Hollosi Information eXchange /HIX/
HIX HUNGARY 485
Copyright (C) HIX
1995-11-10
Új cikk beküldése (a cikk tartalma az író felelőssége)
Megrendelés Lemondás
1 Re: Szu3cs Andra1s (mind)  20 sor     (cikkei)
2 Re: Ka1da1r (mind)  19 sor     (cikkei)
3 The Yeltsin Files (mind)  52 sor     (cikkei)
4 Re: (no subject given) (mind)  9 sor     (cikkei)
5 Re: Szu3cs Andra1s (mind)  24 sor     (cikkei)
6 Re: The Yeltsin Files (mind)  75 sor     (cikkei)
7 Dangerous? Not really (mind)  8 sor     (cikkei)
8 The university textbook on Hungarian history (mind)  18 sor     (cikkei)
9 17 new "figments of Pellionisz' imagination" (mind)  525 sor     (cikkei)

+ - Re: Szu3cs Andra1s (mind) VÁLASZ  Feladó: (cikkei)

> Felado :  [United States]
> Temakor: Hungarian Anti-Defamation League ( 73 sor )

Since I am reluctant to discuss any substantive issues with a phantom
I challenge  to prove that he is
an actual person. The only thing I know for sure is that no person
named Szu3cs is listed in the Silicon Valley area codes (408 and 415).
Does our szucs_andras have a phone? A driver's license?

As for the rest, there is nothing defamatory in stating that the
"100,000" was much less. This is what all press reports say.  I also
stand by my earlier assertion that 1956 was not a war of independence
(szabadsa1gharc). A lively debate will no doubt ensue, assuming there
are live persons to conduct it...

Andra1s Kornai

PS. (To Greg Grose) Maybe you are right. Maybe it's not so dangerous to
have all these phantoms around. But you must admit there is something
creepy about it.
+ - Re: Ka1da1r (mind) VÁLASZ  Feladó: (cikkei)

Kornai wrote:

>(from the seventies onward, Western newspapers could be bought for forints
>first in hotel lobbies, later in all newsstands in tourist-frequented areas),
>and of course access to the West itself (increasingly liberal passport/visa/
>foreign exchange policies). Implicit (sometimes explicit) statements as to
>bringing Hungary into the western orbit as far the convertibility of the
>currency and integration into western organizations was concerned.

Well, I think we knew about these things here more than you give us
credit for because many of us visited back there regularly from the '70s
on.  Unfortunately, we were also reminded with regular frequency how
shallow those new freedoms really were by such things as Hungary's
slavish following of the Soviet line in boycotting the
Los Angeles Olympic Games.  It was pretty embarrassing to see only
the Romanian team there from the East Bloc.  And this was already in
the '80s!

Joe Pannon
+ - The Yeltsin Files (mind) VÁLASZ  Feladó: (cikkei)

Peter I. Hidas writes:

> During a November 1992 visit to Budapest, Russian President Boris Yeltsin
> handed to Hungarian President Arpad Goncz a dossier of Soviet archival
> materials related to the 1956 Hungarian Revolution. The documents contained
> in the file, consisting of 299 pages, have now been published in Hungarian
> translation in two volumes, and also made available in russian archives.

I am curious about the two volumes.  The edition published jointly by
the 1956 Institute and Szazadveg Publishers in 1993 has just one volume.
Its title is "A Jelcin-dosszie.  Szovjet dokumentumok 1956-rol".  Is there
a second volume?  When was it published?  What is in it?

I have a sneaking suspicion that the "second volume" might in fact be
the compilation called Missing Pages from the History of 1956 (Hianyzo
lapok 1956 tortenetebol), edited by a pair of Russian researchers.  It
contains material collected (stolen?) from the Central Committee archives,
and has nothing to do with the files handed over by Yeltsin in 1992.  The
two collections often overlap, although the translations are different.
This edition contains many partial documents, often just single paragraphs
ripped from minutes and memoranda.  The two volumes were published within
weeks of each other.  If you can shed any light on the mysterious second
volume -- better yet, can provide a bibliographic reference -- I would be
very grateful.

> The Soviet documents suggest that October 26 was a turning point. On one
> hand this is when Imre Nagy's policy of searching for a political solution
> was formulated.  He decided that a new political, conciliatory line was
> needed. This change was supported by Kadar with some reservation.

