“The German-Hungarian relationship rests on a solid foundation. The thread of the conversation never broke off in the face of the differences of opinion,” Ambassador Haindl points out to Diplomacy&Trade.
Describing the current situation, he highlights that “our societies have been heavily affected by the COVID-19 pandemic in the past few months. The impacts of this epidemic have led to a severe recession whose dimensions might reach those of the financial crisis in 2008/2009. Needless to say, that the economic relations between Germany and Hungary are influenced by the pandemic, too.”
The economic relations between Hungary and Germany are traditionally very intense and Germany is Hungary’s most important trading partner with about one quarter of Hungary’s foreign trade done with Germany. The most important German export goods are electrical and electronic devices, motor vehicles, automotive components, machines and chemical products. Similarly, the most important Hungarian export goods are motor vehicles, automotive components and electrical and electronic equipment. According to the Ambassador, the significance of the economic relations is very well illustrated by the sum of German investments in Hungary. Today, 3,000 companies with German ownership background employ roughly 250,000 Hungarians, and the German investment community accounts for a quarter of the foreign investment to Hungary. The latest available figures suggest that in 2019, Germany made direct investments in Hungary amounting to EUR 1.1 billion. Thereby, the total amount of German investments has risen to around EUR 18 billion. More than a third of this sum was invested in the automotive sector. The latter can therefore be seen as the most important branch of the German-Hungarian economic relations.
The Ambassador also finds it important to mention that in 2019, Hungary established its first European defense project (PESCO) in partnership with Germany: an Integrated European Joint Training and Simulation Center (EUROSIM).
Throughout the second quarter of 2020, German exports to Hungary shrank by about 30% compared to last year’s figures while the Hungarian exports to Germany decreased by approximately 25%. Fortunately, Hungarian exports to Germany started to pick up in the third quarter by a modest 3%, however, imports from Germany were still 5% below the previous year’s level. In Hungary, it was particularly the important automotive and supply industry that were severely affected and interruptions of the production could be observed in all Hungarian car factories. For instance, Audi Hungary suspended its production at the end of March 2020 and nearly simultaneously, Mercedes Benz took the same measure in its plant in Kecskemét. Aside from that, automotive suppliers such as Bosch were affected by the pandemic. Due to declines in orders or missing supply of components, the production process had to be reduced or completely ceased.
However, Ambassador Haindl notes, the automotive industry had already been weakened before the COVID-19 pandemic. In Germany, the years 2008-2018 are regarded as the ‘golden decade’ of the automotive industry, but since 2019 the world market for motor vehicles has been declining. The pandemic has increased this effect since it hit a sector, which was undergoing an adjustment process. Nonetheless, there is reason to hope, he says. “It seems the worst is overcome. Indeed, there was a decline in production in the Hungarian automotive and supply industry for the first quarter of 2020 of about 25%. However, the downward trend is not as strong. Most of the automotive plants have restarted their production, although some of the suppliers partly on a reduced level. Most of them report a rising demand.” He adds that furthermore, a possible relocation of the production from Asia to Europe (‘nearshoring’) could benefit Eastern Europe but it remains to be seen if this process would eventually start. “So far, there is no concrete evidence supporting a possible nearshoring effect. But investment projects such as the construction of BMW’s plant in Debrecen are said to be continued, albeit with delay.”
Focus on electro-mobility
The Ambassador highlights the expansion of electro-mobility as an important field of German-Hungarian cooperation in the automotive industry. “Hungary has recently established a program in order to promote the sales of electric vehicles by means of state subsidies. Such subsidies were already provided in 2016 and 2018 by the Hungarian government. Germany also offers state subsidies in order to make the purchase of electric vehicles more attractive. In July 2020, these grants were raised. Since then, customers can benefit from subsidies in amounts between EUR 5,625 and 9,000 when purchasing new electric vehicles. In September 2020, 8% of the new registrations were pure electric cars in Germany. Hybrid cars had a share of around 20%, whereby plug-in hybrid cars accounted for approximately 8%. Consequently, more than a quarter of the new registrations possessed an alternative drive. It is forecast that by 2022, one million electric vehicles will drive on German roads.”
The German Presidency
In the second half of 2020, the rotating Presidency of the Council of the European Union is held by Germany. On July 1, 2020, the Federal Government took over the presidency of the Council of the European Union (EU) for the following six months and with it the challenge of providing important impetus for European politics and the development of the EU. Germany faced major challenges. These concerned important negotiations on Brexit, the multiannual financial framework and the European asylum and migration policy.
