As a sine qua non of Hungary’s renewal, we must establish a higher education offering competitive knowledge. A successful and rising country needs to permanently augment the capacities of fresh and creative knowledge that does not go without a modern higher education to meet labour market expectations as well as the actual demands of the economy and of the society.
Currently in Hungary much more is being spent on support related to disability than in other countries which are at a similar stage of development or which have similar healthcare parameters. In Hungary the number of handicapped people with a job is very low, and the support system is only favorable for some privileged organizations which are invested with special rights.
In the past few years the Pension Protection Fund required a contribution of 600-700 billion forints from the central budget. What is more, the state pension system would have closed with a deficit of 800 billion forints in 2011 but for the measures of the Orbán government in 2010.
With continued economic policy efforts to put businesses at the forefront, the Government is planning moves to make the entrepreneurs’ life easier through administration cuts as a part of structural reforms on the agenda. For Hungary to regain its leading position in the region and to become one of Europe’s most business-friendly countries, it is inevitable to ease the administrative burden on businesses that could weaken competitiveness of those.
The key indicator to judge the competitiveness of an economy is the amount of general tax liabilities. If enterprises consider administrative costs too high, they may opt to scale back production and investments or would-be investors may decide not to come to Hungary. As a result of the tax measures implemented during the last couple of months, the tax burden fell to 37%, but it is still more than the average of the Visegrád group members.
At present one million jobs and, consequently, places of work are missing on the Hungarian labour market. That is why the government committed itself to form a partnership with the enterprises to create them in ten years’ time. The creation of one million jobs is necessary so that our extremely low rate of employment, in comparison with the European Union, should belong to the premier league of the EU.
The size of the Hungarian national budget relative to the size of our economy is almost 6 percent bigger than that of the countries with economies at a similar stage of development or that of the average of the other Visegrád group members. Almost half of the difference is the result of the significantly higher Hungarian interest liabilities due to our bigger public debt, but our primary expenditures are also higher than those of our competitors in the region. The current structure of expenditures in the national budget is not pro-growth: the proportion of expenditures on investments is low, the proportion of running expenditures is high – especially, within this, the amount spent on social benefits.
Hungary has been committed to a strict budget policy. In accordance with the convergence programme, the government will gradually reduce budget deficit from 3.8% as of GDP in 2010 to 2.9% in 2011. Parallel to this, they will contribute to jumpstarting an economic growth with measures aimed at job creation. As a result, the level of public debt will fall from 80% as of GDP in 2010 to 70% by 2014.
The minister for national economy had proposed that a stability reserve of 250bn HUF be set up as part of the budget. This stability fund will protect Hungary from unforeseeable external economic developments without having to modify this year’s budget under any circumstances.
Despite the ongoing volatility of the international capital markets, mainly caused by renewed concerns about the worsening financial situation in some of the developed countries, the Hungarian government securities market worked well and provided smooth and stable financing for the government throughout 2010.
Since the constant aggravation of the2008 global economic crisis, it has been clear that the prioritised issue of the 2010s will definitely be that of government debt in economic terms. The crisis management measures taken by the Western states and the huge amounts spent to save the financial sector induced fast-growing indebtedness for these countries.
The so-far complicated and, in certain aspects, often lavish system of public employment is about to be replaced by the transparent and financially viable national public employment programme of the government that acknowledges value-creating work.
The 2010 budget constructed and left behind by the Socialist government is characterized by overestimated revenues, underestimated expenditures and, thus, an unrealistic deficit target. The landmines hidden in this year‟s budget have been overlooked by, among other financial organizations, the Fiscal Council. The 500bn HUF “problem” has been corrected by the extraordinary measures taken by the Government of National Issues to keep the deficit target of 3.8, which is an exceptionally low figure in the EU.
Hungary would like to contribute to the execution of the Europe 2020 Strategy with its particular national capabilities and priorities. The primary priority of the government’s economic policy is to improve employment – it also appears as Hungary’s most important commitment of the National Reform Programme, outlining the execution of the Europe 2020 Strategy.
The 500-700bn HUF extra gap in the budget left behind by the Socialist government forced the new government to urgently introduce measures aimed at increasing revenues and cutting expenditure.
The new Hungarian government is firmly determined to make Hungary the 21st century financial services centre of Central Europe by the recently released, long-term and sound economic policy concept. To reach European competitiveness standards, we intend to create an environment with such taxation as well as legal and market regulatory background which, by stimulating financial investments, could turn Hungary into an attractive destination for foreign institutional investors and which could facilitate the long-term rise of domestic savings rate.
Report on the measures taken in response to Council recommendation of 7 July 2009 under Article 104(7) of the Treaty
The objective of the comprehensive pension reform currently under way in Hungary is to return to the two-pillar pension system, based on social solidarity on the one hand and voluntary contributions on the other, which is in place in eighteen EU Member States, from the current three-pillar system which is hopelessly threatening the budget balance, and is financially unviable in the short, medium or long run. Having accomplished this transformation, the government is committed to maintain and support voluntary private pension funds parallel to the state-run social security pension pillar.
From 1 January 2011, Hungary will have a flat rate personal income tax system with a 16 percent flat-rate personal income tax.
under the Europe 2020 Strategy
The main objectives of the New Széchenyi Plan starting on the 15th of January, 2011 are to improve the competitiveness of Hungary and to create one million new jobs over the next ten years by the help of seven break-out points. The economic development programme of the Hungarian government provides an adequate response to every challenge the country is facing, and it secures sustainable economic growth for the long term.
Reports on Government deficits and dept levels.
Experts of the Ministry for the National Economy have been on a three-day study trip to Tallinn where they examined the Estonian family policy, the flat tax rate system and the challenges of old age pension system. It is justified to examine Estonia in these fields because:
As the minister of national economy emphasized on the occasion of the nomination of the Government Debt Management Agency's new Chief Executive Officer, a central objective of the government's financial policy they pay special attention to is regaining credibility.
As the Ministry for National Economy communicated yesterday, the talks due to be held this autumn would take place exclusively within the economic policy consultations as usual with all the member countries (Article IV consultations).