Gergely Gulyas – Photo: MTI

Government to maintain price caps until June 30

The government has decided to maintain the current cap on the price of certain products until June 30, Gergely Gulyas, the head of the Prime Minister's Office, told a regular press briefing on Thursday. Referring to the war in Ukraine, Gulyas said that "as long as there is war and sanctions, there will be inflation", adding that the government was committed to reducing inflation to single digits by the end of the year.

Gulyas welcomed a recent central bank statement that the Monetary Council could decide next week to lower the upper threshold of the interest rate corridor. He hailed the move as “the first sign that could indicate lower inflation”.

On the subject of the war in Ukraine, Gulyas said avoiding the involvement of NATO in the conflict was in the entire world’s interest, arguing that such a scenario would lead to a world war and a nuclear war.

Hundreds of thousands have died in the war so far, and more and more weapons are making their way to the frontlines on both sides, indicating a protracted war for the foreseeable future, Gulyas said.

He said steps that escalated and extended the conflict were “irresponsible” because they posed the risk of a nuclear war.

The Hungarian government is unwaveringly on the side of peace, Gulyas said, noting that it did not send weapons to the war or allow the transit of weapons deliveries through its territory.

On another subject, Gulyas said farmers will not be charged for the water they use to irrigate their land this year. He said the government was committed to reducing the damage farmers suffered due to last year’s droughts, and it would pay for farmers’ water consumption.

Meanwhile, Gulyas said the government had imposed a ban on the import of 25 product categories from Ukraine, including grain, rapeseeds, sunflower seeds, cooking oil, and some meat products until June 30. He added, however, that transit shipments would not be blocked.

He noted that according to the European Commission, Ukrainian grain exports should be facilitated to ease the food shortage in Africa, but added that those imports could “ruin the Hungarian agricultural market instead”. He said corn exports from Ukraine had increased by 7,000 percent and grain by 1,000 percent between 2021 and 2022, adding that the increase had “ruined agricultural distribution channels especially in countries bordering Ukraine”.

On another subject, Gulyas said the government would reduce the price of electricity from 165 forints (EUR 0.44) to 70 forints/kWh for the smallest businesses above average consumption.

The measure will apply to companies employing 10 or fewer people, with annual takings of no more than 2 million euros, Gulyas said. He expressed hope that the measure would boost the economy and significantly increase the profits of small ventures.

Gulyas said the government would continue its programme ensuring that average retail consumers were provided gas and electricity at the earlier price levels, adding that the scheme cost the central budget a total 1,500 billion forints in 2023. He also added that the government was working to shield businesses from “an unbearable burden”, with special regard to small companies.

Government spokeswoman Alexandra Szentkiralyi announced that the government will instruct major grocery chains to offer price discounts with a view to lowering prices.

Szentkiralyi said the improvement in the inflation data was already visible thanks to the government’s measures, but the cabinet decided to introduce a new tool based on Greek and French examples — classifying basic foodstuffs into 20 categories such as poultry, cheese, bread, baked goods, vegetables, fruit and cold cuts — from July 1 at the latest.

The retail outlets in question will have to offer a product of their choice in all categories at least 10 percent cheaper than the price in effect in the 30 days preceding the special offer, she added.

Products must be selected for the special offers every week in order to ensure that the possibility of purchasing at a discount covers a wide range of products, Szentkiralyi said.

The discounts cannot apply to price-capped products, she added.

Meanwhile, she said the Competition Office (GVH) and the government’s online price-monitoring platform is set to start running on July 1, noting that it aimed to boost competition and prevent overpricing.

The authorities have inspected more than 6,000 shops since the price caps were introduced, Szentkiralyi said, adding that inspections would continue as long as the price caps are in effect.

“High inflation will be with us as long as the war in Ukraine is ongoing and as long as the sanctions are in effect,” she said, noting that the government aims to push inflation into the single digits by year-end.

Responding to a question, Gulyas said the government was not considering any proposal to cap fuel prices.

Asked about a bill in the works that would change the status of teachers and prohibit them from quitting before the end of a semester or school year, Gulyas said no draft legislation had been prepared yet, and the government was still consulting teachers’ unions on the potential regulations.

Put to him that some 4,000 teachers had signalled their intention to quit the profession if the law was passed, Gulyas said there were well over 100,000 teachers working in Hungary, adding that though the loss of 4,000 teachers “wouldn’t be good for the education sector”, it was only 3 percent of all teachers.

Gulyas said it was impossible to have a meaningful debate on a law while consultations on it were still ongoing.

The government intends to keep talking with unions until they reach a point where an agreement can be reached on every issue, Gulyas said.

“But we’re not there yet,” he said, adding that he could not guarantee that they would agree on every single issue, adding this is why there is no date set for when the bill will be submitted to parliament.

Asked to comment on reports that the US ambassador had been sent to Hungary “to take control of the left wing”, Gulyas said the Hungarian government respectfully welcomed representatives of every state. They come to Hungary to deepen relations between the two countries, he added.

Gulyas said a billboard campaign supported by the US embassy had come “too late”. He said the campaign would have served Hungary’s independence better in 1956, “but Suez or the presidential election was more important to them at the time.”

Gulyas said the Hungarian government’s position on the war “should be acceptable to an important NATO ally”. “If it isn’t, then that partner should discuss the matter with the cabinet,” he added.

He said there were two views taken on the war. One view, he said, urged a ceasefire and peace talks. But, he added, a ceasefire would not entail the recognition of the current frontlines as borders. It would, however, “end the killing”, he said. According to the other view, the war should go on until the borders between the two countries are identical to the ones recognised by international law, Gulyas said. Those who hold the latter view support a months-long or years-long war, he insisted.

Meanwhile, Gulyas said it was not yet clear what areas the European Union’s planned 11th sanctions package would apply to because the European Commission had yet to send a draft version.

