No governmental support, Budapest strives to survive
The Budapest municipal assembly voted to amend the city council’s 2023 budget on Wednesday.
The proposal submitted by Mayor Gergely Karácsony was passed with 18 votes in favour and 12 against.
The amendment is aimed at “updating” the budget regulation to ensure that funds that have been allocated are available and amended revenues can cover expenditures.
The draft amendment notes that the risk posed by the uneven flow of budget revenues was known when the budget was passed given the city council’s “minimal reserves” and “limited room for manoeuvre” when it comes to its borrowing limit.
It became clear that if the planned funds do not arrive “due to actions beyond the city council’s control”, there is a significant risk of liquidity problems, the proposal said.
It said that though the capital’s “survival programme” had been successful, it did not mean that the current fiscal year would be closed according to the originally approved budget decree.
Receipt of some HUF 55 billion (EUR 140.9 million) in support promised by the government is “still in question”, the proposal said.
After reviewing the city budget’s projected revenues and expenditures based on the first half of the year, the city administration cut HUF 13.8 billion (EUR 35 million) of expenditures, part of which will be deferred until next year.
If government support for Budapest is not approved, the city in the fourth quarter will have to make use of financial instruments that enable the restructuring of the needed funds within the framework of the economic stability law, they said.
In the debate on the amendment proposal, Karácsony said the city council would expand its room for manoeuvre “using every possible political, legal and financial tool”, because they did not want Budapest “to go bankrupt over the government’s austerity measures”.
Zsolt Wintermantel, group leader of ruling Fidesz, said it was “cynical” on city council’s part to call “pushing Budapest into debt” a survival programme.
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Here is the central bank’s big decision, forint getting stronger
Hungarian central bank (NBH) rate-setters kept the base rate unchanged at 13.0 percent at a regular policy meeting on Tuesday.
At the same time, the Monetary Council decided to narrow the interest corridor further, the upper band lowered by 100 basis points to 16.5 percent. The forint continued to strengthen after the national bank’s decision. Currently, we have to pay 381.5 forint for 1 EUR. As we wrote in THIS article, the markets already priced the consecutive quick deposit rate decreases.
Government earmarks HUF 2 bn for Hungarian orgs across borders
Hungary’s government has earmarked two billion forints (EUR 5.2m) for supporting Hungarian organisations across the borders, the state secretary for Hungarian communities abroad told a press conference on Tuesday. The Caring Nation programme received 4,109 applications from the Carpathian Basin and Hungarian diasporas by the June 5 deadline, Árpád János Potápi said. The government will support 62 percent, or 2,571 applications, he said.
Fully 1.5 billion forints were earmarked to support operational costs and development such as the ice rink in Carta (Csikkarcfalva) in Transylvania. Another half a billion is going towards organising events and programmes such as the Harmony – Music Awards for Slovakia Hungarians, he said. Most of the bids for funding arrived from Transylvania, he said. The government is working to maintain its strategic goals despite the difficult economic situation and the war, Potápi said. It continues to bolster institutions across the border and maintain the network created during the thematic years organised to support various aspects of life, he said.
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Another goal is to support cooperation among micro-communities, he said. The Fidesz government has spent more than 500 billion forints on supporting some 34,000 organisations across the borders since it came to power in 2010, he said. More than 300 billionn forints has been ploughed into 5,400 investments, he added.
Hungary’s forint among the world’s best currencies: what does the future hold?
The leading analyst of CIB Bank, Mariann Trippon, gave a precise prediction of the forint’s future. The Hungarian currency has been struggling in the last few months, partly because of international and domestic reasons. Will we have to pay HUF 400 for 1 EUR in the second half of 2023 or just 360? That is the big question she answered, and her result is quite astonishing and logical at the same time.
According to G7.hu, the forint may take three possible levels: 400, 385, and 365 per euro. To predict where the forint will be months later, we have to know what factors affect its currency exchange rate. In 2022, the forint was one of the worst-performing currencies in the world. Meanwhile, in H1 2023, it was one of the best-performing ones. How is that possible?
