Hello, welcome to visit Shanghai Forum
May I just start by saying that the Belt &Road Initiative of presidencies is supposed to be the single most promisingendeavor to reunite and revive the global economy. It is also, to myunderstanding, a fair and just business proposal. And it is a game and a badlyneeded bridge between Europe and Asia. One pillar is supposed to be Asia; theother pillar would be in Europe. When it comes to the European Union, my landis not in the best shape. But when it comes to political stability, there is nopolitical stability at present. Behind this scene, there is a signal of socialdisorders. And here is the gist of my presentation: the reasons for the lack ofsocial stability are rooted in the economic policy of the European Union.
May I just give you an example of a “we all-”under European threat, because we all badly need a stable Europe, we all need aprosperous and dynamic European Union.
When it comes to the One Belt One RoadInitiative, we got all historical routes. It is really good to be built on theancient Silk Road routes, because we have also the new proposal. The new SilkRoad is key for Hungarian and European convergence and long-termcompetitiveness. We can see the whole network of Silk Roads coming from Asia,from China towards Europe. These are the new bridges of the One Belt One Roadconcept and again the European Union badly needs new bridges in order to reviveand reunite the European Dream.
When it comes to China, China will be a leaderin the fourth industrial revolution, and in the new Machine Age. China has areally smart strategy to win the 21st century. This strategy will nourish theOne Belt One Road initiative. Multiple Silk Roads will be built between Chinaand Europe, and it is really good. It happened in the ancient times and themedieval times. We need many Silk Roads in order to bridge Europe and Asia, theEuropean Union and China.
What about Hungary? We are really a very smallcountry within the European Union and we are also a minor player in the globaleconomy. However, Hungary since 2010 has been fighting against an uphillstruggle, in order to come out of the global financial crisis. Hungary andGreece both were badly hit by the global financial crisis after 2008. We werethe two most badly hit European Union member countries by the springtime of2010. However, the roots and the starting points were the same for the twocountries. You can spot it with all the macroeconomic figures of the twocountries. The average of macroeconomic figures between 2003 and 2008 werenearly very close to each other. It is not a shock; it is not just coincidencethat these two countries were hit by the global financial crisis. They werevulnerable; they were extremely sensitive to the crisis. The two countries werein the same boat by the springtime of 2008. But the two countries chose twodifferent paths to get out of the crisis.
Greece was forced to pursue a conventionalcrisis management path based on austerity measures. This is an officialeconomic policy of the European Union. All the measures are based on austerityphilosophy. However, it proved to be a failure. Then, we have a look at thevector on figures of the Greek present economy, we will spot the failure. Inthe Hungarian case, we chose a different path, an unconventional and unorthodoxcrisis management. We were heavily criticized by our partners and friendswithin the European Union, and also from the part of International MonetaryBank. We had a mixture of economic policy measures which are not based onauthority. We launched sector reforms and asked our business community for aburden sharing scheme. Finally, the Hungarian crisis management proved to be asuccess story. Burden sharing command at that time was first in Europe,introducing a bank levy and crisis taxes, but at the same time, we alsointroduced a completely new tax system, tax ledge, tax regime.
I’d like to give some examples. All in all, wemanaged to complete a fiscal consolidation. The National Bank of Hungarymanaged to launch a completely new monetary policy. Both resulted in therevival of GDP growth and economic growth. This is the gist of the Hungaryexample. These are reforms of innovations used by Hungarian government and usedby the National Bank of Hungary, in order to complete the fiscal consolidationscheme, and finally, to reach a completely new economy. We introduced demanddebts, flat tax for our personal income. In taxation, we have a 15% flat tax bynow. We reduced government debts significantly. We disciplined the budget. Welaunched an opening to the East, to be prepared for the Silk Road. We managedto start public works. We achieved price stability. The National Bank ofHungary launched a targeted monetary policy, helping our small and medium-sizedcompanies to have more financial resources. That’s the trick of Hungarianclassic management, or these measures are supposed to be such reforms. Reformsand innovations.
Why don’t we have a look at the two stories? Onthe one hand, Hungary and Greece started from the same point. The historicalbackground was very similar to each other. There was a spotted deteriorating incompetitiveness. In both countries, economic growth was financed by externaldebt. Both countries reached high deficit and public debt. In the case ofHungary, however, we managed to launch structural reforms. We were autonomousand independent while shaping our economic policy. And finally, it proved to beinstrumental to the success. In the case of Greece, it is a completelydifferent story. Because if you have a look at the Greek part of the chart, youcan see the increased taxes, the decreased expenditures, some austeritymeasures. Also, they introduced some other economic policy measures. Theresult, however, is a diminished employment.
In the case of Hungary, we had a complete taxform; we reformed the expenditures; and we also took some other steps resultingin a final success. Hungary, we decreased tax in 2010 and we continue to do itduring next couples of years’ time. It enhanced employment and economic growth.Greece is not alone. Many European countries were badly hit by the sudden badof Eurozone, and also by the official economic policy of the European Union.You can see the gap between two economies. Similar or very similar startingpoint might finally result differently.
GDP growth recovered in Hungary, while Greece isstill struggling. Also Hungary has been paid the loans from the internationalfinancial assistant programs. You can spot the blue box in 2010 and we do notsee any blue boxes. However, in the case of Greece again, due to a wrongeconomic policy forced by the European Union, they resulted in a much higherlevel of debt. You can spot the gap between the two crisis management policies.There is a huge gap.
In Hungary, employment friendly measuresdecreased unemployment rate significantly. In the case of Greece, probably thisis the second most important chart of my message. Because sir Christophermentioned all the impacts of the Machine Age. All these impacts are stillaccelerated by the wrong economic policies. In the case of comparison of Greeceand Hungary, you can spot it. Finally, Greece fell into a vicious circle, whileHungary broke out from it. It might be a virtuous circle. But again the twocrisis management paths proved to be completely different and the startingpoints were the same. These are macroeconomic results for the Hungarianunconventional and unorthodox crisis management strategies. All themacroeconomic figures improved tremendously.
Finally, Hungary has an example that all thecountries of European Union can break out of the trap. But in the case ofbuilding up bridges between Asia and Europe, the European Union badly needsgood enough economic policies to grasp the opportunities, to take theopportunities of the One Belt One Road Initiative.
