State Ownership: Are Hungarian nationalizations unique? Éva Voszka, University of Szeged

Comparison with the EU countries A snapshot: the lack of fully-fledged models The starting position Expansion after 2008 Timing Declared goals Sectors concerned Methods Directions Conclusions

1a. Rather low level of state ownership before the crisis Government assets in % of GDP 1999 2007 2014 EU average 13,6 16,3 15,2 CEE average 32,1 19,9 18,9 Hungary 23,0 11,1 14,8 Poland 22,6 23,5 16,2 Source: Eurostat

1.b. SOE share in selected EU countries, 2008-09 Number of firms Share in employment Asset share in GDP EU 13 average 50 3,5 8,2 CEE 5 average 264 3,7 12,9 Hungary 379 4,4 7,4 Poland 712 23,7 Source: Christiansen (2011) OECD

2a. Frontrunner in expansion Recapitalization of banks/GDP Nationalization /GDP EU avarage 3,4x/ 2,4-3,1 CEE average 1,1xx/ n.d. Hungary 0,0 5,2 Poland n.d x/ High: Ireland 38%, Greece 22%, United Kingdom, Spain, Belgium 5-6% xx/ Slovenia 8,9%, Latvia 2%, Lithuania 1%, all others 0% Source: Recapitalization DG Competition, Crisis related state aid used 2008-2013, Nationalization own estimation

EU 13 average 41 3,6 10,4 CEE 5 average 186 4,4 15,9 Hungary 373 10,6 2.B. SOE share in 2012 Number of firms Share in employment Asset share in GDP EU 13 average 41 3,6 10,4 CEE 5 average 186 4,4 15,9 Hungary 373 10,6 Poland 336 1,5 15,6 Source: OECD (2013)

3. Delayed nationalizations (Per cent of total expenditure) 2008-2010 2011- EU (recapitalization) 67,4 32,6 HU (nationalization) 0,0 100,0 Source: European Commission (2014): State aid scoreboard

4. A new model of capitalism Declared goals of nationalizations EU smooth operation of financial markets restoration of confidence alleviate recession crisis management HU the crisis of neoliberal market economy; public interest, sovereign economic policy remedy of market failures (monopolies) rearrangement of property and income distribution (to correct „unfair” privatization) “creation of a new system”

5. Broader sectorial coverage - financial institutions - „aftershock”: public services energy sector EU Non-tradable sectors: - Banks (other than bailout) -Public utilities - Pension funds Other sectors: Energy manufacturing transport communication real estate,etc. HU

6. Ownership changes embedded into legislative and regulatory measures - purchase (increase of capital in banks), -termination of contracts - ‘nationalization of profits’ (rarely) EU - purchase – value of firms depressed by regulation (special taxes), administrative prices - direct economic pressure - ‘expropriation’ HU

7. Nationalization accompanied by privatizations EU New state investments: banks (to original and new owners) Old state assets: Other sectors (60% of total EU priv. income 2009-14) –Poland 2., following Portugal HU New state ownership - to new owners: Banks Tobacco shops Broadband spectrum Airport services Agricultural land Soruce: Privatization Barometer

Conclusions Similarities Differences – quantitative indicators The presence of state ownership before the crisis It’s expansion after 2008 Different sectors, including banks Mainly purchase Nationalization and privatization parallely Differences – quantitative indicators Extent, proportions Unique in qualitative aspects the goal is to set up a new form of capitalism, with the decisive role of the state – rather than a short-term crisis management tool embedded into a wide range of regulatory and policy measures

Is it really a new model? Counter arguments State ownership is still around European average, although in some sectors (public services, energy, banking) it became rather high Nationalization did not concern major sectors (construction, different kinds of services, export oriented manufacturing) – market economy and foreign ownership persist Privatization is modest: income less than 1% of GDP, re- privatization to selected domestic groups insignificant But Constraints of the market (admin. prices, regulation, new monopolies, etc.) Expansion in the role of the state (also by regulation and state subsidies), centralization of decision-making Domestic entrepreneurial groups, selected by the government are being enriched also by making business with new or old state enterprises, by state orders or other subsidies.