Hungarian economist and former central bank supervisory board member Péter Róna told ATV yesterday that government plans to decrease public spending by 5.5% of GDP announced on Tuesday lacked specifics. “We have a tradition in which the government announces some large number and objective but doesn’t explain what is behind it,” he told ATV’s Egon Rónai. “There is no basis for the ensuing debate because nobody knows what we’re talking about, and nothing comes of it, apart from the fact that they steal the money.”

According to Róna: “They need the austerity so that there is something to steal. This is the basic mechanism.”

In response to whether he felt public spending could be decreased HUF 1.7 trillion (USD 7.3 billion) without causing great pain, Róna responded that he didn’t see how it could be realized, just as he didn’t see in 2011 how the Kálmán Széll plan could be realized.

What (Minister of National Economy) Mihály Varga announced yesterday is the same thing the government announced in 2011, the so-called Kálmán Széll program, but did not fulfill. The program formed the basis for the convergence plan. The redistribution of wealth was supposed to decrease from 49.7% to 40% in 2015. It presently stands at 50.6%. Nothing came of that program. At the same time, the previous (Prime Minister) Orbán government and current government introduced 2000 billion (forints) in austerity which they don’t call austerity but sectoral taxation.

Róna could not comment on Varga’s statement that there will be fundamental reforms to education and health care. On keeping the deficit to under 3% of GDP, Róna said:

A political agreement was struck between Hungary, that is Viktor Orbán, and (German Chancellor) Angela Merkel. So long as Hungary keeps its deficit to under 3% Germany will not object to the steps taken to realize that goal. Viktor Orbán honors the agreement to keep the deficit to under 3% and Angela Merkel keeps to the agreement not to interfere in Hungary’s internal matters.

On Varga’s announcement that Hungary needed to show “flexibility” when it comes to selling foreign currency-denominated treasuries, Róna said he supported earlier plans to substitute forint debt for forex debt: “The biggest problem of Hungary’s national economy is the huge foreign exchange burden arising from public and private debt. The fact that the exchange rate is always fluctuating constitutes an uncertaintly factor that has a large destructive impact.”

On the subject of employment, Róna criticized Varga for failing to disclose what specific steps are to be taken to ensure that the private sector will be able to create jobs.

“In order for the private sector to create jobs, there has to be investment. In order for investment to take place, there has to be confidence in the reliability and fairness of the state. This confidence was fundamentally broken. There is no investment and there is no job creation.”

Róna says the secret to combatting Hungary’s growing black economy is for the government to impose some discipline on public expenditures.

Source: The Budapest Beacon

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