I was looking for the "other hand", but did not find it.  Do you feel
that October 26 was a turning point in Soviet policy also?  The two volumes
of documents show the Soviet leadership vacillating all the way up to
October 30, when the decision to intervene was finally taken -- although
there is no "smoking gun" anywhere in the two volumes, only the usual
bureaucratic euphemisms.  Even on October 30 the Presidium is spending
its time on a suspiciously conciliatory government communique, where they
are cautiously offering to reexamine the economic and military arrangements
of the Warsaw Pact, including a negotiated withdrawal of Soviet troops.

Everything about the communique indicates that the Soviet leadership was
confused, flabbergasted, and discombobulated by a series of events that
were quite outside the range of their experience.  They were moving in all
directions at once, and there was no telling what they might do next.
Not much in the way of "historical inevitability" is apparent: clueless
bungling is more like it.  It seems to have taken until mid-November for
them to regain their footing, and start feeling a bit more secure again.
What do you see about October 26 to make it a "turning point"?

-----
Gabor Fencsik

+ - Re: (no subject given) (mind) VÁLASZ  Feladó: (cikkei)

kristyan has me wondering now in connection with Nancsi neni -- just what
is the word for "redneck" in Hungarian? Being of impeccable Southern
redneck lineage myself, I know we have a large number of terms that fall
under the redneck umbrella --- "wool hat", "good old boy", "goober",
"trailer trash", "poor whites", "white trash", etc. There are some really
subtle degrees of difference between all of these terms. Does Hungarian
offer this variety of terms or is there just one omnibus catch-all word?

Sam Stowe
+ - Re: Szu3cs Andra1s (mind) VÁLASZ  Feladó: (cikkei)

I also
>stand by my earlier assertion that 1956 was not a war of independence
>(szabadsa1gharc). A lively debate will no doubt ensue, assuming there
>are live persons to conduct it...
>
>Andra1s Kornai

In 1956 Hungary was not an independent country. The Red Army, the only
representative of the
Warsaw Pact countries not only confronted the West but maintained the rule
of Hungarian communists by its threatening presence. One of the main aims
of the Hungarians '56-ers was to make the country free of foreign troops.
During the first days of the revolution there was fighting between
Hungarian military units (esp. Ulloi-ut part of Budapest)  and Soviet tank
units.  Freedom fighters confronted the Russians from the night of October
23 (Madach Square).  The revolutionaries had other aims besides
independence, however, the liberaton and the defense of their country was
on the top of their agenda.

Peter I. Hidas, Montreal


Peter I. Hidas, Montreal

+ - Re: The Yeltsin Files (mind) VÁLASZ  Feladó: (cikkei)

>Peter I. Hidas writes:
>
>> During a November 1992 visit to Budapest, Russian President Boris Yeltsin
>> handed to Hungarian President Arpad Goncz a dossier of Soviet archival
>> materials related to the 1956 Hungarian Revolution. The documents contained
>> in the file, consisting of 299 pages, have now been published in Hungarian
>> translation in two volumes, and also made available in russian archives.
>
>I am curious about the two volumes.  The edition published jointly by
>the 1956 Institute and Szazadveg Publishers in 1993 has just one volume.
>Its title is "A Jelcin-dosszie.  Szovjet dokumentumok 1956-rol".  Is there
>a second volume?  When was it published?  What is in it?
>
>I have a sneaking suspicion that the "second volume" might in fact be
>the compilation called Missing Pages from the History of 1956 (Hianyzo
>lapok 1956 tortenetebol), edited by a pair of Russian researchers.  It
>contains material collected (stolen?) from the Central Committee archives,
>and has nothing to do with the files handed over by Yeltsin in 1992.  The
>two collections often overlap, although the translations are different.
>This edition contains many partial documents, often just single paragraphs
>ripped from minutes and memoranda.  The two volumes were published within
>weeks of each other.  If you can shed any light on the mysterious second
>volume -- better yet, can provide a bibliographic reference -- I would be
>very grateful.
>
>> The Soviet documents suggest that October 26 was a turning point. On one
>> hand this is when Imre Nagy's policy of searching for a political solution
>> was formulated.  He decided that a new political, conciliatory line was
>> needed. This change was supported by Kadar with some reservation.
>
>I was looking for the "other hand", but did not find it.  Do you feel
>that October 26 was a turning point in Soviet policy also?  The two volumes
>of documents show the Soviet leadership vacillating all the way up to
>October 30, when the decision to intervene was finally taken -- although
>there is no "smoking gun" anywhere in the two volumes, only the usual
>bureaucratic euphemisms.  Even on October 30 the Presidium is spending
>its time on a suspiciously conciliatory government communique, where they
>are cautiously offering to reexamine the economic and military arrangements
>of the Warsaw Pact, including a negotiated withdrawal of Soviet troops.
>
>Everything about the communique indicates that the Soviet leadership was
>confused, flabbergasted, and discombobulated by a series of events that
>were quite outside the range of their experience.  They were moving in all
>directions at once, and there was no telling what they might do next.
>Not much in the way of "historical inevitability" is apparent: clueless
>bungling is more like it.  It seems to have taken until mid-November for
>them to regain their footing, and start feeling a bit more secure again.
>What do you see about October 26 to make it a "turning point"?
>
>-----
>Gabor Fencsik



