Berlin's Poison-Pen Letter

2009/11/25 BUDAPEST/BERLIN(Own report) - The Hungarian media reacted with estrangement to Germany and eight other western nations' diplomatic arm-twisting of Hungary. Through their embassies, the nine countries admonished Budapest with a public protest note, following Hungarian measures against West European and US companies operating in Hungary. A water company lost its lucrative franchise in a southern Hungarian city, because of overpricing and suspicion of irregularities while the German chaired European Bank for Reconstruction and Development along with a US company had to give up the radio frequencies of their stations to their rivals. The protest note was considered a very "unusual step and a venturous interference," an affront, to which the prime minister gave an immediate public response. He said he would take into consideration the objections of the West Europeans and Americans. This procedure shows clearly, to what extent Hungary has become economically dependent, above all, on Berlin. The mere threat of a withdrawal of investments is enough to force Budapest to enact new legislation.

Overpriced Water

One of the cases Germany and eight other countries referred to in their intervention concerns the water supply of the southern Hungarian metropolis Pécs. For the ridiculously low price of 1.6 million Euros, Suez, a French company, obtained 48 percent of the shares and the operative direction of Pécs' municipal water utilities in 1995. As in many other countries, where western companies took over the water utilities, the population began to complain of rising prices.[1] In the end, the overpricing of water led to hefty protests. There are diverging accounts of what happened subsequently. Pécs' mayor declared that because of various accusations, Suez had been given a notice of cancellation, effective October 1, 2009. Suez pleads ignorance. In any case, on October 5, the mayor had the French company locked out, and transferred the franchise of Pécs' water utilities to a local company. Suez has now taken the case to court.

Radio Frequencies

The second case concerns the Sláger and Danublus radio stations. At the end of October, the relevant authorities refused to extend licences for the frequencies of these two stations giving them instead to two new consortia. The US controlled Sláger Rádió is very popular. Danublus Rádió was run by the European Bank for Reconstruction and Development, with its German manager.[2] Both new consortia are closely affiliated with major Hungarian political parties, the Social Democrats and the ethnic chauvinist Fidesz Party. The United States had protested this non-consideration to the Hungarian government already back at the beginning of November. The "Sláger Rádió/Danublus Rádió" case has also been taken to court.

Like Client States

Without awaiting the court decisions, those embassies in the Hungarian capital representing Germany and eight other western countries have now publicly protested the "non-transparent behavior affecting investors."[3] The protest note, which can also be found on the German Embassy's website, dryly opens with two appraisals: the signatories represent countries, whose companies provide the majority of Hungary's foreign direct investments and Hungary finds itself in a serious economic crisis. This ostentatious muscle flexing is followed by the explicit indication that, in the case of unappreciated behavior, the investments could also fail to materialize. According to the document, the Hungarian government must now enact "anti-corruption legislation" to prevent such incidents in the future, as in the cases explained above. The tenor of the letter and the fact that the "statement" is accessible to the public, are an exceptional affront to Budapest, which is being treated like a dependent client state.

Corruption

When one takes a look at the economic relations in Hungary, one sees that the West European countries, the USA as well as Japan, have fared rather well with the corruption that they are now criticizing. That there have repeatedly been cases of irregularities in the country, since the upheavals in 1989 and Hungary's joining the EU and NATO is hardly disputed. "Illegal collusion, backroom accords, corruption and fraud," according to the press in Budapest, have recurred occasionally. But the predominating west has had "enough influence and time" to have intervened "over the past twenty years".[4] In fact, through 20 years of "corruption" the economic control of the country has been turned over, to a large extent, above all to German companies. Nearly one-fourth of all foreign direct investments originated in Germany and that is excluding German investments carried out via Austria or the Netherlands as intermediaries. More than 7,000 companies have been founded, with German capital investments, either partially or totally, resulting in approx. 300,000 jobs in a country with a total population of only 10 million. German companies manage more than one-fourth of Hungary's foreign trade. Back in the spring, Berlin did not mention "corruption" when a manager, who for years had worked for a Hungarian branches of German enterprises, was positioned to become Hungary's minister of the economy.[5]

Clarified

Confronted with Hungary's economic dependence, the prime minister gave in to the demands within a few days. On Monday, he invited the nine signatory ambassadors to a meeting. The German business press reported that during the conversation, the prime minister reiterated "that with the new anti-corruption law, the government wants to do everything possible to improve the atmosphere for foreigners to invest in Hungary."[6] The power relations have been re-established.

The Ethnic Chauvinist Rightwing

The socio-political effects are disastrous. The "poison-pen letter",[7] according to the press, "merely provides gratuitous ammunition to the national chauvinist forces of the Fidesz Party and beyond." As a matter of fact, the dependency on the west, reminiscent of colonial relations, is being made an issue particularly by ethnic chauvinist forces, such as the Fidesz Party or the other extreme right-wing Jubbik Party. These forces are charging the impulse in opposition to this foreign interference with ethnic chauvinism, linking it to typical anti-Jewish theories of conspiracies. The Jobbik Party, which resorts to this sort of imagery, had won 15 percent, six months ago, in Hungary's last EU elections. According to opinion polls, the spectrum of ethnic chauvinist political parties could even win a two-thirds majority in the coming parliamentary elections next year. Under these conditions, muscle flexing, such as the recent interference by the embassies, reinforce the extremist ethnic chauvinist right-wing.

Please read also A Special Relationship, The German Ethnic Model (I) and Ethnic Loyalty.

[1] see also Property Obliges and Schwerwiegende Provokationen
[2] see also Wegbegleiter
[3] Es handelt sich um die Botschaften Belgiens, Frankreichs, Großbritanniens, Japans, der Niederlande, Norwegens, der Schweiz und der Vereinigten Staaten. Joint statement on transparency; www.budapest.diplo.de 18.11.2009
[4] Schriftliche Daumenschraube; Pester Lloyd 47/2009
[5] see also Ein Zeichen der Freundschaft
[6] Westliche Investoren setzen Ungarns Regierung unter Druck; Handelsblatt 24.11.2009
[7] Schriftliche Daumenschraube; Pester Lloyd 47/2009

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http://www.german-foreign-policy.com/en/fulltext/56301