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Reactions to Matolcsy package 2.0

October 19th, 2012

The leading right-wing daily claims that the new austerity measures are the result of “IMF blackmail,” while its counterpart on the left suggests that either Matolcsy has difficulties with numbers or he lied when he announced his first package.

On October 17, Minister for the National Economy György Matolcsy announced a 367 bn HUF adjustment-package, doubling the tax levied on all financial transactions (including cash withdrawal and cheques), postponing the lowering of the extra tax on banks, raising social security contributions on cafeteria (employee) benefits, promising more effective tax collection, a new tax on public utility infrastructure (cables, wires) and a few other measures.  The new package was announced less than two weeks after an adjustment package of similar magnitude. (See BudaPost, October 8 and 9).

In Népszabadság Ákos Tóth says the two packages taken together will have frightful consequences, with enterprises “buried” and economic growth made impossible for the near future. The poor, he writes, were already “struck hard” by the cap on social welfare payments announced earlier this month. PM Viktor Orbán told teachers, whose pay raise was postponed as part of the first package, that he still hoped there will be room to give them their wage hikes from September next year, as originally planned. Now either Matolcsy lied to his boss, or he does not know his numbers, if a second such package was necessary after the first was announced. But – adds Tóth – more plausibly, Orbán made his promises to the teachers well aware of the fact that a second package would be needed imminently. The author accuses the Prime Minister of cynicism and contends that while he tries to project the image of a man doggedly pursuing his goals, in fact he is not in control anymore, and the collapse of his policies will bring down Hungary.

In Magyar Nemzet Anna Szabó argues that by forcing the Hungarian government to introduce another adjustment package, the European Commission foiled at a stroke the “consolidation” process planned by Hungary’s leaders. Considering that the Union is struggling with the threat of disintegration, with Spain asking for help, austerity measures provoking mass demonstrations in Portugal, the problems of Greece “now beyond hope” and eleven EU countries forecasting deficits higher than 3 per cent, this heightened attention towards Hungary and the claim that its deficit will exceed the target by 1 to 1.5 per cent, is more than unusual. How is it possible, then, that under the former Socialist government a deficit several times higher than the present target seemed acceptable to Europe? (The EU started excessive deficit proceedings against Hungary in 2004.) Now, she complains, the Union threatens the withdrawal of Cohesion and Structural Funds for the second time (in March the Commission proposed to hold back part of the funds from Hungary but eventually dropped the proposal. (See BudaPost February 23 and 25; March 14June 1 and  25). While the Hungarian currency is out-performing its regional competitors and sovereign bonds sell quickly and easily, Commission members “who are not elected by anyone,” hunt minuscule errors. Such an attitude towards Hungary cannot be based on economic rationality, Szabó claims. The obvious conclusion, she concludes, is that the EU is doing everything to “kill” economic independence; “all we can hope for is that this is only a war of words and the package will never be implemented”.

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