Read also:
- Hungarian forint among the world’s worst-performing currencies – Read more HERE
- Hungary’s forint became one of the best currencies in the world!
Firstly, the Hungarian national bank introduced a high base interest rate, one of the world’s highest (18%). Furthermore, they announced they would not reduce that as long as inflation is not down and the forint is not protected. As a result, many investors borrowed money in EUR, USD, GBP, etc and invested in forint, increasing its value. The strategy worked but balancing it costs a lot for the Hungarian taxpayers (because they pay the high interest rates, which makes the business profitable for the investors).
Here is what the future holds for the forint
Moreover, European gas prices decreased, the global market started to boom, and investors were optimistic concerning the foundations of the Hungarian economy. However, investors will not park their money in forint forever, so such strategies are risky in the long run. And that is why the forint’s currency exchange rate changed significantly between January and August. We paid 365 and 395 for one euro during these months.
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However, in the next few months, Hungary will lose its advantage concerning the high interest rates because the national bank announced a gradual rate-lowering program, while the Fed and the ECB said they would not modify their interest rate. Thus, the advantage of Hungary and the forint will soon vanish. Among additional risks, the analyst mentioned the lack of EU money and the state of the budget. Among the good news, she wrote about the lowering inflation rate and the national bank’s more calculable monetary policy.
The positive and the negative effects may balance each other, so the 380-385/EUR exchange rate might remain in H2 2023.
Hungary will lose millions of EUR in taxes in 2024 and its economy is faltering
Joe Biden’s global minimum tax (GMT) scheme will kick off next year. The first pillar will concern companies with a higher than EUR 750 million global net income. That means only two Hungarian companies, MOL and OTP. However, it affects the entire German carmaking industry, which generates a profit in Hungary even during the contraction of the economy.
According to portfolio.hu, companies
- generating EUR 750 million global net income,
- headquarters or subsidiaries in any of the 130 countries joining the scheme,
- and a higher than EUR 4 million aggregated balance sheet with a minimum EUR 8 million net revenue
will have to pay at least 15% corporation tax. If they pay less, they will have to pay a top-up tax in the country where they have their headquarters. In Hungary, the scheme concerns MOL, OTP and German carmakers like Audi, Mercedes and BMW.
As a result of the scheme, there will be countries that lose substantial amounts of tax money, while others will come out as winners. In the latter category are the developed countries like the United States (that is why the initiative came from Washington), Japan, South Korea, Germany, China and Australia. Hungary will be in the category of losers. The amount the Hungarian state budget will lose is exorbitant: 19.9 million euros net, which is 0.06% of the country’s tax revenues. The news outlet highlighted that there were many uncertainties surrounding the scheme. Thus, the figures may change. Nevertheless, Hungary’s position in the new global system will probably remain on the tax losers’ side. Even though we desperately need that money.
Read also:
- Large American manufacturer leaves Hungary, laying off hundreds of employees – Read more HERE
- Government ousts foreign companies in this sector in Hungary
Nobody expected such daunting GDP data
As we wrote HERE, the shocking GDP data just dropped this morning. The 2.4% contraction in 2023 Q2 (compared to Q2 2022) means that the Hungarian economy has been faltering for four quarters years, which the last time happened back in 1996. Furthermore, it clearly indicates that the Hungarian economy is not progressing the way the Hungarian government wished or hoped for. According to g7.hu, nobody expected such a high decrease rate, experts calculated a minus 1.2% contraction. In the EU, only Estonia and Sweden performed worse than Hungary.
There are multiple reasons behind the poor performance of the Hungarian economy: high inflation, lack of state investments and blocked EU money due to the rule of law procedures. Besides, no segment of the Hungarian economy is booming except for the German car industry. Péter Virovácz, a senior analyst of the ING, said the Hungarian government’s hopes for a 1.5% GDP increase in 2023 are surrealistic. He believes the Hungarian economy will contract in 2023, so the budget will need every tax source it can access. Thus, the global minimum tax’s introduction comes at the worst time.
