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Hungary has no option but painful reforms

April 26th, 2012

Commenting on the planned reforms presented by PM Orbán in Brussels, analysts agree that the Hungarian government has no choice but to take further steps to reduce the deficit after a decade of irresponsible governance. Some, however, fear that the austerity measures will deepen the economic crisis.

The Hungarian government was given an ultimatum by the EU and the IMF, and could choose only between bad and worse options, Anna Szabó writes in Magyar Nemzet. If the government resisted further tax hikes, the IMF would not agree even to start negotiating a possible credit line (see BudaPost April 25, 2012). Without a credit-line, however, the Hungarian Forint would plummet and state securities could not be sold, Szabó notes.

As a result of the newly proposed measures, Hungarian taxpayers will have to shoulder most of the surplus taxes which the government has levied for the past 18 months on telecom companies, the energy sector and foreign retail chains, Szabó remarks. The right-wing commentator hopes that the Hungarian public will understand that without the new burdens the country has no chance of getting out of the economic crisis.

In Magyar Hírlap, Mihály Szalontai notes that the Orbán government will have to clear up the mess of the past governments. As neither the European nor Hungarian economic prospects have improved, the government will have to introduce new restrictions and, simultaneously, stimulate economic growth. Szalontai contends that this will require an honest recognition that there is no cuch thing as a free lunch – and that social services have to be paid for by Hungarians, which the former Socialist government did not dare to  admit publicly.

Writing in Népszava, Zsolt Zsebesi also acknowledges that the Orbán government will have to correct the errors of past governments. He adds, however, that the Socialist-Liberal coalition could not implement reforms because of the fierce opposition of Fidesz, the party which in 2008 initiated a “social referendum” to maintain unsustainable practices and institutions. Zsebesi, nonetheless, is not convinced that Orbán is serious about the proposed restrictions, and hints that the EU and the IMF may also be sceptical about the Hungarian government’s U-turn.

In Népszabadság, Miklós Blahó interprets Orbán’s recent willingness to accept the conditions of the EU as an admission of the failure of his government’s economic strategy for the past two years.

Blahó is afraid, nonetheless, that the new restrictions will not pull the Hungarian economy out of the slump, but will instead only serve to deepen the crisis. The left-wing columnist speculates that the austerity measures just announced will further weaken the prospects of growth, and perpetuate stagnation, unless the government reaches an agreement with the IMF and secures a credit-line in the near future.

On Wednesday the EU authorities gave the green light to the IMF talks. The Hungarian stock exchange index increased by more than 4 per cent, and the Forint strengthened significantly against the Euro.

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