The government’s 2010 budget
draft was approved by 200
votes to 156 in parliament last
week with the backing of the governing
Hungarian Socialist Party (MSZP) and
the liberal Alliance of Free Democrats
(SZDSZ) politicians.
The vote ended a long day in which
the bulk of 1,500 amendment
proposals were binned. Only a few
changes to sensitive areas were made,
for example, the reinstatement of
subsidies for school meals. Key
cutbacks, such as HUF 40 billion (EUR
146 million) in annual funding for the
state railway company MÁV and HUF
70 billion from local governments,
remained. The budget bill is due to be
put to a final vote on 30 November.
In drawing up its 2010 budget, the
government based its calculations on a
predicted 0.9 per cent contraction of
the economy next year, after a 6.7 per
cent shrinkage his year. The government
is banking on tax revenues of
HUF 12.6 trillion (EUR 45.86 billion),
while spending HUF 13.5 trillion next
year, creating a deficit of HUF 870.3
billion (EUR 3.17 billion), or 3.8 per
cent of GDP.
Under terms agreed with the IMF
in exchange for the EUR 20-billion
bailout loan Hungary was granted in
October last year, the country has
committed to keeping its 2010 deficit
to a maximum of 3.8 per cent of GDP.
The centre-right opposition party
Fidesz has already stated that it will
revise the budget immediately upon
taking office if – as opinion polls
suggest – it wins the next general election
which must be held by the spring.
Finance Minister Péter Oszkó told
reporters last Thursday, however,
that fears over Fidesz loosening the
purse strings and allowing
Hungary’s budget deficit to widen,
against the wishes of the
International Monetary Fund and
international financial market
players, are overstated. He noted
that, during the parliamentary votes
last Monday and Tuesday, Fidesz
voted in favour of all the necessary
legislative amendments that
required a two-thirds majority, only
voting against those measures that
required a simple majority, which
was comfortable supplied by the
Socialists and the Free Democrats.
No room for error
Fidesz last said it saw major flaws
in the budgetary planning.
“Revenues will miss targets, while
expenditures have been underestimated,”
said Fidesz shadow finance
minister Mihály Varga, who claims
Hungary’s budget deficit is likely to
be between 5 and 7 per cent next
year. “It does not include financial
consolidation funds that may be
required for state firms such as
state railways MÁV, Budapest
public transport company BKV nor
the losses of the state asset
manager MNV, which could run
into hundreds of billions of
forints,” he added. “The budget
serves neither the interests of the
country nor of the economy,” he
added, noting that cuts to local
government funding are not to be
balanced by the central budget
filling the holes.
Talking up track record
Oszkó praised Hungary’s performance
so far. Last Thursday he
spoke of how three years of
austerity measures had dragged
Hungary back from being the EU’s
economic black sheep, with a
deficit of 9.2 per cent in 2006, to
one of its better performers in the
era of the global financial crisis.
“We are not only good boys now,
but better than average,” he said.
However, he warned that the huge
government debt of close to 80 per
cent of GDP must be addressed in
coming years.
Next year, the government
expects to pay HUF 1.2 trillion,
which amounts to close to 10 per
cent of tax revenue, simply
servicing its existing debts. When
asked what the government would
do if it had five years rather than
just one to turn around Hungary’s
economy, Oszkó said he saw a need
for drastic institutional reforms.
“Spending on healthcare, pensions
and education is now at a level that
the country can afford, but it is not
spent properly,” he said.
SZDSZ divisions
As a coda to the week’s budget
politicking, the recently elected
leader of the SZDSZ, Attila Retkes,
said his party could not support the
budget bill in its current form,
although it was broadly in line with
his party’s ideas of what needs to be
done. His remarks were indicative
of a division in the party, which
opinion polls suggest is unlikely to
return to parliament in the forthcoming
general elections. Retkes
said that the five members of the
20-strong liberal parliamentary
caucus who voted against the draft
budget last Wednesday “represented
the position of the SZDSZ”.
The rest, along with former party
president now caucus leader János
Kóka, will vote “according to their
consciences” on 30 November,
Retkes said.
In an open letter to the prime
minister last Friday, Kóka said he
thought it was “a good decision” on
the part of the majority of SZDSZ
MPs to support the government’s
budget bill. “On the basis of what
the government has done so far, I
believe we made the right decision.
In the space of a few months, taboos
have been broken and painful steps
taken that have succeeded in
moving Hungary from among the
bleakest to one of the most
successful in terms of financial and
budgetary stability,” Kóka said.
