Hungary's Viktor Orbán tells China's central bank that he hopes to build an 'integrated and economically successful Eurasia in the coming period'
Good morning. I've just got a permission to speak Hungarian.
Greetings to everyone, have a good day!
Before I begin, I would like to tell you that I have just returned from Shanghai, where I witnessed a moment of world history, and I would like to draw your attention to this. If someone had told us, say, ten years ago, that we would be present at a conference where the Chinese, together with the World Bank, the head of the World Trade Organization and the head of the IMF, would defend free trade and multilateralism against an unnamed major global economic player, well, if someone had told us this ten years ago, we would have laughed heartily. It shows the extent of the changes in the world, that perhaps only our Eastern or Central European ears hear this as something interesting, because China has become such an accepted player in the world economy that as a fighter for multilateralism and free trade, it no longer surprises us at all in this role.
I respectfully greet the Governor of the Central Bank of the People's Republic of China also because next year will mark seventy years since the two countries established diplomatic relations. This may not be a world record, but it ranks us among those countries that have not only recently begun to recognize that China will one day have global economic and historical significance, and these seventy years of cooperation and friendship are a very serious advantage in Chinese-Hungarian relations today. And, in a biased way, let me also greet my friend Isărescu, who is the Governor of the Romanian Central Bank and who reminds us of our poetic youth, since back in 2000 I was able to serve as Prime Minister together with the Governor of the Central Bank. Welcome back to Budapest!
Ladies and Gentlemen!
I greet you with respect here, in Buda Castle, the ancient intellectual and political center of the Hungarian nation. We can see that our ancestors had their own minds. They built the place where the most important ideas and decisions were born over the centuries in a place from which you can see not only to the west, but also to the east. There is a panoramic view that forces those who work here to look in all directions before making decisions that are important for Hungary. This is of particular importance now, because if someone only looks in one direction, they cannot make decisions that would properly designate their place in the world order that is now being formed. And yet, ladies and gentlemen, the strong commitment and plan, the optimistic vision of the Central European countries and the Balkan region, which is closely linked to us, that we, this region, Central Europe and the Balkans together, want to be the winners of the next decade.
Dear Ladies and Gentlemen!
This is the first time that the central bankers of the sixteen and China have held a joint conference. We have done many things before, but we have not met in this format, but we suspected that sooner or later we would reach a point where it would no longer be enough to deal with trade and investment issues, but the moment would come when we would also have to seek cooperation in the field of finance.
Dear Ladies and Gentlemen!
The fact that this happened is due to the outstanding, initiating and decisive role of Governor György Matolcsy, who organized this conference, and to whom we are grateful.
If we look around us, ladies and gentlemen, we can see that we are a very diverse society. I am not only thinking of the different types of governments operating in the 16 countries, but I also mean diversity in terms of how we pay and what we settle accounts with. Here are Estonia, Latvia, Lithuania, Slovenia and Slovakia, which are both members of the European Union and members of the eurozone. Here are the Czech Republic, Poland, Romania, Bulgaria, Croatia and Hungary, which are members of the European Union but not members of the eurozone, and they are saying different things about whether they want to become members and, if so, when. They know very well that Hungary is one of the more cautious ones. We want to be an integrated part of the European community while remaining open to other regions and communities, and this will also have to be reflected in our decision on the euro. And then we have our friends from Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia. They represent an extremely fast-growing region, but they are not members of the European Union or the eurozone. I would like to make it clear that Central Europeans, including Hungary, are the most strongly committed to the European Union membership of the countries of the Balkan region. We want to see rapid, strong enlargement, led by Serbia and Montenegro, which I believe are the closest to becoming members of the European Union. And to top off the diversity, we also have China, whose currency we will have to reckon with in the future.
If I understand the Governor's request correctly, my job here this morning would be to somehow open this conference from a non-central banker perspective, which is more than enough here. So my job is to try to direct your attention to some things that seem important from a political perspective.
