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Food price caps to be abolished at the beginning of August, family support to increase

The government has decided to maintain the current cap on the price of some food products until August 1, after which time the scheme will end, the head of the Prime Minister's Office told a regular press briefing on Thursday. Gergely Gulyas also said the government will increase the sum of the village CSOK home purchase subsidy and the maximum size of the prenatal baby support loan effective January 1.

Concerning the decision to remove the caps on food prices, Gulyas cited forecasts saying inflation could fall to 15 percent in August, adding that the tendency would further accelerate in the autumn.

Gulyas also announced that discounts on certain products supermarkets had been obliged to apply would increase from 10 to 15 percent, adding that the products whose prices had so far been controlled would be included in the programme. He said the price caps had proven an effective measure against inflation, adding that the government’s goal to reduce inflation below 10 percent before the end of the year was realistic.

Meanwhile, he said the government had reviewed the family benefit system and concluded that circumstances had changed fundamentally in the recent period, mainly due to the war in Ukraine, the related sanctions and inflation.

Concerning the prenatal baby support loans, Gulyas said the government wanted it to encourage women to have children as early as possible. Accordingly, from Jan. 1, 2024, only couples where the wife is under 30 will be eligible for the subsidy, he said. He added however that a transitional period will be introduced between January 2024 and Jan. 1, 2025 when women between the age of 30 and 40 will be eligible for it. The maximum sum of the loan will be increased to 11 million forints (EUR 29,700) from the current 10 million, Gulyas said.

Meanwhile, he said the rules for the village CSOK programme will remain in place, with the subsidy being increased by 50 percent “or even higher in certain cases”.

However, CSOK will no longer be available in cities, and a new subsidy scheme will be devised for towns with populations over 5,000, Gulyas said, noting a steep rise in home prices in Budapest and major cities which has led to a significant drop in CSOK applications.

Gulyas said CSOK was most popular in smaller places where the subsidy and the recipient’s co-payment was sufficient to buy a property, while in larger cities couples needed to take out a bank loan to complete the purchase price. Since banks have “practically stopped providing loans” as customers were discouraged by high interest rates, the number of CSOK applicants is also dwindling, he said.

The village CSOK continues to be available for new construction, buying a second-hand home or for renovation, and applicants will enjoy a VAT benefit below 5 million forints, Gulyas said.

Concerning the new changes, he said the subsidy amount to build or buy a house would increase from 600,000 forints to one million for one child, from 2.6 million forints to 4 million for two children and from 10 million forints to 15 million forints for 3 children.

For renovation, the subsidy will increase from 300,000 forints to 500,000 forints for one child, from 1.3 million forints to 2 million forints for two children, and from 5 million forints to 7.5 million for three children, Gulyas said.

Gulyas expressed his condolences to the families of the crew members of a Hungarian military helicopter that crashed in Croatia on Wednesday. What is known about the accident at this time is that an Airbus H145 helicopter with three soldiers on board crashed near Zadar, he noted. Two bodies have been recovered and a search is under way for the third crew member, Gulyas said, adding that there was no realistic chance that they would be found alive.

He noted that the chief of staff of the Hungarian Armed Forces arrived at the scene of the accident on Wednesday with a team of experts to investigate the circumstances of the crash together with a Croatian team. The findings of the investigation will be made public after it is completed, Gulyas said.

Meanwhile, he said the mandatory food price discounts were important because of the sharp rise in food prices in the country. There is a good chance for a significant slowdown in food price growth by the end of the year and a return to normalcy at the beginning of next year, he said. In response to a question, Gulyas said the new price cap scheme would remain in effect until at least Dec. 31.

On the subject of teachers, Gulyas said teachers could get a wage hike if Hungary’s “left-wing MEPs who make 6 million forints weren’t blocking it”. He added, at the same time, that teachers still received pay hikes each year. Meanwhile, he said the government had decided to regulate the number of classes teachers had to teach and their time off in order to establish a clear framework.

Concerning the upkeep of school buildings, Gulyas said it was up to the school operator Klebelsberg Centre and its director to indicate any serious problems in school buildings, noting that urgent repairs were financed from a fund set aside for that purpose. He said there would not be any major renovations in the coming 12-18 months, but help could be provided in the case of serious problems.

