Hungary’s illiberal democracy may result in 55,000 job losses

January 22, 2015


Minister of National Economy Mihaly Varga appeared on Hungarian public television channel M1 Tuesday night to assure viewers that the retail sector will see no new taxes or downsizings. Varga’s statement comes in the wake of Hungary’s largest retailer, Tesco, announcing the closure of 13 stores after the ruling Fidesz-KDNP supermajority passed legislation making it illegal for shopping centers and shops over 400 sqm to operate on Sundays or at night.  Tesco, Hungary’s largest employer, recently announced that a new law stripping loss-making grocery stores of their operating permits after two consecutive years of trading in the red may result in an additional 33 store closures.

Opponents of the laws adopted in December include the Association of Entrepreneurs and Employers, and Liga Labor Union, which have warned that the legislation could result in as many as 30,000 job losses.  The two organizations intend to challenge the situation by bringing the issue before the general public by way of referendum.

According to Sandor Demjan, president of the Association of Entrepreneurs and Employers and Hungary’s richest man, the government’s decision to close large retailers on Sundays may result in the loss of as many as 55,000 jobs, including some 15,000 people working in logistics and transportation.  He also pointed out that the move will cost the government as much as HUF 250 billion (USD 900 million) in foregone value added tax revenues, which he says the government will seek to make up for by leveling additional taxes on retailing.

Varga says Hungary’s retail sector employs 330,000 people and there’s absolutely no talk of the sector downsizing 20 to 30 percent of its workforce. Furthermore, he reasons, both Austria and Germany have been able to regulate “the day of rest”, therefore Hungary should be able to find a way to make it work without any significant impact on the national budget.

Earlier Varga told reporters that Sunday closures was a luxury Hungary could not afford.  Apparently, he was misinformed.

Fortunately, Hungary’s largest domestically owned grocery retailer, CBA, is not affected by the Sunday closure law because all of its stores are under 400 sqm.

Referenced in this article:

Varga: Nem lesznek új adók a vasárnapi zárva tartás miatt,; 22 January 2015