The first thing I would like to mention is that in 2008, during the financial crisis, it became clear that we were moving towards a new economic world order. Some had said this before, but the financial crisis of 2008 made it clear that we were now in a period of change. Ten years have passed since then, and it is now 2018. I think we can venture, with sufficient modesty, to say that we can now see what the world will be like in the next ten to twenty years. We can now say that the unipolar world order will definitely be replaced by a multipolar world, in which new actors, new cooperation and new values will emerge and gain ground.
The second thing I would like to draw your attention to is that we, politicians not only in Hungary but also in the EU, see that globalization will continue, but its internal balance of power will change. Because new and new centers of power are rising, which will carve out ever larger slices of the world economy pie. Among the new centers that are rising, we find China in the first place. I tell the Governor that if you read Western European analyses related to China, you will often read analyses that describe China's success as temporary. It is difficult to know how much of this is calm analysis and how much is wishful thinking, but I see that the past ten years have proven that the rise of the Chinese economy is not a temporary phenomenon. China will be a fixed star in the coming period, and it will be a determining player in the world economy for a long, long time, and we must think of China in this way, and we must reckon with it in this way in the future. Among the changes in the internal balance of power in globalization, I must mention the fact that a new center has emerged in Europe, and this is Central Europe, and if God permits, then the Balkan region, that is, Central Europe and the Balkans together, that is, us. There is a consensus in Western Europe that in the next five to ten years, the Central European region will be the engine of European economic growth. We will be the fastest growing economic group of countries in Europe. Our advantages are not cyclical, but structural. These countries are innovative, operate with a low tax system, and have a highly skilled and qualified workforce. We are an important part of the engine of the European economy. Hungary is particularly like this, and we feel that we have good reason to look to the years ahead with confidence. I would also like to draw your attention to the fact that, in addition to historical relations and geographical relations, economic relations will obviously also be established between the two rising power centers, China and Central Europe, and the two regions will become increasingly interconnected. The Chinese have formulated this, they have announced this program: “One Road, One Belt”, they want to create an economic area. The term still sounds strange to our ears, but here we are talking about the construction of Eurasia. There are always three concepts on the table when we talk about the future of Europe, the Eurasian, the Euro-American and the Eurabian concepts. There is a lot of truth in each of these, but undoubtedly the Eurasian approach is the most novel and economically attractive. This means nothing less than that China and Central Europe are part of a continuous geographical area. You can get from Central Europe to China by rail in two weeks and transport any goods. And if we manage to build a high-speed railway from the Greek ports to Europe, that will mean an even shorter time. I just wanted to say thatthat we must think of Eurasia not only as an obviously existing geographical fact, but also as an economic region in the future.
Dear Ladies and Gentlemen!
It can be argued, of course, that the countries of the European and Asian parts of Eurasia are based on different ideologies, but if I look back at the past ten years, I have to say that this is of no significance. The western half of Europe is learning more slowly than the central European part, but in the end everyone will realize that we must approach China without ideology. We must accept that we are different, that we organize our lives in different ways, and that we govern our countries in different ways. The task is not to judge. We will leave that to the pen-wielders. The task of decision-makers is to look for what common interests we can find in a common system of relations.
Dear Ladies and Gentlemen!
It is no coincidence that China-Central Europe relations are considered a success story of the new era. The President was kind enough to mention that our trade volume has approached 70 billion dollars and the growth rate is impressive, an average of 10, but in terms of China-Hungary trade relations, if I read the data for the first three quarters correctly, we registered an 18 percent growth.
Dear Ladies and Gentlemen!
I would also like to draw your attention to the fact that in this new world order, knowledge, talent and creativity will play a prominent role. Everyone has two options. The first is to produce knowledge, the second is to buy knowledge. The fight between regions for excellent professionals is becoming increasingly fierce. There will be winners and losers in this brain drain. Central European countries have never been famous for wanting to suck knowledge from others. Throughout their history, every Central European country has believed that their independence and national sovereignty have cultural and intellectual foundations, and that a country that cannot produce the knowledge necessary for modern competitiveness does not deserve to exist as a nation. I think this is a common belief among Central European countries, which is why we do not want to buy knowledge, but we want to produce it. We have everything we need to create this knowledge. There are educated and smart young people in Central Europe. If I compare my generation – no offense to anyone my age – with the young generations that are coming of age behind us, it is clear that they are more educated and competitive than we were, and will slowly become more competitive than we are. We have no shortage of smart and educated young people, we have creative businesses, and we have political systems that support research and development. For example, in Hungary, the goal is to reach 1.8 percent of GDP in R&D by 2020, which would mean spending roughly 1,000 billion forints on this by 2020, which is a huge number by Hungarian standards.