Extraordinary cabinet meeting held by PM Orbán yesterday
Prime Minister Viktor Orbán held a cabinet meeting in his office, the PM’s press chief said on Wednesday. Ministers reviewed issues related to the war in Ukraine, the prospects for achieving peace as soon as possible, as well as issues triggered by the “Brussels” war-related sanctions, Bertalan Havasi said in a statement. Furthermore, they discussed government measures aimed at curbing inflation and ensuring cheap household energy bills, the statement added.
Hungary’s budget deficit reaches EUR 7.6bn in June
Hungary’s cash flow-based budget balance reached 2,896 billion forints (EUR 7.6bn) at the end of June, the finance ministry confirmed in a detailed release of data on Monday.
The central budget deficit reached 2,908.3 billion forints at the end of June and the social security funds were 78.1 billion in the red. Separate state funds had a 90.4 billion forint surplus.
Alone in the month of June, the deficit was at 132.7 billion, the narrowest June gap in eight years, the ministry said.
The ministry noted that expenditures related to the regulated utilities price scheme for households came to 969.2 billion forints by the end of June.
Expenditures on home subsidies reached 330.7 billion forints in January-June, up by 60.2 billion from the base period.
As we wrote two weeks ago, the Hungarian parliament passes the 2024 budget, opposition slams it, details HERE.
Forint will get wings after minister’s optimistic announcement?
Hungary’s finance minister, Mihály Varga, acknowledged to Reuters in an interview that the high one-day deposit rate of the National Bank of Hungary served the protection of the forint. He added that the notion of weak currency boosting exports was in the past. The government seems committed to protecting the Hungarian national currency and not letting it weaken below the current level (370-380 per euro). But will that be enough?
The Hungarian forint is a very volatile national currency. That could be seen in its high amplitude exchange rate modifications following e.g. this year’s bank crisis. However, the Hungarian government seems to be committed to protecting its rate around 370-380 HUF/EUR. After reaching historic lows last October, the national bank introduced high one-day deposit rates. They started to decrease that, but Reuters highlighted that the process would be gradual.
As a result, the national bank (NBH) has very high losses, which the law says the state budget should cover. But it will not, probably because it does not have money for that. The sum is HUF 2,300 billion (EUR 6 billion). Mr Varga told Reuters that “we have agreed with the National Bank of Hungary that we propose a solution to the ECB that … would allow the NBH to correct its losses over the medium term, that means about 3-5 years. Having a negative equity poses no threat to the operation of the central bank.” Therefore, they will amend the central bank law.
Varga painted a very favourable picture of the Hungarian economy. He said inflation would be around 7-8 percent by December (now it is approximately 20 percent, the EU’s highest). Varga said the government planned economic growth (1.5 percent in 2023 and 4 percent in 2024). Finally, he highlighted that the suspended EU recovery and cohesion funds would start flowing. “I trust that we will not have to prepare an Fx bond issue, so talks on EU funds will accelerate,” he said.
Anda Present inaugurates HUF 2.5 billion investment
Promotional gifts company Anda Present inaugurated a HUF 2.5 billion (EUR 6.7m) expansion at its base in Kalocsa, in southern Hungary, on Thursday. The investment created 100 jobs, Finance Minister Mihály Varga said at the event. Anda Present has built a 5,300sqm hall with 1,100sqm of production area, 3,700sqm of warehouse space for finished products and a 500sqm office, CEO Attila Andras said. The project, supported by a government grant, is the first part of a 4 billion forint investment, of which the next phase has already started: the construction of a 5,000sqm warehouse, he added. Budapest-based Anda Present employs a total of 570 people, including 265 in Kalocsa.
Orbán to EU: Where is the money?
Hungary wants to know who is responsible for the European Union having been “pushed to the brink of bankruptcy”, Prime Minister Viktor Orbán said in Brussels on Thursday.
“Everyone has a single question in Brussels right now: where has the money gone?” Orbán said in a video on Facebook ahead of a summit of EU leaders.
He said the European Commission had proposed an amendment to the EU budget, “and is requesting hundreds of billions more in contributions from member states”.
The prime minister said this raised the question of “how is it that the European Union could be pushed to the brink of bankruptcy”.