These have been tasks, the solution of which has been made structurally and in terms of content considerably more difficult and influenced by the management of the global Covid-19 pandemic. The adoption of the post-coronavirus recovery instrument ‘Next Generation EU’ and the political agreement on a multiannual financial framework (MFF) 2021–2027 are likely to be important events in the presidency of the German Council. The Federal Council Presidency has been working intensively on a solution over the past weeks and months.
Another goal of the Presidency was overcoming the COVID-19 pandemic permanently, including the economic recovery and the promotion of a stronger and more innovative Europe. "Germany places measures to overcome the social and economic consequences of the COVID-19 pandemic in the center of the efforts. A decisive precondition for recovery in Europe is the economic recovery of the European enterprises. Their resilience and competitiveness should be improved. Strategic European value chains should be strengthened. These goals can be achieved by tailoring regulations concerning public procurement more effectively to future emergencies and economic crises. Besides, preventing market distortions caused by state-controlled and subsidized companies from third countries is important. European companies which could be targets of takeovers have to be protected. This applies to both large-scale industrial production and to small and medium-sized companies (SMEs). Therefore, Germany attaches high importance to keeping markets open and to enhancing trade and investment on the basis of international, enforceable rules. Protectionism and trends targeted towards re-nationalization have to be strongly opposed," Ambassador Haindl says.
With regards to the latter idea of a stronger and more innovative Europe, he stresses that it is essential that Europe achieves sovereignty in the digital domain. That means having state-of-the-art skills in the field of key digital technologies. A well-functioning single market, also in digital matters, is an important precondition for ensuring the EU’s competitiveness and for its economic recovery after the COVID-19 pandemic. Moreover, remaining unjustifiable barriers in the single market have to be eliminated. Examples of such barriers are extensive and complex administrative procedures concerning the sales of goods or services in other Member States or unequal access to public contracts. "The EU’s unified economic area without internal borders builds the basis of our prosperity, social security and cohesion. For this reason, superfluous obstacles must be abandoned. SME’s competitiveness should be increased, for example, by the dismantling of bureaucratic obstacles and legislation in their favor. Another aspect is the mobility of the future. The EU needs to achieve this goal in a sustainable, innovative and interconnected manner. Thereby, the environmental challenges of our age have to be addressed while safeguarding the competitiveness of the European transport sector," he adds.
As the Ambassador highlights, cultural ties and educational exchange are important elements in bilateral relations. The German language plays a significant role in education, society and business in Hungary. In the field of higher education, German-Hungarian cooperation can look back on a centuries-old tradition. Andrássy University Budapest, which was founded in 2001, is the only university outside the German-speaking countries that operates entirely in German. It is regarded as one of Hungary’s universities of excellence.
Moreover, the Goethe Institute in Budapest (since 1988), the Thomas Mann Gymnasium (since 1992), the Central Office for Schools Abroad and the Institute for Foreign Relations are located in Hungary.
Two important German foundations – the Konrad-Adenauer-Stiftung and the Friedrich-Ebert-Stiftung – maintain offices in Budapest and contribute through conferences and exhibitions and seminars to strengthening German-Hungarian relations. The German Academic Exchange Service has sent several German-speaking lecturers and language assistants to Hungarian universities and colleges. The Alexander von Humboldt Foundation awards research grants to Hungarian scientists, sponsors scientific conferences and donates equipment to scientific institutions. In Germany, the Collegium Hungaricum Berlin and the Hungarian cultural institute in Stuttgart play a similar role. There are also various city partnerships. The German minority living in Hungary also contributes to the colorful network of German-Hungarian relations and, with 186,000 people, is the second largest national minority in Hungary. In order to commemorate the many displaced Hungarian Germans, Hungarian parliament decided in December 2012 to make January 19 a day of remembrance for the deportation of ethnic Germans from Hungary following World War II.
On the science front, the Joint Declaration on the Further Development and Intensification of Cooperation in Scientific Research and Technological Development of 2004 forms the basis for collaboration. Examples of such collaboration include the Fraunhofer Project Center for Production Management and Information Technology in Budapest, its spinoff joint firm EPIC InnoLabs, and the site of the European laser research project Extreme Light Infrastructure Delivery Consortium, with German investment, in Szeged, SE Hungary.