The following two volumes published the Soviet documents related to 1956:

Eva Gal, Andras B. Hegedus, Gyorgy Litvan, and Janos M. Rainer, eds., A
Jelcin dosszie." Szovjet dokumentumok 1956 rol. (Budapest: Szazadveg Kiado-
1956-os Intezet, 1993.

Vjacseszlav Szewreda and Alekszander Sztikalin, eds., Hianyzo lapok 1956
tortenetebol: Dokumentumok a volt SZKP KB Leveltarabol. Budapest: Mora,
1993.

Imre Nagy adopted a policy of conciliation  on October 26 and not on
October 28, when he declared the armistice. He gained support for this from
popular pressure coming from below and the actions of the party opposition.
For details see Hianyzo lapok, 109-110 [Mikoyan-Suslov to CC CPSU, 26
October 1956]




Peter I. Hidas, Montreal

+ - Dangerous? Not really (mind) VÁLASZ  Feladó: (cikkei)

Greg wrote:

>With respect, if it's that easy to see through, how dangerous can it be?

Well, not very dangerous in this sense. What bothers me is that some older
Hungarian emigres fall for Pellionisz's drivel in a big way.

Eva Balogh
+ - The university textbook on Hungarian history (mind) VÁLASZ  Feladó: (cikkei)

Andras Kornai wrote:

>E1va Balogh summarizes a "university textbook," (I'm actually interested
>who's the author)

Here it is: Ferenc Poloskei, Jeno Gergely, Lajos Izsak, eds. *Magyarorszag
tortenete, 1918-1990: Egyetemi tankonyv. Budapest: Korona Kiado, 1993. The
authors are: Mihaly Bihari, Jeno Gergely, Lajos Izsak, Jozsef Kardos, Istvan
Kukorelli; Gyorgy Perczel, Ferenc Poloskei, Ignac Romsics, Istvan B. Szabo,
Karoly Szerencses.

Lajos Izsak is the author of the chapter on the revolution of 1956 es Karoly
Szerencses of the chapter on the Kadar regime's political history. I
especially liked Szerencses's chapter. By the way, Szerencses mentions some
of the other reasons for the later Kadar regime's popularity: travel abroad,
the "right of murmuring," and so forth. It is worth reading.

Eva Balogh
+ - 17 new "figments of Pellionisz' imagination" (mind) VÁLASZ  Feladó: (cikkei)

We learnt here in "Hungary", that "Dr. Endrey was just a figment of
Pellionisz' imagination".  For all I can see, by Andras' magic (or by
Nature?) Dr. Endrey turned out to be an existing elderly statesman-like
lawyer, who lives in his retirement in Hodmezovasarhely (a good distance
from Silicon Valley...). He breeds, on his pleasure farm, a dozen or so
"Grey Hungarian" cattle (on the list of endangered species!). In his spare
time left, he bothers even to care about yet another "endangered species";
poor Hungarian Nation.

As TV, radio, and scores of newspapers have personally interviewed "Toni
bacsi" (several articles appeared with his photo) I can only ask
"conspiration
theorists" of "figments of Pellionisz' imagination": has it ever occurred to
you that perhaps Dr. Pellionisz is the figment of Dr. Endrey's imagination ???

Also, I kind of doubt that the crowd, unprecedented in size since 1990,
that Adam Horvath TV director feared as "one hundred thousand", was
composed of
"figments of Pellionisz' imagination". On the TV screen they appeared more
like human bodies, completely filling Szabadsag and Kossuth squares.

Nonetheless, after Andras could successfully figment tens of thousands of
people to appear in front of the Parliament, I am not too surprised that he
apparently turned out, by his magic, yet another seventeen.

