Hungary’s 2015 budget retains fiscal “hole” equal to 0.6% of GDP

November 29, 2014

sinkhole

Hungary’s 2015 budget contains a gaping HUF 200-230 billion “hole” which, according to Napi.hu, the government plans to fill with some HUF 200-205 billion taken from private pension funds.  After a week of parliamentary committee deliberations, next year’s budget continues to contain some HUF 230 billion of unsupported projected revenues, writes Napi.hu, including HUF 169 billion from the sale of unspecified state assets, HUF 40 billion in additional e-road tolls and HUF 25 billion from a tax on internet use taken off the table even before the 2015 budget went to parliament.

A possible explanation is that ESA2010 rules prohibit EU member states from treating money taken from private pensions as government revenues.  This means that were the government to adopt a budget showing a HUF 200-230 billion revenue shortfill being filled with money taken from private pension funds, it might trigger another excessive deficit procedure against Hungary at the European Commission–something the current government is eager to avoid at any cost.

Both the Hungarian National Bank and the State Auditor’s Office (Állami Számvevőszék), representatives of which sit on the so-called Budget Council, have called these deficiencies to the attention of the Ministry for National Economy. Experts claim the Budget Council must veto the budget if the government fails to provide satisfactory answers to questions raised over the course of parliamentary debate.  However,  this view is not shared by the government, which believes the Budget Council may not veto a budget which provides for an overall decrease in the national debt, according to Napi.hu.

The budget also contains some HUF 180 billion in reserves to fund various promises made by the government in the run-up to national, European Parliament and local elections held in 2014, including HUF 60 billion for public institutions and for settling the arrears of hospitals, HUF 51.7 billion for supplementing the salaries of public workers and HUF 61.1 billion for increasing the wages of defense, law enforcement and teachers.

Napi.hu reports that the Fidesz-KDNP-dominated budgetary committee rejected all opposition proposals, but approved Fidesz deputy chairman Lajos Kosa’s proposal to allocate an additional HUF 200 million to volunteer firemen, and as well as Chancellor János Lázár’s proposal to allocate an additional HUF 600 million and HUF 85 million, respectively,  to the Museum of Fine Arts and the Hungarian National Museum.

The committee also approved proposals by Kristóf Szatmáry (Fidesz MP and state secretary for domestic eonomy at the Ministry for National Economy) to increase support for sport associations from HUF 1.6 billion to HUF 1.8 billion, and by Fidesz MP  Szilárd Németh that HUF 400 million be allocated to the renovation of the Csepel wrestling hall.

Government plans to appropriate the private retirement savings of some 61,000 individuals sparked a protest in Budapest earlier in the week.

Reference:

http://www.napi.hu/magyar_gazdasag/hallgat_a_kormany_ebbol_megszoritas_lesz.590172.html

http://www.napi.hu/magyar_gazdasag/kiderult_mire_kellhet_a_nyugdijpenztari_penz.589865.html