As expected, the referendum held in Britain now has some others in Europe beginning to defy the bureaucrats in Brussels, with Hungary being the latest. They have decided to hold a referendum on October 2. However, it will not be a decision on leaving the EU, but whether they should accept any more migrants. Prime Minister Viktor Orban has taken an anti-immigration stance, which is in direct opposition to the stated position of Brussels. Good for them.
The more countries that put a halt to the ever increasing, suffocating bureaucracy of the European Union, the quicker will be the unwinding of this unnatural political union. I lived in England when the idea was sold to us as an economic, not political, union—but that is exactly what it has become. In an article from Reuters, Mr. Orban’s Chief of Staff, Antal Rogan, is reported to have said, “The Hungarian government asks Hungarian citizens to say no to mandatory resettlement and to say no to the immigration policy of Brussels. Only Hungarians can decide with whom we want to live in Hungary.”
The Hungarian economy has been muddling along with the latest GDP numbers coming in at 0.9% for the first quarter of 2016. That is a dramatic fall from 3.2% in the last quarter of 2015, caused by a contraction in capital formation and government spending. On the other hand, the Budapest stock market (BUX) has produced an enviable return YTD of 13.42%, which is one of the highest in Europe. Though it did drop about 3.4% around the end of June, it has since recovered. But the bigger picture is about the future of Hungary.
Again, the unemployed with too much time on their hands have now coined the word “Hexit”, but the drive behind it is real and picking up steam. Recently Hungary returned some 17,000 illegal immigrants back to Serbia from where they had originated. Increasing the cry to exit the EU has politicians like Secretary of State for Public Diplomacy Zoltan Kovacs saying, “seeing the EU’s recent migration politics, I would vote to leave the EU in case of a referendum. This is my personal opinion.”
Hungary actually faces a shortage of skilled workers, and after having built a 100-mile fence on their border with Serbia, they are now inviting in guest workers, presumably from other parts of Europe. But I believe it will only be a matter of time before either the referendum plan for October 2 includes Hexit or a separate referendum follows soon after.
Recently though, the government has taken stances which leave many scratching their heads. They adopted onerous regulations causing the transportation company Uber to exit the country. Yet shortly after the announcement, Economic Minister Mihaly Varga said that the “Hungarian economy needs as many innovative companies as possible.” Really? You just kicked out one of the most innovative companies on the planet!
Peter Kohli is the CEO of emerging market specialist DMS Funds