are, how human rights should be interpreted, what national sovereignty is, national politics and so forth, but we have no arguments with the Americans with regard to the economy, and the reason for this is that we have developed the institution known as the system of strategic cooperation agreements. You know about these, we conclude them with large corporations and have signed 42 so far. And if you take a close look you will see that the largest proportion of them are American. Nine of the forty-two corporations that have signed strategic cooperation agreements with the Hungarian Government, the largest number, are American. We have signed such agreements with the majority of large American corporations operating in Hungary. These are otherwise generally high-tech, electronics and information technology industry corporations. They all have an interest in the successful realisation of a modern industrial development policy in Hungary.

This is also what we have done with China. In the case of China the situation is that the Chinese also have an interest in Hungary being successful, because we are the country through which they can most easily access the market of the European Union. They are doing so elsewhere too, but nowhere is it so easy, so quick, or are the techniques so well established as in Hungary. Let me provide you with two tangible examples: the Bank of China opened its regional centre here in Hungary, and the regional centre of China's tourist office can also be found here in Budapest. So it may be clearly seen that we have also achieved a certain position in this area. We can safely say that it is in China's interests, if it has any interests at all within Europe and the Central European region, for us to be successful.

The situation is the same with regard to Russia. This is a sensitive topic in view of the situation in Ukraine, but let us disregard the sensitivities of the issue for the moment and think rationally. It is in our interests that Russia should also have an interest in Hungary being a successful country. This requires us having a level of cooperation that is especially important to them. And in relation to this we must move on from the previous state of affairs according to which they have natural gas and we need natural gas to keep the Hungarian economy operating, so we need to buy gas from them. What techniques we wish to apply to enable us to move on from this situation and reduce our dependency is the subject of another lecture. I would like to point out that the gas pipeline towards Slovakia that makes it possible for the first time in Hungary's history for Hungary to acquire gas that isn't derived from Russia, will be officially inaugurated on 27 March. But this isn't what I would like to talk about now, but instead about nuclear cooperation, because one of the ways we can ensure that Russia has an interest in Hungary's success is by having a field in which we develop and maintain a quality partnership, a special partner relationship. And in view of the fact that we have had a valid contract that includes them in Hungary's nuclear market since 1966, we have no reason not to continue this cooperation. They have an interest in building new nuclear power stations and replacing old ones with new ones. There are two places where they have the opportunity to do this in Europe today: one is England, which they are working on, and the other is in Central Europe, here in Hungary. And accordingly we are ensuring that the Russians have a long term interest in making sure that the success and stability of the Hungarian economy also remains a Russian interest.

We are aiming and shooting at a similar target with the Turks, with whom we have not established a construction of this kind for the moment. We have signed an agreement on doing so. We have come to an agreement with both Turkey's Vice President and Prime Minister on establishing a strategic cooperation, but we haven't for the moment found the strategic sector in which we would be able to deepen cooperation and allow each other into each other's economies to such an extent that would mean we have a mutual interest in each other's success, in addition to simple trade perspectives. Here too, it will most probably be involvement in the privatisation of Turkey's energy system that provides an opportunity of this nature. And so it may well be the case that our strategic cooperation with Turkey will also have something to do with energy, but this is still an issue for the future, for the day after tomorrow, if you will.

Ladies and Gentlemen,

The third important element in the construction of the new Hungarian economy is the issue of medium-sized enterprises. Germany has always served as an instructive example to us in view of its success, and so I think that we Hungarians are in full agreement with regard to the fact that without strong medium-sized enterprises there can be no stable national economy. The examples cited with regard to this subject are always Germany and northern Italy.  If we take a look at how Hungary stands at the moment, then what I can tell you is that there are perhaps 2,200 medium-sized Hungarian enterprises that are capable of producing for export, are standing on their own two feet and have a secure future, according to financial data from Eximbank, and according to our economic policy strategy we would require around 12 thousand such companies. These are Hungarian-owned companies, not companies that are operating in Hungary, but medium-sized enterprises that are under Hungarian ownership. Our goal is to increase their number from the current level of two thousand or two thousand two hundred, to somewhere around twelve thousand.