Dear Ladies and Gentlemen!
What I would like to draw your attention to is a possibility. We do not know if it will happen, although it seems very likely that we must prepare for the dollar losing its dominance in world trade. It is no longer alone on the market. It seems that the world will become more diversified not only politically but also financially than it was. The weight and power of new trade centers will not necessarily be expressed in dollars in the future. The yuan is an investment and trade instrument that we, Hungarians, must also reckon with. It is no coincidence that Hungary has already issued government bonds in Chinese yuan, and we will continue to do so, although we want to finance the government debt primarily from Hungarian domestic savings, but if we issue bonds abroad, it will be in the east, and we are working to create the possibility of the yuan being the settlement currency in bilateral trade. This is an exciting thing, there are huge changes before our eyes. It is worth seeing this not only as a danger, but also as an opportunity, and even more so as an opportunity than a danger.
I would also like to say a few words, ladies and gentlemen, that I think the role of central banks in the new world order will change. Of course, it is life-threatening to talk about this to prime ministers, because the doctrine today in the West is that prime ministers cannot say anything about central banks, but if central banks say something about governments, then you have to stand up for yourself, that is pretty much the situation. To affect central banks with a prime minister's opinion is a life-threatening thing. But still, at such a conference, perhaps we can allow ourselves this luxury. Mostly because I would like to agree with the president of the Hungarian central bank, who emphasized that in this era, cooperation between national banks and governments is of crucial importance. The job of central banks is to provide financial stability, and politics is to provide political stability. We cannot go our separate ways. If the financial system and the political system are both stable, then we can prevent the crises that occur again and again in the global economy. And if there is cooperation and we both bring our own stability performance, then we cannot go bankrupt like we did in 2008.
Dear Ladies and Gentlemen!
I also think that national banks could perhaps participate more strongly in the development of the economy and trade. They have all the tools and authority to do this, perhaps I will say a few words about this later. And finally, I would like to draw your attention to the fact that another crisis cannot be ruled out. Of course, no one can say for sure on this topic, unfortunately neither can I. I can tell you that the analyses that have come into my hands, partly domestic and partly international, speak in a ratio of 70-30 about the imminent occurrence of another crisis, that we must count on an economic downturn not on the scale of 2008, but on a smaller one, in a form that is not precisely identified, but which will certainly occur. No one knows whether this will be the case, I say it again: international analyses speak in a ratio of 70-30 about this. This supports what the Governor said, and this is also true for Hungary: we must have two plans, both Plan A and Plan B. It cannot be that the Hungarian government does not have a plan in its desk drawer that will prepare for this economic eventuality.
Dear Ladies and Gentlemen!
Everyone mentions the debt situation among the causes of the crisis. Indeed, a significant part of the EU states are more indebted today than they were during the 2008 crisis. They talk about the end of the era of cheap money. We also have trade wars on our shoulders. The Hungarian language is more direct than the Chinese language, we translate trade disputes into trade wars, the Hungarian language is just that, Governor. And there is also migration, which I think will have a much greater impact on our lives than we think. As for the issue of the trade war, we Hungarians have long seen that the United States is striving to maintain its hegemonic role in the world economy and is therefore trying to transform world trade relations. We understand this, which is why they are imposing tariffs, for example, on European Union products and our most marketable sectors, and in this way are trying to significantly transform trade, which is the engine of the world economy. The regions interested in exports – and our Central European, Balkan region is a region interested in exports – must find the right policy in this situation. This is not easy. Here I can only dare, I can only undertake, I can only say that this war is not our war. This is perhaps the starting point with which we can determine how we should behave in a period burdened with such trade conflicts. This war is not our war, but it affects us. So we must manage our economic policy in such a way that we can simultaneously maintain good relations with the parties that are otherwise interested in the opposite direction, and we must be able to build good trade and economic relations separately. I think we are capable of developing such an economic policy, not only for Hungary, but for the entire region, so that China, Germany or the United States are simultaneously interested in Hungary and the Central European region being successful. It is not an easy operation, but it is possible.
