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Books on Hungary
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Update No: 126 - (26/11/07)
The bullyboy saviour
The Hungarians are at their wits' end. They have a scoundrel and a serial liar
as their leader; Ferenc Gyurscany has admitted as much. He confessed that he
lied and lied again to get re-elected last year. His partisans however might say
that he is only unusual in that he admitted it, whilst other leaders are less
candid.
But he is a clever man for all that. He made a million or two out of the
collapse of communism. He was head of the Communist Youth League, whose hotels
and gymnasia, etc, he made over to proxies of himself. He is now the Butlin of
Lake Balaton.
The Hungarians are counting on him being the proverbial poacher turned
gamekeeper.
At the brink
Hungary is in a ghastly hole. It began to run a huge public deficit, nearly
10%of GDP. The ex-communists who ran the show kept making promises that they
could not keep.
The government is nearing the end of its period of severe fiscal austerity, but
the structural reforms will continue and a budget deficit of less than 3% of
gross domestic product is within reach in the coming years, Prime Minister
Gyurcsany said on November 15.
"The period of austerity measures seen in the past 1.5 years is over but
this doesn't mean that the reforms are done. Now a period of improvement and
construction is to come," Gyurcsany said at a conference organized by
domestic think tank GKI.
The ongoing painful reforms of Hungary's healthcare, education, and public
sectors are not only aimed at bringing the budget back to a sustainable course
but also at putting an end to stop-go fiscal cycles, and at convincing
Hungarians that no more can be spent on social services than is received in the
budget.
"In a small and open economy such as Hungary's, we need to aim to have a
budget that has not a 3% deficit but which is totally balanced (with no
deficit)," Gyurcsany said.
Hungary recorded the biggest budget deficit as a percentage of gross domestic
products in the European Union last year, at 9.2%. The austerity measures
carried out this year and last year amounted to 7.5% of GDP, one of the biggest
spending cuts ever by a European country, Gyurcsany said. "A stable, less
than 3% (of GDP) budget deficit could come during the current (political)
period," Gyurcsany said meaning the current Socialist party-led government
cycle.
Concerns from analysts and investors that Hungary will fail to meet its budget
deficit reduction goals in the coming years, including 2010, are
"unfounded," Gyurcsany said. The bill on new budget planning rules
submitted to parliament will serve as an institutional guarantee for reaching
those targets, he added.
As a result of the fiscal spending cuts, Hungary's GDP growth has slowed sharply
and analysts fear that the country is facing stagflation. "The question is,
then, where economic growth will come from? We need to reject all ideas that
suggest that growth should come from boosting domestic consumption and boosting
domestic investment demand," Gyurcsany said.
"This was one of the gravest mistakes in the past years and there's no road
back to that," he added.
Gyurcsany's Socialist party and the leading opposition party, the center right
Fidesz party's views strongly differ regarding that, Gyurcsany added. With the
budget lowering its financing need, the private sector will gain room to invest
and develop, the premier said. Furthermore, development programs drafted by the
government will add to that, he added.
Growth to pick up
GDP growth will be significantly faster in 2008 at about 3%, compared with 2007
and economic growth of around 4% is realistic from 2009 onward, Gyurcsany added.
The government forecasts 2007 GDP growth at 2.2%.
Hungary's economy will grow faster in 2009 or 2010 once the current period of
economic adjustment has been completed, the Prime Minister said on November15
after figures showed that growth had dropped to an 11-year low.
Over the last few years Hungary has enjoyed annual growth of around 4 per cent,
but tax hikes, energy price increases and other measures aimed at cutting the
budget deficit have taken their toll.
The third-quarter figure was even lower than the second quarter's 1.2 per cent,
bringing growth over the first nine months of the year to 1.6 per cent. 'We are
now paying the price of what we did between 2001 and 2006,' said Gyurcsany,
referring to poor fiscal discipline during the period.
Speaking after meeting Angel Gurria, secretary general of the Organization for
Economic Cooperation and Development (OECD), the prime minister said he was
committed to his reform. 'There is no growth unless we dare to change,' he said.
The government is attempting to reduce its budget deficit, which, at 9.2 per
cent of gross domestic product in 2006, was the highest in percentage terms in
the European Union.
Bodies such as the OECD had long been calling for Hungary to address the problem
before the government acted, and Gurria said that a sustainable fiscal policy
was key to economic growth. 'No country can achieve economic growth if the
state's financial position is unstable or if its debt is growing,' he said.
Main centre-right opposition party Fidesz, however, criticized the government
for leading the country into a slump, pointing out that Hungary now had the
lowest growth in the European Union.
'The Gyurcsany government has turned Hungary into Europe's straggler,' Fidesz
deputy chairman and former finance minister Mihaly Varga said.
Many of Hungary's regional neighbours are seeing growth figures of between 5 and
10 per cent.
Growth in the EU as a whole is expected to hit 2.9 per cent in 2007, although
Brussels is predicting growth will drop to 2.4 per cent through 2008 and 2009.
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