“Where has the money gone?” – Orbán asks in his Facebook post:
Detailing the EC’s amendment proposal, Orbán noted that member states were being asked to contribute another EUR 50 billion to the budget “so that they can give it to Ukraine even though they can’t account for the money we’ve already contributed”.
“They want a lot of money from member states so that they can cover the interests on earlier EU loans,” the prime minister said. “These are the loans from which Poland and Hungary have yet to receive a single penny.”
Orbán said it was “unserious” of the EU to “want more money for migration, though not for border protection, but to bring migrants in”.
“And of course, they haven’t forgotten about themselves, either,” he said. “They’re asking for billions of euros to raise the salaries of the Brussels bureaucrats.”
Hungary’s position is clear, Orbán said. “First and foremost we want to know what all that money we have contributed so far has been spent on,” he said. “And then we want an answer to the question of who is responsible for the European Union being pushed to the brink of bankruptcy.”
Hungarian FinMin: Opposition budget amendment proposals would entail HUF 3,200 bn bigger tax bill
Left-wing amendment proposals to the 2024 budget would add a tax bill of HUF 3,200 billion (EUR 8.63bn) on top of current plans, Finance Minister Mihály Varga said on Wednesday.
Varga said in a video posted on Facebook that budget spending would overshoot by HUF 6,528 billion and entail extra taxes amounting to 3,200 billion, hitting businesses the hardest. Corporate taxes would balloon to 25 percent from 9 percent, making companies shoulder several thousand billion forints of extra tax payments, he said.
The opposition’s uncosted proposals, he added, would mean spending reserves of 200 billion forints eight times over, raising the budget shortfall from 2.9 percent to more than 10 percent.
Varga said the government’s 2024 budget was focused on ensuring the country’s security in times of war, protecting families, pensions, jobs and cheap utilities, while enabling further cuts to the budget deficit and the public debt in Hungary.
Arbitrary extra spending proposed by the left-wing opposition would put these achievements at grave risk, he said.
Orbán: Brussels budget proposal lacks seriousness, unsuitable for debate
Prime Minister Viktor Orbán held talks on Tuesday with Charles Michel, president of the European Council, and the prime ministers of Croatia, Belgium, Luxembourg, Slovakia and Sweden, Orbán’s press chief said.
At the talks Orbán rejected an EU budget proposal which promotes migration and “an increase in Brussels bureaucracy”.
Orbán also said that the European Commission’s budget amendment proposal in its current form “lacks seriousness” and was “unsuitable for debate”.
According to a statement released after the video conference, Brussels would provide EUR 50 billion in support to Ukraine, while the utilisation of EU resources provided since the start of the war “is still unclear”. Brussels was demanding further resources from member states in order to cover the deficit caused in the EU budget by rising interest rates, while the money due to Hungary and Poland from a previous joint loan was still being held back, the statement said.
“Another problem is that the EC budget proposal would further bloat Brussels bureaucracy,” it added.
The Hungarian government argues that instead of stopping illegal migration, Brussels would spend further billions on supporting the inflow of illegal migrants to Europe, the statement said. Orbán underlined Hungary’s position that the solution to illegal migration would be for any person submitting an entry request to the EU to stay beyond European borders while the request is assessed.
Budget deficit edges over EUR 7.5 billion at end-May, ministry confirms
Hungary’s cash-flow-based budget shortfall at the end of May was HUF 2,763.3 billion (EUR 7.5bn), the finance ministry confirmed on Thursday.
The central budget deficit was HUF 2,752.4 billion, while social security funds were 67.3 billion in the red. Separate state funds posted a surplus of HUF 56.5 billion.
The deficit in the month of May came to HUF 53.6 billion, the lowest May deficit in seven years, the ministry said.
The ministry noted that expenditures related to the regulated utilities price scheme for households came to HUF 894.6 billion by the end of May.
Expenditures on home subsidies reached HUF 320.3 billion in January-May, up by 95.7 billion from the base period on higher payouts for home renovations.
“During wartime, the government’s primary goal is the protection of families and workplaces, and preserving the value of pensions,” the ministry said. “The budget will ensure all necessary resources for that, while the government continues to improve balance indicators.”
