Gergely Gulyas – Photo: MTI

Government announces support scheme for energy-intensive SMEs

Price caps, freeze on retail mortgage rates extended

Hungary's government has decided to extend the price caps on basic foodstuffs and fuel, the prime minister's chief of staff said on Saturday. The freeze on retail mortgage rates, which was set to expire on Dec. 31, will also be extended by at least six months, Gergely Gulyas told a regular press briefing. The government is doing everything in its power to ensure that the economic situation allows for these measures to be prolonged and for utility bills to be kept low, Gulyas said, calling the measures "Europe's biggest family support scheme".

He also said that if the war ended or if the European Union were to lift the energy sanctions on Russia, the prices of oil and gas would “go down by half the next day”.

Gulyas said the war in Ukraine and the related sanctions had led to “a brutal rise in energy prices”, which had caused inflation, particularly in the price of food products. This has in turn led to soaring fuel prices in recent months, he added. He noted that the government had introduced measures as early as last autumn to shield Hungarian families from these price increases.

He said the government had decided to extend the price caps because “as long as the sanctions are in effect, there is no realistic chance of the situation improving”.

Gulyas said the mortgage rate freeze helps tens of thousands of families and that the government trusted that it could also curb the fuel price increase. Hungary has the lowest fuel prices in Europe, he added.

The caps on utility bills will also remain in place up to average consumption levels, he said. The first energy bills issued under the amended utility price cap scheme indicate that there are more households that are considered lower-than-average energy consumers than originally thought, adding that many households had also started to save energy. The utility price cap scheme saves families 150,000-180,000 forints (EUR 369-443) a month, he said.

Meanwhile, Gulyas said Hungary has been conducting intensive negotiations with the European Commission on the conditionality mechanism which links European Union funding to the rule of law over several months, and there are no more unresolved issues.

The government has accepted several of the EC’s recommendations, Gulyas said, adding that the two sides had compromised on the proposals Hungary could not accept.

The cabinet discussed and approved these proposals at its Saturday meeting and will submit them to parliament next Monday and Friday, Gulyas said. The laws in question will enter into force in November, paving the way for the end of the conditionality procedure, he said.

The series of talks held between Hungary and the commission over the last two months can be considered “a step from mutual distrust towards mutual trust”, Gulyas said.

The EC will make a statement on the matter on Sunday, he said, adding that part of the agreement was that Hungary must implement the commitments it has made to the commission.

He urged lawmakers to approve the proposals so that the conditionality procedure could be concluded.

Talks are also ongoing on the post-pandemic recovery fund and the partnership agreement on the operative programmes of the EU’s next seven-year budget, Gulyas noted.

Marton Nagy, the minister for economic development, told the same press briefing that the government has approved a support scheme for energy-intensive small and medium-sized businesses.

The scheme, which will run from Oct. 1 until the end of 2023, is aimed at supporting operating costs and investments, Nagy said.

As regards the operating cost support, Nagy said the state will cover 50 percent of the increase in the electricity and gas bills of energy-intensive manufacturing SMEs.

The government is also launching a programme to support investments aimed at improving energy efficiency, Nagy said. SMEs will receive a maximum 15 percent subsidy on their own resources in order to maintain their long-term competitiveness, he said.

Meanwhile, Nagy said SMEs are being asked to keep at least 90 percent of their staff employed until the end of 2023.

The minister said that the government had also discussed a scheme to save factories and a new job protection action plan. He added that both would be finalised over the coming weeks. The scheme will support investments aimed at improving energy efficiency in large energy-intensive factories, he said.

The job protection action plan is designed to prevent massive lay-offs by energy-intensive companies that would seek to offset higher energy prices by reducing their workforce, Nagy said, adding that the government gives priority to protecting jobs.

The minister said the programme may affect about 10,000 small or medium-sized enterprises in 116 energy-intensive sectors. The government seeks to help SMEs remain viable and competitive even after the energy crisis and retain their workforce, he said.

The minister said he had also supported the proposal for extending the price caps at the government session, even if he maintained the position that these measures are not normal interventions in the market. He added, however, that the current market conditions are far from normal either as Hungary is amidst an energy crisis aggravated by sanctions, with inflation imposing a growing burden on families.

Citing the central bank’s forecast, the minister said the rate of inflation would continue to increase in the coming months and only start to decrease next year.

In view of the coming winter, phasing out price caps would make no sense, Nagy said. He added, however, that “price caps will not stay with us forever, we must get rid of them sooner or later”.

Meanwhile, Gulyas qualified the European Parliament’s Thursday decision condemning Hungary on rule-of-law grounds as “the Hungarian left wing’s effort to prevent the country from getting access to EU funds that are due to it”.

Asked about the EU sanctions imposed on Russia, Gulyas said no one disputed that Russia had violated international law by attacking Ukraine but the sanctions had generated windfall profits for Russia and impoverished Europe. All European governments are struggling to save their energy-intensive businesses, he said.

Nagy called the United States one of the biggest winners of the sanctions. The US price of gas is merely the sixth of the EU and Asian level, with the energy costs of US companies remaining by and large unchanged over the past year or two, he said.

Gulyas qualified the EC’s decision to refrain from proposing a price cap on gas as “a temporary victory of common sense”. A measure like that would have generated shortage, endangered the heating of homes and hit the European economies, he said.

In response to a question, Gulyas said the government had not cancelled, merely postponed the start of its major health care-related investment projects in the capital, including the construction of a central hospital in southern Buda and the upgrade of the St. Janos Hospital. In response to another question, he said the government’s intentions regarding the takeover of Liszt Ferenc International Airport had not changed.

On another subject, he said the government will raise the wages of teachers once Hungary is given access to the EU funds it is entitled to.

He said the government is also expected to approve today a proposal that requires primary schools to limit their heating to 20 degrees Celsius and secondary schools to 18 degrees.

Asked about government support for the utility bills of health institutions, Gulyas said that no hospitals or clinics would close because of utility costs.

Meanwhile, he said the government would also approve a measure today that will increase lignite production.

He said Hungary has enough gas storage at present to cover 89 winter days.

Concerning Democratic Coalition (DK) MEP Klara Dobrev’s decision to form a shadow cabinet, Gulyas said ruling Fidesz had been correct when it said that the “true leader of the left” was DK leader and Dobrev’s husband, Ferenc Gyurcsany.

There has not yet been an attempt to set up a shadow cabinet in Hungarian politics, “but there’s already a shadow prime minister: Klara Dobrev, because it’s actually Ferenc Gyurcsany who’s controlling their executive branch”, Gulyas said.

Meanwhile, Gulyas denied as “untrue” press reports that Prime Minister Viktor Orban had raised the possibility of reviewing Hungary’s EU membership in 2030 at an annual civic event held in Kotcse, in western Hungary. The government has always found that the advantages of Hungary’s EU membership outweigh its disadvantages, mainly because of the common market, he said.

Commenting on reports of opposition parties and politicians receiving funding from abroad, Gulyas said every such case would have to be investigated, adding that the ban on such financing needed to be respected by everyone.

As regards abortion, he said the government has not tightened the relevant law in any way and women remained free to make their own decision in the matter. Gulyas said the government had approved provisions put forward by the College of Health Care Professions, adding that this did not impact women’s freedom of choice.

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