Evaluating the economic economy of the past three years, Mihály Varga pointed out that the Government faced two enormous problems in 2010, a debt trap and a dire employment situation, but now it can already be announced that Hungary is doing better in both fields.

In his keynote speech, Fidesz parliamentary faction leader Antal Rogán emphasized that over the past three years economic policy focused on crisis management, but positive news are already appearing. In his words, the best news would be if next week the economy and finance ministers of the EU decide to abrogate the Excessive Deficit Procedure against Hungary.

Mihály Varga said that in 2010 the direction of economic policy was determined by the legacy of former governments; government debt and employment were two issues affecting each Hungarian family. Three years ago, from an economic perspective Hungary belonged to the most risky countries of the world; we were in the same league with Greece. Speaking about the latter topic, the Minister recalled that the IMF also acknowledged that crisis management regarding Greece had been unsatisfactory. Therefore, the Hungarian Government was right in formulating conditions for IMF negotiations, the Minister said.

He pointed out that not only the state and the government budget but enterprises and households were also deeply indebted. Between 2004 and 2008, taking out foreign currency loans was “easy as apple pie”, and that was making Hungary vulnerable while nobody was raising alarm over the issue.
Hungarian families amassed huge debts in 2002-2010, the amount of foreign currency loans increased 140-fold in this period, and it often happened that such loans were “almost forced” on borrowers. The new Government limited foreign currency lending, provided the options of early repayment at preferential rates and a prolonged loan repayment scheme, Mihály Varga said.

He informed the audience that the early repayment scheme helped 170 thousand people “escape the debt trap”, while until the end of March some 150 thousand families joined the prolonged repayment scheme. Speaking about the Ócsa housing estate, he said it is a pilot project which opens the window of opportunity for a new start for families, adding that “it may take a while for it to work out”.

The Minister for National Economy also said that general government debt increased by HUF 12 000bn in 2002-2010, for which amount interest payment liabilities average HUF 1000-2000bn per year. While in this period Europe was booming, Hungary deteriorated from “group leader to also-ran”, Mihály Varga stressed.

He pointed out that the country lost its economic independence and competitiveness, therefore eliminating the debt trap was top priority in 2010 – a huge task in itself. However, by now Hungary has been among those five EU countries where debt is decreasing: the government debt-to-GDP ratio is 78 percent, and in 2014 it is expected to go below 77 percent, whereas this figure was 83 percent back in 2010.

As Mihály Varga explained, Hungary managed to reduce the government deficit as well: it was below 3 percent in 2011 and 2012, and it will also be below this threshold in 2013. The Minister added that he hopes this trend to continue in 2014.

With regard to flooding, the Minister emphasized that some of the money spent on flood protection should assist people living in flood basins to move to safe places.

As far as the employment situation of 2010 is concerned, Mihály Varga highlighted that under Socialist-dominated governments the unemployment rate doubled: it was 11.8 percent in 2010, having increased from 240 thousand to 480 thousand, while the number of people in employment was down by 90 thousand. In contrast, recently 140-150 thousand more people have a job and many more people are given the opportunity to return to the labour market via public work schemes. As he emphasized, the Government has been keen to provide work instead of welfare benefits for people.

The Job Protection Action Plan was launched in 2013. This helps enterprises create jobs by exempting them of paying contributions and offering contribution allowances. He also said that the employment of mothers with small children is supported via incentives for part-time jobs and lower social security contributions: thanks to these measures, the number of women in employment increased by 42 thousand over the past three years.

In addition, the Government has overhauled the taxation system: the flat-rate personal income tax stimulates work. The minimum wage was also raised by 5.4 percent in 2013, while the minimum wage for skilled workers increased by 5.6 percent – a similar wage hike was introduced for the last time in 2001.

“We are fighting on,” the Minister said referring to impending Government-mandated public utility tariff cuts; some politicians and lobbyists are against these, but it is important for the Government to help families and improve the country’s competitiveness.

Source: Ministry for National Economy