Gulyas: Gauging public opinion on sanctions important for government

Gulyas said Europe was in a “uniquely difficult situation”, mainly because the war in Ukraine and the EU’s related sanctions on Russia had led to a surge in energy prices. Because of this, families and businesses in Europe are forced to pay a “sanctions surcharge” on energy, which often translates to a four to five-fold increase in energy bills, he said.

The government’s decision to keep the cap on household energy bills up to average consumption saves households an average 181,000 forints (EUR 440), Gulyas said, calling the measure “the biggest support scheme” in Europe.

Gulyas said Brussels had “forced the sanctions on member states” by pledging that they would hurt Russia more than the countries imposing them and bring a quicker end to the war.

But the sanctions turned out to have the opposite effect, Gulyas said. “They hurt Europe a lot more than they do Russia and by paying sky-high energy prices it is we, who are financing Russia,” he said, adding that Russia had made record profits unseen in the past thirty years on high energy prices. Neither did the sanctions bring a quicker end to the war because “this is obviously a protracted conflict,” Gulyas said.

He said more and more Western press outlets were saying that decisions that help fund Russia were morally unacceptable. Meanwhile, Europe finds itself in an extremely difficult situation and will fall behind on the global economic stage because they have to compete while paying three to five times more for energy, Gulyas said.

Meanwhile, Gulyas said that in an effort to save energy, the winter break at Hungarian schools will be longer than usual this year, lasting from Dec. 22 to Jan. 8.

Government spokeswoman Alexandra Szentkiralyi added that while the winter holidays for schools would be longer, the autumn break would be cut.

Government offices will also stay closed in this period for the same reason, Gulyas said, adding that employees in the sector would be required to take their paid holidays off for those days.

The cabinet also discussed the effect of rising energy prices on local councils, Gulyas said, noting that some local councils are seeing a 10-20-fold increase in their gas bills.

The government has therefore tasked Fidesz MP and ministerial commissioner Gyorgy Balla with coordinating talks with local councils together with the finance, the interior and the technology and industry ministries on finding a solution to help local governments survive the coming year, Gulyas said.

Most local councils will be able to afford their energy bills this year because of their long-term contracts, but it is certain that they will have to cut costs and will need government support next year, he said.

The government will hold separate talks with the local councils that need additional help, he added.

Gulyas denied press reports that the government had ordered a halt to its payment obligations, adding, however, that all payments must be made with the approval of the finance ministry. He said the reason for this was that Hungary was committed to keeping this year’s budget deficit at 4.9 percent of GDP.

Hungary has no solvency issues, Gulyas said. Although the global economic environment is hectic and there are strong fluctuations in currency exchange rates, the government is doing everything in its power to stick to its deficit target, he said. The Hungarian economy “is performing particularly well”, he said, arguing that it had strong foundations and unemployment was not on the rise.

Concerning the forint’s new historic low against major currencies, Gulyas said monetary policy was determined by the central bank. The National Bank of Hungary is committed to keeping the exchange rate stable and correcting gyrating exchange rate movements, he added. Gulyas said he did not believe there were any real economic reasons behind the movements in the exchange rates.

He stressed that the government was not in talks with the International Monetary Fund (IMF) on raising a loan.

Government members were in agreement on Wednesday that the 2022 state budget was sustainable and the 4.9 deficit target achievable. He said there were few countries in Europe that would be capable of sticking to their original deficit targets.

Asked about the extension of the winter break for schools, Gulyas said the autumn break was being cancelled for all public schools. The decree on the changes to the school year will be published later today, he added.

Concerning the EU’s planned eighth sanctions package, Gulyas noted that Hungary had made it clear that it would not approve any package that contains sanctions on energy.

Gulyas said the time had come for Slovakia to oppose the sanctions.

Put to him that the EU had not imposed sanctions on Russian gas deliveries, and it was therefore unclear why the price of natural gas would go down if the sanctions were lifted, Gulyas said there was a correlation between the prices of oil and gas. When the EU imposed its sanctions, the prices of oil and gas both increased, he added.

Meanwhile, Gulyas said Hungary shared the EU’s position and did not recognise the outcome of the referendums held in four Ukrainian regions occupied by Russian forces. He said the solution that would be in line with international law would be if Russia pulled out of Ukraine.

Asked why the government believed that sanctions were hurting Europe more than Russia when the latter is in a recession and its inflation rate is projected to reach 20-22 percent, Gulyas said Russia was selling oil and gas at record-high prices. Even if Russia “doesn’t make a single cent” from oil and gas sales next year, that loss would still be covered by the 158 billion dollars it has made in profits so far this year, he said.

Gulyas said Hungary’s position was that rising energy prices were bringing the European economy to ruin and hurting households. “On one side we’re pushing the European economy into a recession,” he said. “Meanwhile, we’re helping the Russians generate a tremendous amount of additional revenue; in other words, we’re financing the war. Why is this a good thing?”

Gulyas said if the sanctions were lifted, energy prices would go down by half the following day.

Asked why Hungary was the only one protesting the sanctions, he said there were other member states that agreed with Hungary “but feel they can’t go against the bigger players”.

Asked about Prime Minister Viktor Orban’s remarks on EU funds in a speech to parliament on Monday, Gulyas said Orban’s comment about “securing funds from elsewhere” was made in reference to the loan part of the post-pandemic recovery fund. Gulyas said Hungary’s talks on the EU funding it was entitled to were “going well”, adding that there was “no reason to assume that Hungary would not be given access to the total amount of funding we are entitled to”. But a loan, he added, was a “different matter”, arguing that Hungary could secure one from other sources if necessary.

The European Commission was clear about the changes it wanted Hungary to enact, and the sides reached an agreement, Gulyas said, adding that it would therefore be “unfair” to assume that the EC would not honour the agreement.