Gulyas said the government earlier adopted a strategy on artificial intelligence but this may need to be reviewed and updated.

As regards the Hungarian peace-keeping mission on Kosovo, he said no requests had been received to increase the number of troops, so its current headcount will be maintained.

Asked about the actual state of investment projects suspended last year, Gulyas said none of them had been cancelled. The aim is to complete all of the construction projects, though the timeframe may change, he said, adding that all major projects would be completed.

In connection with the EU’s recent request for financial contributions from member states, Gulyas said Hungary fully respected EU laws but would like to learn the reasons that led the decision. “It is hard to imagine Hungary approving additional contributions without a well-founded reason, given the fact that the country has not yet received the funding it is entitled to,” he said.

Gulyas called it “regrettable” that the EU Luxembourg court ruled that Hungarian asylum regulations breached EU directives, arguing that earlier the Strasbourg court had approved the regulations. The Luxembourg court, Gulyas said, had interpreted the asylum law incorrectly. He said the European Commission — despite the European Council’s request — had failed to formulate the legal framework allowing for the separation of the matter of asylum from migration. “If they cannot separate the two, everybody will come to Europe,” he said.

Responding to the suggestion that more and more government members held the view that Hungary could cope without EU funds, Gulyas said: “We are not preparing for such a scenario”. He said the past year had shown that Hungary had not received any cohesion funding under the EU’s current seven-year financial framework. “Still, the country’s economy is functioning and central budget financing is sustainable without problems or time limits.” Gulyas said Hungary sought to reach an agreement with the European Commission, adding that it had done everything it could to dismantle obstacles preventing access to EU cohesion funds.

Meanwhile, Guylas said that Hungary was politically obliged to reject EU migrant quota arrangements as the government had canvassed public opinion on migration and a distribution mechanism, and 3,400,000 people had clearly responded in opposition to Hungary becoming “a country of immigration”.

Asked about the additional 50 billion euros expected from EU member states, he said Hungary awaited an answer from the European Commission as to why, amid a shortage of funds, member states should provide Ukraine with new resources. He added that the government wanted to see whether the commission could give an account of why it had spent more than planned and differently from planned.

Gulyas said the additional contribution was especially “humiliating” in the case of member states that have yet to receive their share of funds from the new seven-year budget, such as Hungary and Poland. Asked if he believed that the reason why Brussels was not approving the funds for Hungary was because it had promised that money to Ukraine, Gulyas said the “cabinet can imagine anything given the commission’s political resistance against Hungary”.

Concerning the introduction of the euro in Hungary, Gulyas said the country had “agreed at the time of its EU entry” to adopt the single currency “at some point, without a deadline”. He added, however, that “relevant regulations have changed to such extent that now we could debate whether that obligation still applies.” The euro, he added, may be introduced “when it is economically relevant”; when Hungary has reached 90 percent of the development and living standards of the EU. He said he hoped Hungary would fast close the gap with Europe but “it is still not a topical issue”. He also warned that joining the euro zone would “involve giving up an independent monetary policy”.

Concerning a recent agreement with Serbia on construction of a new oil pipeline, Gulyas said the deal served the country’s energy security and diversification.

Meanwhile, Gulyas said Hungary had a higher inflation rate than in other countries of the region due to its higher dependence on raw material imports. Hungary imports two-thirds of its crude oil needs and over 90 percent of its natural gas, he added. He also noted last year’s droughts as a factor in higher food prices. He said the central bank and government’s responsibility for inflation could be raised, though “the responsibility of the EU for sanctions and Russia’s responsibility for attacking Ukraine should be raised, too.”

Concerning pensions, Gulyas said the current system could be maintained “for the next decade with any problems” but in the long run it would “become an issue of demographics: with fewer births, maintaining the social security system will run into increasing difficulties.”

Concerning a recent law on guest workers, Gulyas said the fundamental principle was unchanged: “foreigners must not take jobs away from Hungarians”. “As many guest workers will be received as there are vacant positions,” he added.

On another subject, Gulyas said the government was expecting a proposal by parliament’s national security committee to publish a report on foreign funding received by the leftist opposition parties before the last general election. “Once the letter arrives, the government will support declassifying the document,” he said.

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