This year, the National Bank of Hungary (MNB), the central bank, has organized the Lamfalussy Conference for the tenth time. At the beginning of his speech, outgoing central bank governor Gyorgy Matolcsy emphasized that the Lamfalussy program pays tribute to Sandor Lamfalussy, who is considered the father of the euro currency, and is of Hungarian origin. Furthermore, at the conference the MNB is also celebrating its 100th birthday this year, the economic daily Vilaggazdasag reported.
Matolcsy highlighted that
the euro has brought the region's countries, economies, and societies closer together, made the global economy more predictable, and balanced market fluctuations in an era full of uncertainties. The creation of the euro thus provided immense help not only to the region but to the entire global economy.
Christine Lagarde, president of the European Central Bank (ECB), emphasized in her acceptance speech for the Lamfalussy Prize that the role of the euro in the fight against inflation cannot be disputed today, and the efforts of Sandor Lamfalussy and his colleagues will not go without thanks today. She said that although central banks sacrificed some of their freedom by centralizing monetary policy, they also made their economies more secure and predictable, and this trust plays a crucial role in the operation of economies today.
Central bank independence is not necessarily obsolete
However, Lagarde stressed that this does not mean central bank independence is necessarily obsolete. Emerging economies still owe much to having their own monetary policies, which can stimulate or cool their economies as needed. Nonetheless, a new concern is arising: recent data show that 10 percent of central banks globally have faced political pressure, even when they were legally independent.
In her speech, Lagarde emphasized that the biggest question of our time is whether national central banks can remain independent in such a volatile macroeconomic environment as today.
In dealing with recent inflationary shocks, central banks acted swiftly and forcefully in order to preserve price stability, and this was necessary in order to avoid the emergence of deeper economic problems – even if this meant curbing growth.
Reliable and credible monetary policy is critical for attracting international capital and ensuring stable economic growth. Therefore, protecting central banks from political influence will be a key priority in the coming years, both legally and practically.
Viktor Orban was the sole European leader
Jeffrey D. Sachs, professor of economics at Columbia University, emphasized in his speech that Viktor Orban was the only European leader who saw that the EU and America had a huge role in Russia’s war against Ukraine, and that the fighting could only be concluded on a calm, negotiated basis. America must exercise self-restraint, not provoke Russia and China, because war will only take us back as humanity, not forward.
Europe needs peace with Russia and China, not war with countries that do not threaten them.
Why Hungary is not part of the monetary union
At the beginning of his speech, Prime Minister Viktor Orban noted that Gyorgy Matolcsy was opening MNB's Lamfalussy Conference for the last time, adding that
Gyorgy Matolcsy will remain a key figure in Hungary's economic policy thinking.
"We owe him great gratitude for all the work he has done over the past ten years. His contributions, comparable to Kalman Szell's, place him among the greatest in Hungary's economic policy history," the prime minister highlighted. Viktor Orban went on to say that the introduction of the euro was certainly of historical significance, but a common monetary policy without a common fiscal operation can cause a lot of problems – as has been seen more than once.
Since the introduction of the euro, the competitiveness of the United States has improved much more than that of the eurozone. In its current form, the euro only benefits strong economies, it does not help the strengthening of emerging markets. This is precisely why Hungary is not yet a member of the monetary union, the prime minister emphasized.
Viktor Orban: Sovereigntist era to replace liberalism
Every nation has the right to consider itself the center of the world and the most important entity for it, therefore it must also be accepted that others see themselves in the same way, Hungary's prime minister said.
The question is only how we can prosper and grow in this new world, but for this we need to clarify what kind of world lies ahead of us, the prime minister pointed out.
He also indicated that a country that cannot defend itself in this new world cannot be considered an ally by others, at most a subordinate: a country that cannot establish relations with the outside world is lost. Hungary is now in a unique situation, maintaining the best relations with America, China and Russia in the Western world, and this will play a huge role in shaping the emerging world.
It is the European Union that is isolated, not Hungary. We are walking on the main street of history, while the EU is stumbling somewhere in the muddy backstreets.
A strong middle class is key
Viktor Orban said that the role of the middle class in this future world will be of paramount importance. He predicted significant societal upheavals in Europe over the next decades. In this new era, only countries where these challenges do not lead to domestic instability will be able to cope. Only nations with an unshakable and robust social order based on the middle class can succeed. This is happening in Hungary and Asia, whereas in the Western model, all this social order has disintegrated, ceased to exist, and faded away. One million more people work in Hungary than in 2010, household wealth has increased fourfold (to around 90 trillion forints) over the same period, making the country the 13th best in the EU. The employment rate of the 20–64 age group has risen from 64 percent in 2010 to 81 percent today.
Nine out of ten Hungarians live in homes owned by them, and the revenues of micro-businesses have doubled over ten years, reaching 20 trillion forints.
The middle class has been strengthened at a time when the Brussels bureaucracy seeks to keep Hungary under financial sanctions because of its close ties with the US Republicans, and the Russia-Ukraine war has cost the Hungarian economy 19.5 billion euros in three years.