"Conspiration theorists" of the Hungary-list (Kornai, Balogh and their
likenesses ... oops, are these two not the SAME PERSON!?!?!) will most likely
label "just figments of Pellionisz' imagination" the seventeen eminent
intellectuals (leading economists, university professors and alike) who
published on the 27th of October in "Magyar Nemzet" in Budapest an "Open
Letter" to World Bank President. Their "Open Letter" appeared in Internet
"Nemzet" fortright and by yesterday also in its English translation. I
spruced translation up a little bit to appear below.

I must add, I am still not completely satisfied with Andras' imagination.
One would think it could take just a twinkle for his magic figment to have
e.g. Janos Kornai's name appear among those famous 17 economists who raised
voice for having Hungary in the "League of Giants", (countries that could
already massively reduce their IMF-debt; Poland, Bulgaria, Albania). Why
did Andras *NOT* figment Janos Kornai's signature under the document below?

Well, conspiracy theorists of Hungary-list I bet already know the answer.
Or at the least, a dark suspicion is afoot... Here it is: Kornai Sr. is only
a figment of imagination of his son, Andras Kornai!

For Mrs. Balogh (if she maintains a separate existence from Kornai), I have
even less to say. She doubts the existence of Joska ba', since it is "proof"
that someone cannot exist if has lived decades in emigration - yet knows
today's slang for SZDSZ extremist-idiots ("blue heads"). Sorry, Mrs.Balogh,
by *your* definition you cannot exist! You are a person who have lived close
to forty years in emigration -- yet you just slipped to reveal that you
know today's slangs that you are not supposed to know. Using your "logic"
(that you've cancelled Nemzet "thus cannot comment on the article Andy
Kozma found offensive. But I am sure it was!") - I could say this: "I never
met Mrs.
Balogh thus I cannot comment on why SZDSZ hired her. But I am sure she does
not exist!"


========    ENCLOSURE: "OPEN LETTER" TO WORLD BANK PRESIDENT   ==========

[This Open Letter appeared (in the original Hungarian Language) in
Hungarian daily newspaper "Magyar Nemzet" in Budapest Hungary, Oct. 27,
1995.
Verification can be made at: Tibor Petho, Chief Editor of "Magyar Nemzet",
telephone 011-36-138-2399]


Mr. James D. Wolfensohn, President of IBRD,
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
181811 Street, N.W.
Washington D.C. 20433, USA

(Hand-delivered to the
HUNGARIAN REPRESENTATION OFFICE
OF THE INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
Attention: Mr. Millard Long)               Budapest, 26th of October, 1995.


Dear Mr. Wolfensohn,

Although you are just beginning to get acquainted with our region and our
country, you have already greatly impressed us. In your radio interview,
you openly admitted that you had completely forgotten to mention, in your
speech delivered at the Alumni Meeting of the World Bank, countries that
undergo transition in our region. But immediately added that you rushed here
to be able to personally feel, on the spot, all that you had read in
reports. Because - as you said -  "... in my new position I have to
evaluate each piece of information in a different manner than it was
before". All this signal to
us a sincere, deeply humane way of thinking.

Your interview encouraged us to turn to you direct, by this Open Letter.
An IMF letter to Hungary, published recently, gave the impression that it
was written on behalf of the World Bank as well ("... we in the Fund,
together with many others in the international community...") and it is
widely known that as
long as no agreement has been reached with the IMF, no contracts can be
signed with the World Bank.

We were led to write this letter by our conviction that we must not
conclude an agreement on the terms and conditions as stipulated by the IMF,
since they are not only impossible to fulfil, but also contradict the
IMF-Charter enacted in Hungary. This charter stipulates that with its
entire policy and with all its decisions the IMF should fully benefit the
increase in
employment and real income in our country.

In our opinion, the expectations of the IMF in Hungary contradict the Charter
of the World Bank as well, that binds the organization to promote
improvement of the standard of living and working conditions and
development of the means of production in a member country, with all its
decisions, giving special attention to business relations. To enable the
organization directed by you to comply with these provisions, we need to
sign such an agreement with the IMF that supports the development of the
Hungarian economy and the quality of life of the Hungarian people.