Ladies and Gentlemen,

And now I must also say a few words about national interests. This is important because in past years we have been in heated debate over economic policy with significant outside participants, and especially integrative ones such as the IMF or the European Union, and we often hear opinions according to which some of the conflicts we undertook were irrational and needless. I think the opposite is true. I believe that we must accept the fact that although we have become integrated into the European Union's system of institutions, we must act and behave there in a similar way to everyone else. And believe me, if you look at the number of conflicts that, for instance, Denmark, Sweden, Germany or Hungary are involved in or have initiated over the past year with the EU's central decision-making, then the fact is that we are in the middle of the field. European Hungarian economic policy can by no means be called renitent. This is clear, because it is not just the verbal conflicts that are important, and in fact those are perhaps the least important, from the number of procedures underway against, for instance, Denmark, Sweden, Germany and Hungary in view of the fact that the EU felt that with one of its laws, decision or government decrees these countries have infringed on one of the EU's important rights, and usually its regulation on the internal market and competition. From this perspective we are in the middle of the field. Except that the issues in question, such as pálinka distilling, are very important to us and so we feel that we are in greatest conflict with the EU, but if we view the numbers calmly and collectedly then what we see is that the sphere of conflict that we have developed around ourselves with regard to the European Union is smaller than that developed by the majority of EU member states. Representing national interests isn't the result of some kind of disorderly Hungarian mentality but from the logical internal structure of the European Union, meaning that within the European Union's decision-making process, national interests collide with other national interests and the mutually accepted general rules and regulations of the various countries collide with the rules and regulations of the European Union. It is my firm belief that there is no need for communities that are unable or unwilling to put forward their own interests and do not express them, and such communities will disappear. It is only a matter of time.

Ladies and Gentlemen,

And now I would like to say a few things about the non-economic prerequisites to the establishment of the new structure economy. Economic policy is a term that is made up of two concepts: economy and policy. And both have their significance, even is technocrats with ice cold expressions do not tolerate such an approach because they believe that the expression economic policy in fact concerns only the economy and can involve only the enforcement of criteria put forward by economists. This is not the case, because then it would not be called economic policy.

Ladies and Gentlemen,

A successful economic policy doesn't only have intellectual prerequisites, meaning that it must be well thought out professionally and be made up of valuable elements that must be properly linked, but the success of an economic policy also requires that it be backed by a strong mandate. Even the best looking economic policy isn't worth the paper it's written on if it doesn't have the required political force backing it. A successful economic policy, and especially if its objective is the restructuring of a country's economy, if it thinks big and sets out a huge objective for itself, can only be realised if it is accompanied by the required political power. In other words, without a strong mandate, meaning without political stability, it is impossible to practice a successful economic policy and transform the structure of the Hungarian economy. And in politics, Ladies and Gentlemen, this power can only come from one source, and this is the principle of popular sovereignty: from a mandate provided by the people, from the electorate, from the support received at the elections and from the enduring nature of that support. And accordingly, in light of the experiences of the past year, I would like to make the strong declaration that during the past four years, and especially last year, when the results began to appear, Hungary's greatest international competitive advantage was our two-thirds majority. And with regard to economic policy, our greatest competitive advantage was most visible in its political element. Because it was the two-thirds majority that made possible the country's political stability and the preservation of a strong political leadership. Because politics is a world in which speed is directly related to strength. There is another kind of speed, that of scuttling away: that is directly related to weakness, but we are talking about something else now. I only mentioned it for the sake of argument. The point is that in politics, in creative politics, that's the right expression, speed is directly related to strength. This is important because in time of crisis the speed of political decisions is a key factor. Since circumstances change quickly, the speed with which a legislation or a government is capable of reacting to the new circumstances is of key importance, for instance our budget also had to be regularly modified to enable us to remain within the required macroeconomic indicators, and this kind of speed requires strength, and in Hungary this strength came from the two-thirds majority, Ladies and Gentlemen! And so what I can say with regard to 2014 is that if we wish to retain our competitive advantage within the global economy then we will need stability and speed.

Stability and speed will continue to be important factors in the upcoming years, Ladies and Gentlemen, and especially in view of the fact that we have not completed the construction of the new structure Hungarian economy. We are perhaps half way through the job. The Chamber of Commerce, which obviously interprets and perceives reality based on its own perspective, was able to draw up an extremely impressive list, and even I was surprised at its length, in this regard. My perspective is a little higher, or rather my watchtower is set up a little differently, and in addition to economic factors I could also mention several other relevant criteria with regard to which we have performed important restructuring, but let us make do with this for the moment. We can see from this list that we have done many things, but – as we heard from László – there are some that were not necessarily successful and which are not moving forward as quickly as they should and in which the work hasn't been completed yet. I have tried to compile a list, and I managed to find ten points, of fields in which I must say that we still have a lot to do in the upcoming years for the establishment of the new structure Hungarian economy. The list is in no particular order of importance, my apologies.