Hungarian government member attacks the EU
The EU is requesting financial contributions from member states even as it is withholding funding Hungary is entitled to, a state secretary of the cabinet office said on Tuesday.
Responding to an European Commission proposal for member states to contribute to a EUR 50 billion support for the reconstruction and modernisation of Ukraine over the next four years, Csaba Dömötör said that the EU had called for contributions becuse earlier support for war-torn Ukraine had left its budget “tens of billions of euros in the red”. “Most of the contributions, some 50 billion, would again be poured into Ukraine, but the rest would go towards covering skyrocketing interest rates and the inflation-djusted salaries of Brussels bureaucrats,” Dömötör said in a video on Facebook.
Modifying the EU’s budget requires a unanimous decision of member states, Dömötör said. He said he expected “an interesting and strange debate” on the issue, since member states were now asked for extra contributions while Hungary had not yet received the EU funding it was entitled to.
The EU is intervening in member states’ budgets, Hungarian finance minister says
The Hungarian government rejects the European Commission’s “even stronger interference” in member states’ budgets, Mihály Varga, the finance minister, said before the meeting of the Council of Finance Ministers (Ecofin) in Luxembourg on Friday, adding that the EC’s firmer hand would introduce “yet another double standard”.
Meanwhile, on the subject of country-specific recommendations to be presented later today, Varga told Hungarian journalists that Hungary had met its commitments to the EU for funds to be unblocked, but the European Commission was unearthing more and more objections so as to avoid paying the money rightfully owed to Hungary.
He said Hungary had undertaken its commitments but the EU was not reciprocating, so “we won’t support the adoption of the document at the meeting”.
Budapest mayor: 2024 draft budget would ‘bleed Budapest out’ further
Next year’s draft budget would “bleed Budapest out” even further, Budapest Mayor Gergely Karácsony said in a Facebook post on Thursday.
Government support for the city would come to HUF 34.5 billion (EUR 9.4bn), up from 33 billion this year, meaning that the real value of the funding would decrease, he said.
At the same time, the solidarity tax imposed on the city would increase from HUF 58 billion to 75 billion, he said.
“This year, the city funded the government with HUF 25 billion; next year, that funding would be over 40 billion,” he said.
That money could ensure the city’s operation for 82 days, he noted.
Meanwhile, the draft budget would also cut funding for “activities and services in localities and communities” by one-fifth, “exposing the lie” that the solidarity tax levelled at cities would help support smaller localities, he said. Environmental protection, social services and railways would also suffer, making the budget “not just anti-Budapest but an anti-municipality one”, he said.
Karácsony called on Budapest residents to give their opinions in an ongoing online survey on the city’s affairs.
“The extraordinary situation warrants extraordinary measures: we will take the government to court. We will prove not only that the anti-Budapest policy is harmful for the country but also that it is unlawful,” he said.
2024 budget submitted to Hungarian parliament
The 2024 budget bill was submitted to the parliament on Tuesday, Mihály Varga, the finance minister, announced, saying that in times of war, Hungary required a budget that guaranteed the country’s security, protected families, pensions, jobs, and cheaper household energy bills.
Varga said the budget prioritised stability and predictability, and, adhering to the custom introduced 9 years ago, MPs will hold a vote on the budget during the summer and may pass it as early as July 7. The bill takes into account today’s known dangers such as the protracted war in Ukraine, he said.
Protecting and maintaining the government’s results achieved so far are the budget’s main aims, the minister said, noting that the Fiscal Council has endorsed it and the target of reducing the deficit and public debt, while it had also identified several which the government has taken into consideration.
Varga said the bill targets a deficit of 2.9 percent and a public debt of 66.7 percent of GDP, with inflation at around 6 percent. The economy is set to grow by around 4 percent, higher than the EU average. The employment level is expected to stay level at 4.7 million, while the jobless rate is likely to be 4 percent, he said.
More than HUF 1,360 billion (EUR 3.7bn) will be available for the fund which helps households, state and local government bodies and companies pay their energy bills, ensuring the lowest utility costs in Europe, he said.