Hungary has been a member of both organizations since 1982. If we take a look
at the output- and employment-figures of Hungarian industry and agriculture, a
continuous decline during the past five years in these sectors is not only
striking, but is outright bewildering. In his letter, Mr. Massimo Russo,
Director of European I Department, summed up the IMF requirements for 1996
and 1997 in the following five points:

i)   Net foreign debt should be reduced in the following two budgetary
years,
     with the current account deficit brought below USD 2 billion.

ii)  Deficit of the consolidated state budget, with social security
     fund included, should be reduced below 4% of the GDP.

iii) Competitiveness should be improved by wage restraints, and inflation
     should thus be reduced to an annual rate of 10% by the last quarter of
     1996.

iv)  Stringent monetary and credit policy should reduce interest rates only
     to the extent of actual declining market expectations of inflation, but
     interest rates in no way should be forced down by monetary policy
actions
     taken by the National Bank of Hungary.

v)   Rapid privatization of state-owned companies and banks should improve
     restructuring of the economy, and thus foreign debt should decline.
     In addition, the number of state-run institutions and their staff
     level should also be reduced, and social security should be reorganized.

According to Mr. Massimo Russo, this is the only possible economic policy to
"realize our shared objectives".

We refrain from entering here into any discussion whether our objectives are
truly shared and if they are whether we have the same share in a success or
failure. We must, however, examine if the conditions can be fulfilled and
if they are well advised, i.e. if they are really suitable for facilitating
the long-term stability of Hungary and the balance of the international
financial system through their implementation. We are convinced that the
answer is "no",
to both, due to the following reasons:

CONCERNING i)  The country's net foreign debt is growing at an accelerating
pace. According to the latest report published by the National Bank of
Hungary, during the l2 months preceding May 1995 the net national debt
increased by USD 5 billion and the gross national debt by USD 6.5 billion,
to USD 32.2 billion. (70.5% of the gross debt is owed by the National Bank
of Hungary, 6% by the Hungarian Government, the remaining part by
commercial banks and companies.)
The IMF expects that there should be an appreciable reduction in net
foreign debt, or in other words, the current exponential growth should turn
into a decrease. This change should take place first of all at the National
Bank of Hungary - and this is not totally hopeless. During one year from
May 1994 to
May 1995, gross debt increased by USD 4.7 billion due to the change in
currency exchange rates alone. If a vast amount like this can be lost on
changes in exchange rates and in currency-structure of the debt, maybe
similar amounts can also be gained this way. However, according to the
latest directive issued by the National Bank of Hungary, all information
relevant to the structure of our debt and reserves, and their changes and
decisions about them, shall be kept confidential for 20 years. Thus, we are
not in a position to offer advice for profit. On the other hand, the IMF
and the World Bank have detailed data at their disposal because it is
mandatory for Hungary to supply them information. Therefore, it is you who
can offer us projected calculations and estimates.

The USD 4.7 billion increase in our debt, caused by changes in currency
exchange rates, amounts to 44% of the export revenues realized from the
supply of
goods and services in 1994. This amount can hardly be recovered by any,
even intensive, growth of export. Making another comparison, the amount of
the loss suffered from cross rate changes is higher than the total 1994
budget revenue, from personal income taxes, and all sorts of corporate
taxes and customs duties! Consequently, the business sector is unable to
contain the swelling of debt, either by export growth or by domestic
operations. If anything, the Central Bank, by its currency transactions
hidden from the public, could be better poised to achieve the goal.

The Hungarian budget predicts a total income of HUF 250 billion (approximately
USD 2 billion) from privatization in 1995 and 1996. Even this amount would be
insufficient to reduce our debt. It can only cover our debt service for a
few months. Any significant growth in the rate of importing working capital
would fall behind the growth of interest payments.

Bearing in mind the above, may we take the liberty to ask you, the President of
the World Bank, the director of many thousands of well-trained experts,
to provide us with information about the factual basis of the IMF debt
reduction targets, by publishing the relevant calculations in detail. This
request is based on the resolution passed by this year's Annual Meeting of your
twin financial organizations, according to which enhanced publicity should
be given to the financial processes taking place in member countries.

CONCERNING ii) The IMF expects that the consolidated state budget of 1996
and 1997, including the social security fund, should be held to a deficit below
4% of the GDP. This expectation is based on the assumption that the state budge
t
deficit is caused by excess consumption which leads to an increase in imports
and, consequently, to an increase in our external indebtedness. In our opinion
this interpretation is incorrect. The primary balance of the Hungarian
state budget is positive, that is, the budget has more revenue than
expenditure. The deficit is caused by interest payments, of which only a
minor part is channeled to the economy, and an even smaller portion creates
real interest which feeds
consumption. Calculations made with real interest show a deficit of only 1 or
2% of GDP for the past few years, far less than the ratio accepted in developed
countries. The major part of the interest payments effected by the state budget
flows to the National Bank of Hungary and then abroad, obviously catering for
no demand domestically whatsoever.

