Sanctions benefit USA, Russia, hurt Europe?

President Putin and Joe Biden on the Geneva Summit last year. Photo: PrtScr/Youtube

Asked if the state of emergency declared due to the war in Ukraine meant that Hungary will mobilise its troops, Gergely Gulyás, the prime minister’s chief of staff said the government had already ordered to tighten the defence of the country’s borders. That level of security will be maintained, but the government sees no reason to increase it for the time being, he said.

If necessary, the armed forces and the police are capable of defending the border, he said.

On another subject, Gulyás said the government believed it was highly unlikely that Russia would attack a NATO country, adding that a well-equipped army reduced the chance of that happening even further.

“We don’t believe Russia poses a threat to any member state right now,”

he said

The windfall taxes announced by the prime minister on Wednesday will be collected into the utilities protection fund and defence fund. Expenditures of the two funds this year will add up to 900 billion forints, Márton Nagy, the minister for economic development, said, adding that 700 billion will be spent on utilities protection and 200 billion on defence. Both funds can still be topped up next year, he said.

In addition to the windfall taxes, the government will also collect around 100 billion forints from smaller tax increases. This will include an increase in the excise tax on alcohol, the public health tax and the tax on company vehicles, among others, the minister said.

Nagy said the move to re-channel the extra profits of businesses would not impact their decision on whether or not they remain in the country. Over the last 12 years, the share of Hungarian ownership within the banking sector has risen above 50 percent, he said, adding that

less than 20 percent of insurance sector players were Hungarian-owned.

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Concerning the government’s decision to postpone 861 billion forints’ worth of public investments, Nagy said Hungary had an investment rate of 27 percent, of which public investments accounted for 5-6 percent, the highest ratio in Europe. The government will continue to promote market investments, he said, adding that the drop in public investments would not have such a significant impact.

Gergely Gulyás, the prime minister’s chief of staff, said the government’s rule of thumb on the matter was that only projects that are yet to be started could be rescheduled, most of them being construction projects.

In response to a question, Gulyás said that the utilities protection fund served to keep consumer prices at their current levels.

The defence fund will be used to speed up a planned military upgrade,

he added.

Read also: BREAKING! — Only Hungarians to buy fuel at capped prices

Nagy said the sectors affected by the windfall taxes knew that extra profits were “profits they didn’t earn”, adding that the government expected the businesses in question not to pass the taxes onto consumers.

As regards consultations on the taxes, Nagy said he had discussed the matter with the banking association on Wednesday and had met energy sector representatives today. The taxes will not increase inflation, the minister said.

Gulyás said the government believed that in terms of “large-scale measures” the windfall taxes would be enough to achieve its goals. He said the taxes gave no reason for businesses to raise prices, arguing that they were taxes on extra profits. The government will take action if it sees the taxes being shifted onto consumers, he added. He said

the tax on airlines will come to around 10 euros per departing passenger.

Gulyás also said the government will decide whether or not to extend the existing price caps by mid-June.

Government spokeswoman Alexandra Szentkirályi said that a total of 728,000 refugees have crossed into Hungary from Ukraine since the start of the war. Altogether 23,000 asylum applications have been submitted and 14,000 approved so far, she said. So far, 120,000 people have applied for a temporary residence permit, she added.

Asked about the oil embargo, Gulyás said that “the government, in general, has reservations about

the policy of sanctions” as it has benefitted Russia and the United States and hurt Europe.

He added that the government advocates European unity and “the proper manifestations of solidarity” even if there were disagreements on the interpretation of the latter concept.

Concerning Hungarian-Polish relations, Gulyás said President Katalin Novák’s recent visit to Warsaw was particularly successful. He added that consultations between the two governments would continue.

Hungary and Poland continue to be strategic partners, he said.

Gulyás said that no cases of monkeypox had been reported in Hungary, adding that the special laboratory capacity required for identifying the virus is in place. He noted that the symptoms of the disease are fairly mild and most of the infected recover in a matter of weeks.

Asked about inflation, Nagy attributed 80 percent of price rises to global reasons, primarily to rapid increases in energy and food prices.

The minister said Hungary’s 9.5 percent inflation rate was “way below the double-digit figures” registered in most European countries. He added that the price caps mitigated inflation by 5-6 percentage points. The central bank has forecast the rate to peak in the summer, to be followed by a decline to 5 percent by next year, he said.