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Ruminating about EU sanctions

March 15th, 2012

Hungary’s leading business daily warns that the sanctions imposed on Hungary by the European Union are just the beginning of the road, and instead of complaining about being treated unfairly, Hungary had better comply with the recommendations of the European Commission.

We should not lay the blame on Brussels,” Mercédesz Gyükeri writes in an editorial in Világgazdaság, commenting on the decision by European finance ministers to partially suspend next year’s cohesion funds for Hungary.

Government officials called the decision a compromise and Minister of Economy György Matolcsy even said it put an end to the policy of double standards applied against Hungary in the past. The media, however, have quoted at length from the comments of the finance ministers of Poland and Austria, to the effect that if Spain could get away with her excessive deficit, Hungary should also have been treated more leniently.

Gyükeri fears that after what happened in Brussels, speeches marking the anniversary of the Hungarian revolution of March 1848 will be full of resentment. But she believes that the European Union is right to “break with a long past of nearly fatal impotence.” She recalls that on March 15 last year, Prime Minister Orbán said Hungary would not let “Brussels or anyone else dictate to us,” though Brussels is now doing just that. Nevertheless, instead of blaming Brussels, Hungary should remember that it accepted the rules of the game when she joined the European Union. “And after all, apart from dictating, Brussels also directs valuable funds to Hungary”.

In another Világgazdaság opinion piece, Attila Bartha explains that without the expenditure cuts demanded by the European Union and without the standby credit to be negotiated with the IMF, it would be hard to imagine how GDP could grow in Hungary. Last year’s 1.7 per cent growth was entirely due to the increase in agricultural output. There was a slight increase in exports too, but the domestic market has been stagnating. A smaller public deficit and an IMF standby credit would increase confidence among investors and result in a higher investment ratio.  Bartha believes however, that in order to bolster the domestic side of the economy, it would also be important to boost consumer confidence, although this will not be easy in the midst of the harsh budget cuts which are planned. Nonetheless, without stronger domestic production and consumption, the population will simply not notice any marginal progress Hungary might realistically make in the immediate future.

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