Mr Prime Minister, I would like to start with the memorandum. Now that it is official that you and the Japanese prime minister want to work together, what are your hopes and expectations?
This agreement is exciting by itself, especially because it's not just a common understanding but it's about common actions as well. The Japanese government is very sharp in understanding that Europe is not a homogenous territory. Hungary is a member of the European Union, but even inside the European Union, we have central European cooperation, and the next step to be modernized is the Balkans, the territory which is southern to Hungary. And we agreed even in May, in Warsaw, that we...I mean the central European countries and Japan together, we will try to be active in the Balkan area together. And we have done a lot of things already. And energy cooperation could be another subject where the Visegrad countries - and Hungary and Japan - can, in the Balkan territory, can cooperate in the future. So we have good hopes that this is not just an agreement to help each other in our own countries, but to have common actions in third countries.
The Japanese prime minister wants to export infrastructure to you, including energy generators and technologies. Do you think that his expectations will be met?
I think so, yes. In Hungary we have quite a long tradition and knowledge of the energy sector, and engineering, it's rather a sophisticated background we have. So I think we are close to you, and we have a sufficient level to cooperate. And the sector in Hungary, the energy sector, is rather contracted and directed by the state because the state ownership in that territory still very high, and we have strong companies, so if the intentions of the government are there, the cooperation of the state-owned companies on behalf of Hungary, it's easy to run. So that's the reason why your expectation is a realistic one.
And how likely then will Japan be to receive orders to build, for example, nuclear power plants?
In Europe we have a lot of stormy discussions. How to continue or not continue with nuclear energy. It's a serious issue. And especially the accident here in Japan intensified that discussion. There are some countries who had previously a considerable percentage of their total energy produced by nuclear, but now they try to stop their nuclear power stations. Hungary is not that kind of country, so regardless of difficulties and political discussions, we would like to enlarge our nuclear energy capacity. Now more than 40 percent of our electricity is produced by nuclear. And we would like to enlarge it in the future up to 60, 65 percent. So there is room for all countries who have expertise and involvement in that area and branch of industry to come to Hungary and cooperate with us. So I think we have a good reason to negotiate on these perspectives also.
How do you envisage the future of energy, nuclear and renewable energy, between Hungary and Japan?
The point we have to understand is that the Americans are doing surprisingly well in the last several years in terms of competitiveness. And one of the main reasons is that they were able to modernize their energy sector, and they changed from being importers to exporters, to the world energy market. So their price in that area of energy is considerably lower than in Europe. So if Europeans would like to compete in the world market with products coming from America, and some other areas also, we have to produce cheaper energy for our economy. So that's my personal goal also in Hungarian economic policy, to provide cheaper energy to the Hungarian or Hungary-based companies. So I think we have a good reason to consider Japan as a considerable, sophisticated and highly educated country on that branch, and therefore we can cooperate. And we have already some security arrangements and some sophisticated elements of nuclear energy already under common understanding and processes.
What about the manufacturing sector?
The point is that in Europe there was some misunderstanding in the last two decades. Everybody has spoken about financial centers and services, and the production center was rather neglected. And three years ago when we won the election, we decided to create a manufacturing center in Hungary. So generally speaking we don't believe that the welfare state which was reared in Europe in the...after the Second World War period... would be maintainable. We thought we needed something new. And in Hungary we tried to create a new social and economic model, what we called a "workfare state". If you would like to provide work and labor for the people, and you would like to provide an economy which is based on labor, you need manufacturing, and a production industry. So now Hungary is very competitive in that field and in total GDP, industrial production is the third highest in Europe, and my plan is that the next year it could be even the number one... Europe. So manufacturing is a good territory to cooperate with you also.
Mr Prime Minister, EU delegates are here. They are here to pursue their own economic partnership agreement with Japan as well as other countries in Asia. Why pursue something independent from this?
Because the European Union is not a nation. It's not a country. There are some areas that come under the authority of the European Union, like free trade agreements, but Europe consists of nations, and nations run their own economic policies. So we can't wait for Brussels or any other capital which is not Hungarian, to do something good for Hungary....So if you would like to have investment, a better relationship, we have to do it on a bilateral basis....To speak of European issues does not mean that all issues belong to the European center. Free trade, yes, because it's a free-trade zone. I mean the European Union. But statehood belongs to the nation states. So we have our own culture, our own language, our own dignity, our own relationship structure and our own economic policy also.
So how do people of Hungary feel about the power of the EU centralizing in certain Western countries?