Dear Ladies and Gentlemen!
Due to the shortness of time, I would like to say three more sentences about migration. It will transform our lives. First, the Westerners', and certainly theirs, this process is underway, Western Europe will no longer be the same as it was. The process seems unstoppable. It seems that the birth of parallel societies is inevitable in Western Europe, especially in Western European cities. Whether Western European governments will manage to cope with the problems arising from this and exploit the opportunities inherent in it, we do not know yet, but we do know for sure that they will have different problems than we in Central Europe, who have so far successfully protected ourselves against migration. Then, if economic conditions stabilize, because the processes indicate this, and Schengen remains and free movement remains here, then we will also have to find answers to the problems that they are still struggling with today. Fortunately, this is not a challenge expected during the current government mandate, and future governments will have time to address it, but it is good to be intellectually prepared for this situation.
Dear Ladies and Gentlemen!
The fact that we are past the first wave of migration does not mean that we cannot or should not see the demographic indicators in Asia and Africa, which predict with complete certainty the subsequent waves.
Dear Ladies and Gentlemen!
We must work to ensure that the region remains what it is now: a safe, strong, rapidly developing region that has influence, even significant influence, on what Europe should look like in the future.
Dear Ladies and Gentlemen!
Finally, I would like to say a few more words about the possibility of cooperation between the central bank and the government. If we seriously want to build Eurasia, then we need to implement serious developments, primarily infrastructural developments, because we need to connect Central Europe, the Balkans and China into a network, and a global network at that. And this requires capital. I think central banks should take on more of a role in making proposals to governments to raise the necessary capital of this type, and even take on a role in it.
The second thing that I think governments should expect, or it would be good if they received help from central banks, would be the launch of programs in which they can participate, with the help of which central banks can participate in the development of enterprises, especially in the development of sectors and innovative enterprises that shape the future. Central banks should perhaps take on a greater role - including the Hungarian one, although here we see successful examples through credit programs - than they have so far.
And, ladies and gentlemen, if what I said about knowledge is true, then it is also true that without modern education it will be difficult to win the future. I think the central bank, the Hungarian central bank, has moved in the right direction, although it could be braver when it takes on a role in training the economists and engineers of the future. So I think that in addition to the government, the central bank could also participate in the education system with greater force than has generally been the case in the past thirty or forty years. I would strongly encourage central banks to consider this possibility.
And finally, ladies and gentlemen, what can national governments give in return? I do not think that there is disagreement among central bank governors on this. The greatest gift that governments can give to central banks is political stability. A political atmosphere free from major fluctuations must be created so that the economy can function predictably. We need a political system that is just as predictable and predictable as the economic system we expect from central banks and our financial institutions. Central Europe has no reason to complain in this regard. Central Europe is a stable place, free from major fluctuations. To avoid diplomatic complications, I will not mention those Western European countries where there are constant problems with government formation, where coalitions are formed and fall apart. And I will not mention by name countries where early elections are threatened. Here, with due modesty, I would just like to say that here is Hungary, for example. The first free elections were in 1990, and it has been 28 years since then, and there has never been a single early election. This shows that we in Central Europe understand that political stability is important and is also a prerequisite for economic success. So what we can promise the central bankers, the governing gentlemen and the leaders of financial and economic life is that we will do everything in our power to build political systems that are at least as stable as the stable economic systems we expect from financial leaders.
Dear Ladies and Gentlemen!
I would like to welcome the 16+1 Central Bank Governors’ Meeting once again. We are grateful to the Governor of the People’s Republic of China for personally participating in this meeting. I would like to extend my warmest greetings once again to our friends from the Balkans and Central Europe. I hope that you will succeed in generating ideas and cooperation that will help us build a truly integrated and economically successful Eurasia in the coming period. I wish you every success in the meeting!