The first important thing of this nature is that a much higher ratio of domestic funding must be involved in the financing of public debt. Prior to the economic crisis in 2008, the ratio of financing brought in from abroad, let us for the moment say the ratio of foreign currency involved, was 30%. Now it is above 40%. And so it is right to say that we should finance a much higher ratio of public debt from forints in future, and I think that it is common sense that it is in our interests, and in the interests of the Hungarian people, that government bonds should, if possible, be in Hungarian hands. Because if it makes sense for Templeton to keep its money in Hungarian government bonds, then why wouldn't it make sense for József Kovács from Karcag to do the same, if he has the money? This is a business opportunity. Financing Hungarian public debt is a business opportunity, which if Mihály Varga does a good job of public debt management policy, enables a higher level of savings and enables higher interests rates and profit in the case of purchasing government bonds than when placing money in other forms of savings. It needs to be done well and we are doing our utmost; we have just launched a new type of government bond, a new series, which attempts to promise higher yields than any other form of saving. Partly because it provides a business opportunity to the people of Hungary, and partly because we would like to increase the ratio of forint-based public debt and reduce the ratio of public debt that must be repaid in foreign currency.

The second important task of this kind is to continue the process of reindustrialisation. I have already spoken about this. We need to move ahead of the Czechs and, for the first time in the history of Hungary, and we are talking about industry now, not about football, we must move ahead of the Germans with regard to reindustrialisation.

Completing the occupation of our positions in the international space. I have mentioned our relationship with Turkey, which we have not yet completed, but there is another dimension that we have also begun but not yet completed. And this is the linking of the Hungarian economy to the emerging Indian economy is some way, or the linking of theirs to ours, to enable the emergence of a business group from India that also has an interest in the success of Hungary.

The fourth thing is changing the ownership situation within the bank sector. I know this is a taboo topic. Anyone who mentions it might as well have spat on the ground in the modern world, but as things stand, and let us be frank, I don't believe that a country can stand firmly on its own two feet unless at least 50% of its financial sector is in national hands. Irrespective of where we put OTP, and how to calculate that and whether we are far from or close to this goal is a mystery in itself. There is still work to be done. We have taken a few steps in this direction in recent years and I hope we will continue to move in this direction. I mention this only in brackets, because I would not like to provoke an argument with the bank sector, but I think it would also be good for competition within the bank sector if new participants were to appear who improve on the proportion of national involvement.

Changing the estate structure in agriculture is the fifth such thing that we must perform. We have set down a principle in this regard. And it is a principle that puts an end to the most important political debate of the Horthy period, and in fact to the most painful debate of the period of dualism that preceded it, which involves the question of who should be in possession of Hungary's farmland. And especially since we are talking about a sector that otherwise holds great promise, which it does, and the Government came to a decision in this regard according to which the proportion of small and medium-sized estates, although more medium than small, but the two together, should be 80%, and only 20% large estates. And with this decision we closed the arguments on this topic – on paper at least. But reality is being very slow to adapt to this decision, and this means that during the upcoming four years we will still have much to do to make use of the various instruments available, as provided for by the new Land Act, to accomplish this goal.

The sixth point with regard to building the new economic system is the establishment of a system of innovation centres. Four years ago, our professed goal was to make Hungary a centre for industrial production. We have succeeded in achieving this goal. Now we must move one step further and move up a notch. As the Marxists said: we must integrate into the system of global capitalism at a higher level. And this means innovation, and research and development. This policy has several flagships. I am sure you know of the Wigner Centre here in Budapest. The previously established Infopark was also established for this reason, and a large ELI laser research centre is currently under construction in Szeged. We need a few more research centres of this kind and a network of them in Hungary, and what is more important, we must not allow these huge investments and development projects to remain solely within the field of research. We must build industrial parks around each of them to be the home of high tech companies who are able to incorporate the research results achieved there into their own production immediately, in a business sense. We are working on this. I feel that this will be the most difficult, the most intellectually difficult task of the next four years, because this does not simply mean creating business opportunities around these innovation centres, but it also means rethinking how Hungarian universities can link to this field. Because if we look at the American system then what we see is that most of the know-how and inventions, or let's say that a significant proportion of the business rights created as a result of research and development, are owned by universities, and the universities are capable of managing these issues. And if I look at the current structure of the Hungarian university system, then I must say that we are not ready for this just yet. These are state universities and this is our responsibility, we must make them capable of adapting their operations to this new way of thinking.

