According to Minister of State for Economic Strategy Zoltán Cséfalvay, reforms and concurrent financial stability are the key for finding a real solution to the global economic crisis which has been ongoing for five years.

At the presentation held at the first Central European Summer University by the Századvég Academy of Politics in Budapest, the Minister of State said that international measures tested over the years of the crisis and which focussed on individual fields had all failed, and therefore neither the fiscal stimuli applied in 2008-2009 nor fiscal austerity enforced “at all costs” proved to be adequate solutions to the challenges posed by the crisis.

Reforms aimed at improved competitiveness that are implemented parallel to financial stability can, however, serve as effective remedies, Zoltán Cséfalvay said. He underlined that Hungary had succeeded in stabilising the budget, and achievement that was clearly manifested by the lifting of the EU-initiated Excessive Deficit Procedure and early repayment of the IMF loan taken on by the previous government.

The Government has implemented substantial reforms in four fields: the institutional, taxation, labour market and regional systems. Currently, the most pressing issue for Hungary is to shift towards production of higher added value, and one of the options for that would be closer integration into global networks. In this respect, Hungary is competitive among the Central and Eastern European countries, he added. Another option is innovation, on which the Government has spent the equivalent of 1.3 percent of the country's GDP, and despite the crisis this is the highest figure in 20 years.
At the presentation held for university student from the Visegrád countries (Hungary, Poland, Slovakia and the Czech Republic), the Minister of State stressed that while the fiscal deficit had amounted to more than 9 percent of GDP in prior election years – in 2002 and 2006 – this trend had been altered and in 2010 the respective figure was 4.2 percent, whereas last year it was as low as 1.9 percent – well below the 3 percent threshold projected in the EU Convergence Programme.

As the Minister of State said, Hungary was placed 9th in the globalisation ranking by Ernst&Young, just behind Sweden and Denmark. The Globalisation Index shows that Hungary is still one of the most open economies in the world.

In the opinion of the Minister of State, only a custom-made national reform policy is capable of establishing the long-term competitiveness of a given country, while the measures of international organisations (i.e. the IMF, EU and ECB) are only capable of creating stability in the mid-term, whereas market-driven measures – such as interest-rate policy – are only short-term fixes. In the CEE countries, including Hungary, reforms that altered the relationship between the markets and the government were also quickly introduced.

In many cases, the state may be the only solution for handling an issue triggered by the crisis, such as the problem of foreign currency debt holders, Zoltán Cséfalvay said.

(Ministry for National Economy)