There is a change about it. In the last one decade, everybody in Europe...the slogan was "ever closer union", because everybody was convinced that this is positive. But the reaction of the European Union and the European economy to the financial crisis of 2008 changed a lot. Because up to now we have not been able to get out of the crisis which was created by the financial crisis. So the trust of the people now is more limited than it was. So a lot of parties and political forces in Europe which have been very much against the European Union have gained ground. And gained rather a wide ground. And we will have a European election just next year and everybody is excited to see, what will be the balance of pro-European Union and non-pro-European Union countries and voters? Hungary, on its own, is very much in favor of maintaining the European Union, because we've seen that it is strategically a very good thing, and free trade is important and cooperation in Europe is vital. But at the same time, we belong to those countries, like Britain, the Netherlands - just now the Dutch have started to think about whether the balance between the national authorities and European level is a proper one, appropriate or not. And now, it's not an ideological issue. It's a very practical issue. So we study, step-by-step, field-by-field, whether the sharing of labor on the European level and the national level is in our interest or not. So these movements, a higher number of countries [are questioning the Union] all over Europe, and Hungary thinks it's reasonable behavior, when there is a crisis and we are not successful enough to treat the crisis, we have to rethink a lot of things. Even about ourselves.
Can your visit here be seen as one way you are seeking to lessen your dependence on the EU?
If you have a look at the Hungarian exports figures, Hungary is very much an export-based country, just 10 million people, without having strong exports it's difficult to provide a good living standard for people. So exports are important. If you look at the export figures, close to 75, almost 80 percent of our exports are going to European Union countries. It's not good. I mean, it's good, but it means that you stand only on one leg, which is very unstable. So therefore we have a clear-cut strategy: opening to the east, that's how we call it, and we would like to enlarge our exports to eastern countries and by 2018 we would like to raise our exports to these countries, of our total Hungarian exports, by up to 33 percent. It's a very ambitious target but not impossible.
Is this something that perhaps from the credit crisis...this encouraged you in your goal?
Of course. in the Hungarian understanding, the credit crisis is not the reason for the crisis. It's just a phenomena of a deeper restructuring of the global economy. So we have to understand that new areas and continents are rising up, and the old continents like Hungary - sorry, like Europe and America, can we say - are losing some ground. So there is a total reshuffling of the economy, but in culture also and info-technology, even in terms of military, we are living in a deeply changing world, and therefore it's obvious that we have to react to that in a way which is more prosperous than we have done up till now. If we just leave it, it would mean Europe would lose more and more of its influence and its significance in global terms, so of course we would not like to accept that situation, we would like to react to that and we would like to be more competitive and gain back our share and influence in the world economy and globally, in international life.
And is this a vision that's shared by the other V4 countries?
Definitely. There is a lot of difficulties discussing the European Union, but there is one good news over which we do not have any discussion, and this is about the fact that central Europe is considered by everybody - even inside the European Union and outside the European Union - to have a very bright future in the forthcoming one or two decades. So the economic engine will be in the future Germany and the central European countries together. So we are very confident and we think we are doing well, and the prospects are even better than the present situation, so we think we can help not just our own nations, but we can help by central European cooperation the whole European Union also.
You receive aid, IMF aid, and then were hit by the European credit crisis. What would you say to the skeptics? What is the future for Hungary?
My first recommendation would be for the skeptics to think back to how Hungary looked three years ago. Three years ago, Hungary was considered as a more uncertain and dangerous country than the Greeks'. It was just 3 years ago. Hungary was very much at the edge of bankruptcy. But a kind of unity of the nation created at the last election resulted in a two-thirds majority for the government, and we launched deep structural processes everywhere in Hungarian society. We created a new constitution, a new civic law, a new penal code, a new labor code, and we created a flat tax system, 16 percent, 10 percent corporate tax for the small and medium sized companies, 19 percent for the major ones, and very flexible labor regulations, so all in all if you have a look now at Hungary, we belong to the very few countries in the European Union which are able at the same time to reduce state indebtedness....We are one of the few countries able to keep under control the budget deficit, the yearly budget deficit is not more than three percent. And at the same time we have economic growth - one of the highest now in central Europe and in the European Union - so my idea to convince the skeptics is to just ask them to see the figures. The figures speak for themselves.
But aren't those the taxes that actually pushed foreign investment out of your country?
The point is that we have some heavy taxation on certain segments. But not on the whole economy. We have a special bank taxation, and taxation on areas where companies enjoy monopolies, so it's a monopoly tax basically. But investment is growing. It's tripled in the last year. So those segments are a little bit paralyzed, they have to wait a little bit, but other segments, especially which are related to industrial production and manufacturing, they are booming.