Varga said the European Commission had no powers to cancel the scheme to lower energy bills, and the scheme would remain in place.
Defence spending will amount to almost HUF 1,310 billion, exceeding 2 percent of GDP, the minister said.
Family support will be preserved in the 2024 budget, Varga said, with 3,307 billion forints channeled to support families. Also, the value of pensions will be ensured next year, with 6,542 billion forints set aside for pensions, 392 billion forints more than this year. If economic growth exceeds 3.5 percent, an additional 20.5 billion will be released for the pension premium, while 449 billion will be available for the payment of 13th monthly pensions.
Fully HUF 3,434 billion are allocated for education and 3,225 billion for health care, both several hundred forints more than this year, with wage rises for teachers and nurses in the pipeline. The wage increase for teachers may reach 20 percent if a deal is struck to resolve open issues with EU bodies, so that Hungary can access its EU funding, he said.
In 2024, the tax on excessive profits will be phased out. Central reserves will amount to HUF 220 billion, he added.
Speaker of Parliament László Kövér said the general budget debate will fall between June 13 and 15, and a detailed proposal will be submitted on July 2, with a final vote scheduled for July 7 concluding the extraordinary summer session.
This is what the Hungarian Fiscal Council thinks about this year’s budget
The Fiscal Council on Wednesday said it has “no fundamental objections that would justify signalling disagreement” regarding the 2024 draft budget, however, it pointed to a number of risks surrounding the government’s GDP growth and fiscal deficit targets.
The Council noted that the 4.0 percent GDP growth projection was higher than the average of the domestic and international forecasts and relied on the contributions of higher household consumption, a dynamic increase in investment, and export growth that outpaced that of imports.
The growth target can be achieved “if external and domestic conditions develop favourably”, it said, but noted the negative impact of the war in Ukraine and the sanctions imposed in response, energy security problems in Europe and “prolonged” negotiations over Hungary’s European Union funding among risks. Achieving the growth target would also require private sector investment to compensate for the decline in public sector investment, and the increase in exports, supported by the resulting new capacities, would need to be “well over” the pace of growth on export markets.
The Council acknowledged that the 2.9 percent of GDP deficit target is under the Maastricht threshold, but warned that budget revenue could be reduced if GDP growth falls short of 4 percent. It added that some revenue items in the 2023 budget, mainly those related to consumption, were expected to fall short of the targets, negatively affecting the base for the 2024 targets.
The Council pointed to “serious risk” related to targets for material expenditures at budget-funded institutions that are “well under” the rate of inflation in 2022 and expected CPI in 2023 and 2024.
A modest overshoot of expenditures and a little shortfall of revenue could raise the deficit over 3 percent of GDP, the Council said.
It added that a bigger-than-targeted gap between expenditures on EU-funded programmes and transfers from Brussels could weigh on the cash flow-based deficit.
The budget draft targets 3,605.5 billion forints of spending related to EU-funded programmes, paired with EU transfers for those programmes of HUF 2,479.8 billion, the opinion shows.
Hungarian government submits 2024 budget to Fiscal Council
Preserving stability and predictability is of paramount importance in times of war, and the government keeps to the practice of submitting next year’s budget to parliament already in the summer, the finance ministry told MTI on Friday, after the government submitted the draft budget to the Fiscal Council.
Despite the challenging circumstances, the government’s aim is to “return to a higher growth path of around 4 percent next year with disciplined fiscal management while curbing inflation to 6 percent,” the Finance Ministry said. The government will keep the price caps on utility fees next year up to the level of average consumption, which is guaranteed by a utility protection fund set up in the budget.
It will increase the funds necessary for protecting pensions and will ensure the stability of the value of pensions next year. Pensioners will receive their 13th-month pension in February 2024. “We will maintain the family support system, which is unique in Europe, and continue to support families with tax benefits and targeted programmes, while maintaining high employment,” the ministry said.
In times of war, a strong Hungarian army is needed, therefore, the resources dedicated to defence will reach 2 percent of GDP.
The government is committed to returning to the path of reducing the deficit and the state debt followed before the pandemic. Under the draft of next year’s budget, the budget deficit will be reduced to 2.9 percent and the state debt to 66.7 percent of GDP in 2024, the Finance Ministry said.