The seventh important point is continuing the reduction of taxes on work and the movement of emphasis towards taxes on consumption. You are all well aware of this. We have no reason to move backwards, and in fact have every reason to move forwards. We must continuously monitor the current state of the healthcare budget and the pensions budget, and when the opportunity arises as a result of increased performance, then we must decide whether to reduce the tax rate or to reduce other contributions. This is a question of tactical assessment and financial possibilities.

The eighth point is that in the meantime we must try and place the whole economy onto the foundations of a demographic mentality. Because the Hungarian national community is decreasing, and it is not only those nations who are incapable of representing their own interests that do not deserve to live until tomorrow, but also those who are biologically incapable of ensuring their own survival. And the situation today is that we Hungarians are biologically incapable of ensuring our own survival. This is our most important challenge. We are talking about the economy now and that is more important, but clearly this will eventually have economic consequences too. I think it is right that we continuously try to enforce demographic criteria during the course of every single government decision, including economic decisions. The magical triangle here is work, performance and family. We must establish a system in which we can encourage people to increase their performance through low taxes, and through that support the creation of more families. The flat rate income tax system, which otherwise also incorporates the tax allowance received for having children, is also based on these philosophical foundations, and the efficiency of this philosophy must be increased in future.

The ninth point relates to the new energy system. We must make energy as cheap as possible. As President Parragh said, we must take a clear stand on the issue of whether the energy sector is a sector of industry that is capable of assessing the rationality of its own operations through profit indices like any other economic sector, or if instead we regard it as a service whose job is not to generate profit but to enable all of the other sectors that use it to generate the highest possible profit and to be as competitive as possible. We believe in the latter philosophy and it in this direction that we are moving the Hungarian energy market system, which is otherwise full of corporations that are the size of mammoths. It is no easy task.

And finally, and perhaps this is what I should have put in first place, the issue of full employment, with regard to which I would like to speak very clearly. I know that this principle is often the object of criticism, but knowing my own homeland to some extent it is my firm belief that not even your enterprises are safe without full employment. What I mean by this is that if we allow what Hungary tolerated during the previous eight to ten years, that the number of people how first of all feel that they are superfluous and who secondly get used to living off money sent to them by the state and cannot provide their children with an example of getting up in the morning and getting ready to go to work to make a living, grew to reach an order of magnitude in the millions; if the luckier proportion of this country, including Hungarian business people, allow the creation of millions of people who live their lives in this way, then those millions will prise apart Hungarian society. And then your businesses will not be safe. There can be no stable society structure if we do not set out as our objective that we must try and provide work to everyone, including people like these. It is easy to criticise public work. I too can imagine prettier dreams than working as a public worker, but if I compare the state of and income received from living off benefits and its effects on the Hungarian economy and on Hungarian society with enabling these people to make a living from work, and a better living, perhaps not a good living, but a better one, then it is clear that the state must do everything possible to ensure that more and more people in Hungary feel that there is a need for them and that no point or group of tension should be allowed to exist that could otherwise endanger the stability of the whole Hungarian economic system. In the best case scenario by applying pressure to the distribution system in reply to which politics does its best to continuously hand out support and benefits, thus placing the economy onto an irrational track, and in the worst case scenario through a state of anarchy. I think this must be taken seriously, and it is my firm belief that it is worth the Hungarian holders of capital supporting an economic policy that is capable of providing this country with social stability, the key factor of which is full employment. Which of course is not equal to zero unemployment, but a 3-3.5% unemployment rate which is otherwise always present in a living, moving, breathing economy, and which is certainly both present as a result of and solved by the renewal of the workforce. But 10% and 9% represent a continuous danger to those whom it affects: to both those who work and to the holders of capital. It is in the fundamental interests of every single person in Hungary that even those who are in the most difficult situation be able to maintain themselves and their families through work, Ladies and Gentlemen! In this sense, full employment is a decisive factor in the building of this new Hungarian economic structure.

Ladies and Gentlemen,

I would like to speak about just one more topic, and my apologies for the fact that this planned short speech has become longer than it should have and was originally indicated. This concerns intellectual idleness. I did my best to understand what László mentioned here earlier about why we made the mistakes we made. What is the reason for these errors, of which we were presented with a long list a little earlier? My explanation is that there is a catching up effect. There always has been in the history of the Hungarian economy, and it especially gained strength during communism, because the developed world, which of course lay on capitalist foundations, had moved far ahead of us. And since I can remember, at least with relation to social issues, I have thought, and I would cite my university years in the eighties; our way of thinking about Hungary has always been constructed around the issue of where we can find those models which, if we transpose them and introduce them here in Hungary, will make us just as successful as they are. This is what I call the catching up effect. We have always thought about what model we should introduce here. And in fact a model-imitating way of thinking was characteristic of the whole of Hungarian intellectual life for at least the past twenty years, but possibly for the past forty-fifty years. I will refrain from discussing the episode between the two wars now, it is perhaps more difficult to judge.