The Hungarian Parliament will start its debate on the 1996 state budget in
a few days. As the amount of our debt servicing figured in the proposed budget
- even without the repayment of principal - is considerably higher than any
other budget expenditure item, its impact on the deficit is paramount not
only in 1996, but in the following years as well.

Under these circumstances it need not be additionally proven that it is not
the social security, public welfare, cultural and other expenditure that
overburdens our state budget, showing a large deficit, but our debt service
and the impact of the relevant monetary policies. This is why we ask you to

disclose detailed preliminary calculations relating to the structure of a
budget deficit that IMF holds suitable to our GDP, so that the 4% ratio
expected by the IMF, could be acceptable to society with some proven reality.

CONCERNING iii) The IMF expects wage restraints since, according to its letter,
the state budget deficit limit can be complied with only in this way, and this
is expected to help bring down inflation to 10% within a year. In our opinion,
direct demand-restraining effect of reduced real wages impacts on the inflation
far less than the burden of our debt service and privatization. During the
past few years, prices were raised not as a result of increased purchasing
power, but in most cases due to central measures (an increase in energy
prices, public transport fees, taxes, etc.). It was the World Bank which
required an increase in household electricity prices. Consequently, inflation
in Hungary inflation is not fed by an excess of demand, but by transferring
the burdens of the state budget and the National Bank of Hungary on the
public. Those who purchase state bonds and luxury items do muster a
relatively high purchasing power but those who live on wages and salaries
do not.

A decline in real wages will also result in a worsening of the composition of
export. A growing part of products sold abroad will be based on cheap hired
labor or will be reduced to exporting raw-material essentially. Fraction of
goods with higher added value will decrease as better trained (more
expensive) workers are squeezed out. Quality goods manufactured in Hungary
are replaced by imported articles in such process. In the first five months
of 1995, according to a report published by the National Bank of Hungary,
Hungarian exports increased by 1.5% while imports rose by 7-9%, although
our deficit was very
high last year already. Within exports, commission work increased by 20% and
the export of raw materials and spare parts grew, so the fraction of sales
of more sophisticated products obviously had to decline. Bearing in mind
the above, wage restraints together with the further decrease of added
value generates an increase in external debt as well, thus will increase
inflation instead of the hoped for reduction.

For a totally clear picture, it would be essential that the IMF disclose
its detailed calculations about the actual impact of an expected fall in
real wages,
including its impact on the export-import as well. If the 10% inflation
level scheduled for the end of 1996 is a realistic projection, then
inflationary expectations could really be curbed and public opinion calmed
by turning such relevant detailed calculations public. Also, by providing
authentic and objective information, prestige of the world's financial
organizations could be elevated.

CONCERNING iv) Stringent monetary and credit policies have kept interest
rates at a high level thus far.  A general credit-restraint impacts the
economy at this time, but this may well be in the interest of a deeply
indebted state and central bank, as credit-restraint is their main
instrument for managing external and internal debts for the time being.

There is no doubt that a central bank exerts a primary influence on credit
policies in every country. The National Bank of Hungary (NBH) has proven
this ability by reducing the interest rate on discount treasury bills from
30% to
10%, within few months preceding the bank consolidation agreement of April
1993. This is the interest to be paid on bank consolidation state bonds with
a maturity of 20 years. NBH "stimulated" the government to assume the
entire loss of commercial banks by this seemingly low rate of interest. But
during
the few months following the consolidation agreement - which was actively
promoted and helped by the IMF and the World Bank - the interest rate of
treasury bills, which must now be paid after the bank consolidation state
bonds as well, rose to exceed 30% again. Such a narrow "V" in the interest
rate diagram cannot be generated by regular market mechanisms!

The NBH needs high revenues for debt servicing. It collects these revenues
from two major sources: the yield of state bonds (at a cost to the budget
and the taxpayer) and the business sector. The NBH itself writes that "..
with the help of relatively low-interest-bearing, high compulsory reserve
ratio it must tax the economy implicitly via the banking sector ...". This
"taxation" increases compulsory reserve ratio tenfold from its
internationally accepted as 1 to 2%!
It is to be deposited with the NBH  - and as the NBH does not pay realistic
interest after these reserves, it generates losses at the commercial banks.