Talks on the payment of cohesion and recovery funds are ongoing, Gulyas said, adding that the EC was “constantly promising to respond in the next few days”.

Meanwhile, Gulyas declined to speculate as to when parliament could ratify Sweden’s NATO accession. Trust between the two countries has to be repaired through dialogue, which Hungary is open to, he said. But some of the labels used by Sweden in the recent period regarding Hungary call for a minimum level of trust between the two countries, he added.

Asked about corruption in Brussels, Gulyas said that as a member of the EU, “we are interested in the headquarters of the European Union functioning well and being above all suspicion”, and yet we see that “Brussels is full of corruption”, and there are still cases suggesting “charges of influence peddling”. It must be made clear that no norms other than EU law apply in Brussels, he said, adding that “we support the investigation of such cases”.

Speaking about EU foreign policy, he said the main subject of Hungarian criticism was that major EU member states did not recognise or represent European interests, while major actors of international diplomacy stood up for their own interests.

Regarding the statements made by French President Macron during his visit to China, Gulyas said it was “a brave step and initiative for Europe to recognise its own interests and act accordingly”.

He said Europe was interested in free trade and that within the relevant framework “we maintain economic relations not only with our allies but also with the eastern half of the world”.

Asked about whether the Hungarian government supported the re-election of Ursula von der Leyen as head of the European Commission, Gulyas said it was too early to comment on that. At the same time, he noted that the German union parties have recently decided that they would support her re-election and she was present at the meeting. Gulyas dismissed as “speculation” the suggestion that the German politician would continue her career as NATO Secretary General.

Asked about the EU farm subsidies, he said “these are coming to Hungary without interruption”, and they were not affected by the dispute over cohesion funds.

Asked about the finances of the Budapest city council, Gulyas said there was no request on the government’s table for Budapest to take out a long-term development loan. He added that the government considered the indebtedness of municipalities as dangerous and harmful, and this was allowed only in the rarest of cases.

He said the city’s local business tax revenue increased by 76.4 billion forints from last year to this year alone. Budapest’s current leadership inherited 214.2 billion forints from Istvan Tarlos, the previous mayor. Of this, 25.5 billion remains on the treasury account, according to the government’s information, “which says a lot about how the capital is managed”, Gulyas said.

He linked Karacsony’s announcement on withholding tax for the central coffers with his intention to run again the 2024 municipal election. Two weeks ago, DK president Ferenc Gyurcsany told him off for not criticising the government harshly enough, Gulyas said. “Maybe he’s just obeying his boss,” he added. In the past 15 years, investments in Budapest were implemented by the government, he said, adding they were not endangered by the city’s near-bankruptcy.

The governing parties are working a proposal under which the rules of party financing should also apply to participants of the municipal election, he said. This would rule out the possibility of foreign funding, he added.

Asked about whether price caps may be extended over additional products, Gulyas answered with a clear “no”.

Asked about the central bank’s planned narrowing of the interest rate corridor and the management of inflation, Gulyas said lending interest rates were “so high nowadays” that almost no one would borrow a significant amount to buy a home.

He said the reduction of the upper threshold of the interest rate corridor should be followed by “many similar steps” for this situation to change.

Gulyas said he expected inflation to fall significantly in the summer, with a breakthrough taking place probably in July and August.

Asked about the fate of the state’s share in the International Investment Bank (IIB), which is pulling out of the country, the minister said the Hungarian state was obliged to enforce all its claims. He said the regulation “making clear that the headquarters of this bank is no longer in Budapest” will be published later during the day, and with the departure, diplomatic immunities will expire.

Asked whether Russia is also a friend of Hungary’s, like the United States. “Russia is our partner, our economic partner primarily in the procurement of commodities; the United States is our ally and our allies are our friends,” he said.

He said he did not know of any substantial damages caused to Hungary by the sanctions announced by the United States concerning the International Investment Bank, but, he added, the question was how much money Hungary could obtain of capital invested into the bank. Just as Czechia and Slovakia, Hungary will also enforce its claim on money invested, he said.

Asked about the landmark Lanchid Palota building next to the Chain Bridge, which until recently served as the headquarters of the IIB, Gulyas said the state may want to acquire certain assets, “but we have yet to reach this point in the legal procedure”. Commenting on the label of “Russian spy bank” that had been used for the IIB, he said that if the Hungarian intelligence services had alerted the government to any threat, the bank’s operations would have been restricted or prohibited.

Meanwhile, Gulyas said the modifications to the expansion of the Paks nuclear power plant did not affect any key aspects of the construction. The changes are technical in nature, and the price and interest remain unchanged, he said. The modifications will have to be submitted to the European Commission for approval, after which they will be released to the public, he added.

Asked about the release of any aspects of the recent Pentagon leaks concerning Hungary, Gulyas said this required the opinion of the intelligence services. Hungary has no knowledge of the US eavesdropping on any Hungarian political leaders, he said, adding that no such documents had leaked from the Pentagon.

On another subject, Gulyas said Hungary had submitted every request for financial contribution to its border fence to the EC, but the body never approved any support. So far, only the leader of the European People’s Party has changed his mind when it comes to building border fences, but there are not yet any signs of the EC changing its view, even though its leader belongs to the same political family, he said.

Asked about the closures in Kossuth Square because of the Pope’s visit next weekend, Gulyas said certain parts of the square were being closed to the public while the stage is being built, and the green spaces also have to be closed off.

Gulyas said the government had no plans to amend the Penal Code to include penalties for “public interest reports” concerning the violation of constitutional values. He said the law had been approved to comply with the harmonisation of EU law.

In response to another question, Gulya said marijuana would not be legalised in Hungary as long as the Fidesz-Christian Democrat alliance was in power.

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