Today, however, the situation is that the world has changed from two perspectives, and this way of thinking is now useless. One is that we are inside a model already. We are the European Union. The question is no longer that we want to copy others; we are sitting in there already, where the decisions are made. This is a different situation. The other thing is that the model that was always most attractive to Hungary, the successful European economic model that came into existence following the Second World War, and we have just seen some related figures, is in crisis. And, if we are right in our assessment, then it is not in a conjunctural crisis, but in a structural one. It may be true that life in Paris and Munich and Vienna and lord knows how many other big cities is better than in Hungary, and this will be the case for many years to come. And so it is easy to say look around and say their standard of living is better than ours, we need to do what they are doing, but it is the tendencies that we must look at Ladies and Gentlemen! As things stand, we are witnessing a continuous shrinkage over there. They may have a good standard of living, but is clear that they are losing what we call competitiveness. And if we read what they think about their own future, well their thinking is pessimistic, because they can also see that something must be done. Consequently, we should not copy the systems used in these countries, because although our standard of living may improve somewhat temporarily, we will eventually fall into the same competitiveness traps they are currently in. And that means that today in Hungary, the way of thinking that is built on copying models and which stems or is caused by the catching up effect, and my apologies to those who this may offend, is useless. We also need to stand on our own two feet as far as our way of thinking goes. We are also in the same community as they are and we can also see the problems they are experiencing, and if we do the same thing they have done then we will suffer from the same crisis phenomena.

Ladies and Gentlemen,

We must believe that the future is not predefined. The Hungarian future is not predefined, at least. Nobody has trodden along this path before us. Everyone is searching for their own path. And so we must now believe that it is our sole responsibility to find an own path for the Hungarian national economy; a path that provides it with the greatest chance. And I think that those who work within the economy must also believe this, because the day after tomorrow is upon us and there are also technological challenges, and politics must believe it too because, and I can today safely declare this, the cheap and shabby bla-bla-bla of Western European political principles, which for a time we felt to be a novelty and then grew bored of, but it seemed compulsory to adhere to them in Hungarian public life, are outdated. New words, new descriptions, new objectives and new situations. We must renew Hungary in every respect, including in an intellectual sense, Ladies and Gentlemen!

I do not claim that what we are currently doing is certain and guaranteed to lead to the desired results, but what I am saying is that this is a sensible course of action that is showing promising results. And the promising results make everything that we have begun worthy of continuation. This is where self-reflection becomes important. Cooperation becomes important. This is where we arrive at the role of the Chamber, since we are all travelling an uncharted path. This is why it is important that we receive regular assessments and impulses with regard to what is happening in reality, so that we can incorporate these into our thinking and can adapt to these processes.

Ladies and Gentlemen,

And this is the thought with which I would like to close my speech. The Chamber has already played an important role over the past four years, but precisely because of what I have just spoken about, its role in the upcoming four years will be especially important. Because from where else can the state bureaucracy expect to receive realistic and down to earth impulses than from the economic community? And who else is capable of collecting these than the Chamber of Commerce? That's its job, after all. This is one of the reason it enjoys special status. And so during the next four years the current direction of economic policy must be followed and even greater emphasis must be placed on the Chamber of Commerce. And it has already been relied on for much. I would like to remind you all that in 2010 we did something that had never before happened in the history of Hungarian politics: we transposed our election manifesto word for word into the government programme and attached the agreement that we had concluded with the Chamber. In 2010, for the first time in the history of Hungarian politics, Parliament adopted a government programme that included the agreement we had signed with the Chamber of Commerce prior to the elections. This is also one of the reasons it is important that we talk about what we have succeeded in achieving. Because when we talk about that, we are in fact discussing the realisation of the government programme, Ladies and Gentlemen!

And accordingly, please allow me to thank you for the support we have received over the past four years. Not the support of a political nature, although I am happy to thank you for that also, but to a much greater extent for the economic, cognitive and intellectual support and for the partnership that the Chamber has granted to the administration, and I would like to encourage you not to change this excellent habit of yours. Please continue to support the following government, whoever that may be, with your views on economic policy, your knowledge and your experience, just as you have done so with us over the past four years. It is in this hope that I thank you for your kind attention!

(Prime Minister’s Office)