This fact compels banks to further increase the interest to be paid by
entrepreneurs. Therefore, the number of clients able to take out HUF loans
is reduced and the number of bankruptcies as a result of unserviceable
loans is increased. At the same time banks with partial foreign ownership,
fulfilling their reserve obligation in a foreign currency, receive a
realistic rate of interest and thus enjoy a competitive advantage over
domestic commercial banks. As a result of this, in the long run local banks
will lose their markets and foreign enterprises with their funds in foreign
currencies will reap unfair advantages. This process will also increase
imports and worsen the balance of foreign exchange. Thousands of jobs will
be lost due to interest rates kept at a high level, entrepreneurs will be
permanently replaced by administrators of firms in bankruptcy and instead
of creating jobs the main managerial activity will be "crisis management".
Foreign investment in cheap commission work will be considered more
valuable since a higher level of production becomes impossible.

Farmers have no access to realistic bank loans either, so they receive credit
from their crop buyers or suppliers. This distorts prices and takes away the
income which could be realized by agriculture and worsens living conditions in
the countryside. In the end budget expenditure rises, investment, infrastructur
e
development and related employment are not accomplished, and the real income
of agriculture flows abroad with cheap raw materials.

The spread of chain-bankruptcies hinder the repayment even of loans
otherwise in good standing, and the adverse moral impact is to relieve
debtors from their obligations. In this way commercial banks are weakened,
they need further and further state rescue assistance, and as a result the
bonds market seems to be expanding. But in reality a false economy is
generated. In the end, Hungarian banks will be driven out of the business
sector. They will trade with each other, the NBH and the state. They will
try to earn their living without real business performance. During the
privatization of banks we can hardly expect a favorable price for the
weakened banks and their market shares.

Bearing in mind the above, we would highly appreciate if the IMF, by
analyzing data undoubtedly available to it and by its quantified forecasts,
would prove the basis for a radical decline in inflation, giving special
attention to the fact that the IMF itself expects the central bank not to
force down the present level of its interest rates.

CONCERNING v) Privatization has been encouraged for years by the all-too-
frequent claim that any private owner is better than the Hungarian state.
Validity of this claim has not been critically analyzed based on the
five years of experience with privatization behind us. Based on their
personal experience, Hungarians reject more and more categorically the
rushed and secretive sellouts. And it was exactly the World Bank experts
who proposed a careful, experimenting and continuously double-checked
process of privatization!

It can be seen from this analysis that a major portion of the foreign capital
arrives at Hungary only for speculative purposes, seeking and finding huge
and invisible profits, settling only for a short stay. In many cases
foreign capitalists buys only "market shares", even if they promise
developments during their negotiation of privatization. Entire industrial
branches were bought up by foreign groups creating monopolies in the
domestic market. People, unlike state administrators and privatization
consultants, sorely feel the very negative consequences. The new foreign
owners often liquidate local processing operations, gaining an advantage by
better utilizing their West-European or overseas capacities, thus consider
our country merely as a market.

A year ago, President Clinton encouraged American capitalists to invest in
Hungary by saying that doing so they would create jobs in America. This is
all very well from a USA point of view, but without compensating mechanisms
this leads to the decline of Hungarian economy. The product and capital
export subsidies, applied in developed countries, are missing in Hungary.
Moreover, the IMF expectations are directed at the elimination of the still
existing
subsidies, so there is no reciprocity.

For example, the state had reconstructed five vegetable oil processing plants
using a World Bank loan prior to their privatization. But now the new owner
dismantles and liquidates these up-to-date plants while the foreign currency
loan, taken out for reconstruction, must be repaid by the Hungarian state. The
World Bank does not object to this procedure, although it contradicts the loan
agreement. Instead of exporting the processed goods, exporting our cheap
sunflower seeds and importing expensive foreign soy beans becomes a
"standard" fare. As a result, animal breeding and meat export-potential is
ruined, and domestic consumption is reduced. As opposed to some
privatization income, enough to cover only a few days of servicing our
interest burden, the Hungarian economy must endure continuous and huge,
direct and indirect losses. Consequently, what is important is not how much
foreign captal arrives at Hungary, but what their real objectives are!

Because of the lack of domestic credit, while an abundance of foreign
financing, it is gradually more to the interest of wholesalers to orient
themselves towards importing. Big European retailer chains, that bought up
shops here that sell everyday goods, therefore supply the public with
imported goods in an ever increasing percentage. It is understandable that
chains use
their existing logistics, their ordering channels, that they are committed to
their previous suppliers, and that they are reluctant to bother with the
local suppliers often with poorer packaging. However, as a result, production
in Hungary is shrinking, the balance of trade in hard currency worsens and
inflation grows.

Although there is some experience about the impact of privatization of the
so-called natural monopolies (bottled gas, telecommunication, etc.) studies

are still lacking on how they impact on retail prices and on the transfer
of profit. At this time, gross distributers of energy (piped gas,
electricity suppliers), with the lack of a public evaluation of earlier
privatization measures, public opinion awaits these privatization decisions
with great
anxiety, fearing a stiff increase in prices which would very severely
threaten their quality of life. The number of people demanding a rejection
of decisions to privatize these sectors continuously increases. Enforced
privatization however, without public support from the society, may give
rise to new tensions.

It is a well-known effect of privatization that foreign capital utilizes
property in Hungary, obtained by means of privatization, by the mechanism
of underpriced exports and overpriced imports to practically implement a
transfer of its profit, without taxation abroad, and is therefore able to
maintain its Hungarian operations even at a loss. It finances the loss from
abroad, but applies for subsidies here, in Hungary. Thousands of jobs were
lost this way and ensuing social subsidies for entire towns became a task
for crisis management by the state. If the IMF urges privatization, it
should objectively evaluate both positive and negative impact, and make
results public.


Dear Mr. Wolfensohn,

During your visit to Hungary you may meet with widespread social
restlessness and mushrooming strikes at several locations and across
various sectors.
Police is steeling itself to "contain" demonstrations, while there is not
enough money to combat "black economy" and organized crime. Large segments of
our society are at a loss to understand present trends, and see no prospects
for their future at all amidst their ruined social and health condition.
The Hungarian-born and educated American engineer, who was awarded the
Nobel prize last year, spotted a potential for a breakthrough in education
- like so
many other people - but today obtaining even a primary education is already
a massive burden. The Hungarian-born and educated professor of economics,
who was awarded the Nobel prize also last year is completely at a loss to
make
sense of economic policies prevailing in Hungary. It appears that present
trends can be understood neither by the men in the street nor by Nobel
laureate professors. Thus, we respectfully ask you and those thousands of
experts who work under your direction, refrain from trying in vain to
persuade the
public by generalities, using ambiguous terms of "structural reform",
"Bokros-package", "rapid privatization", as these slogans ring in people's
mind just as the "official reasoning" in the worst of times of
command-economy.
Instead, you may wish to try to persuade a still well-educated Hungarian
public by proving them that the economic policy required by the IMF is
appropriate, by making the specific facts and projected calculations
public.  In our humble opinion, a fair agreement of Hungary with the IMF
can only be reached on the basis of criteria that are proven to be both
attainable and appropriate for the goals.


Sincerely:


Dr. Laszlo Andor
economist

Dr. Magdolna Csath
university professor of economy

Dr. Mihaly Fecske
university professor of economy

Dr. Erzsebet Gidai
university professor of economy

Dr. Sandor Kopatsy
economist, candidate of Academy

Dr. Janos Kovacs
economist, research scientist

Karoly Lorant
economist

Dr. Miklos Mandel
university professor of economy

Dr. Jozsef Mocsary
economist, candidate of Academy

Dr. Pongrac Nagy
economist

Tibor Nemeth
economist

Dr. Kalman Pecsi
university professor

Istvan Siklaky
economist

Dr. Gyorgy Szakolczai
university professor

Dr. Tamas Szita
economist

Dr. Barna Talas
doctor of political science

Istvan Varga
dipl. mechanical engineer


=====  END OF ENCLOSURE:  "OPEN LETTER" TO WORLD BANK PRESIDENT  ==========

AGYKONTROLL ALLAT AUTO AZSIA BUDAPEST CODER DOSZ FELVIDEK FILM FILOZOFIA FORUM GURU HANG HIPHOP HIRDETES HIRMONDO HIXDVD HUDOM HUNGARY JATEK KEP KONYHA KONYV KORNYESZ KUKKER KULTURA LINUX MAGELLAN MAHAL MOBIL MOKA MOZAIK NARANCS NARANCS1 NY NYELV OTTHON OTTHONKA PARA RANDI REJTVENY SCM SPORT SZABAD SZALON TANC TIPP TUDOMANY UK UTAZAS UTLEVEL VITA WEBMESTER WINDOWS