With the opinion of the Fiscal Council, the government will submit the 2024 budget bill to parliament on May 30, 2023.
Hungarian government to release 700 foreign criminals from jail
In a recent announcement by Gergely Gulyás, Minister for the Prime Minister’s Office, it’s been confirmed that 700 foreign human traffickers will be released from Hungarian jails soon. This was enabled by a newly accepted decree, which expanded the use of the reintegration custody system for sentenced criminals.
This decision is expected to save billions of taxpayers’ forints and is unprecedented in the country’s history. Not everyone is thrilled, however. The opposition party Democratic Coalition now accuses the government of allowing nearly a thousand dangerous criminals to roam the streets freely, writes Szeretlek Magyarország.
Reintegration custody
Reintegration custody is a special form of custody that serves to help prisoners reintegrate into society faster and easier. It has been available for Hungarian convicts for a long time now. It enables those sentenced to prison to return to their homes before finishing their term in jail and carry out the remaining time there. This does not mean nullification of the sentence though. For example, they are still required to wear electronic leg cuffs that track their movement.
The recently adopted decree now extends this opportunity to foreigners convicted of human trafficking as well. In this case, however, it does seem to work like a get-out-of-jail card. Those affected by the change will receive 72 hours to leave the territory of Hungary. If they don’t, they will be sentenced to prison again. After departure from jail, these criminals can return to their home country to continue their sentence under surveillance. It is questionable, however, how many of them will actually do so.
Purpose of the decision
In his announcement, Gergely Gulyás stressed the economic benefits of the decision.
“There is overcrowding in prisons, and we are aware of this. This is how Strasbourg is trying to squeeze more money out of the Hungarian state. So it is the right decision not to use Hungarian taxpayers’ money to continuously detain the hundreds of people smugglers who are now in Hungarian prisons.”
-said the minister.
The main driver behind letting these convicts go is so they don’t burden the Hungarian taxpayers anymore. The number of people convicted and jailed for human trafficking has been steadily growing in the past few years. Thirteen percent of them come from 73 different countries, making up 2,600 of the total amount. Now 700 of them, mostly those originating from neighbouring countries will be expelled from Hungary.
The Hungarian government to submit 2024 draft budget soon
The government will submit the 2024 draft budget to parliament on May 30, with a vote scheduled for July 7, the head of the Prime Minister’s Office said on Thursday.
Despite the challenges surrounding the drafting of the budget such as the ongoing war in Ukraine, the government is keeping to its practice of submitting the budget bill during parliament’s spring session, Gergely Gulyás told a regular press briefing. This ensures predictability and sets the government’s economic policy goals for next year, he added.
The budget aims to guarantee the country’s security, protect families, pensions and jobs, as well as the cap on household utility bills, Gulyás said. It must calculate with the possibility of a protracted war, but it is important that the government’s goals are maintained and that the budget deficit and the public debt are reduced, he said, adding that the draft budget will target a deficit of 2.9 percent of GDP.
The government plans to submit the draft budget to the Fiscal Council on around May 20, he said.
The bill was drafted with the war in mind, Gulyás said, adding that peace and a phasing out of sanctions would greatly increase the budget’s room for manoeuvre, making the country’s situation much easier.
During times of war, the defence budget has to be increased, he said. Amid these circumstances inflation is higher, too, he said, adding that the government continued to urge an immediate ceasefire and peace talks.
Meanwhile, Gulyás said the government is renewing frozen interest rates for retail borrowers and small and medium-sized businesses, and will keep the policy in place until the base rate drops to below 10 percent.
He noted that the interest rate freeze on retail loans was introduced in January 2022 and expanded to SMEs in November.
The rate of inflation and, consequently, the base rate make it impossible to scrap the measure, he said.
As soon as the central bank base rate drops to below 10 percent, the government will phase out the freeze on interest on loans. The government expects inflation to fall into single digits by the end of the year, he noted.
Phasing out the rate freeze now would place too great a burden an many families and SMEs, Gulyás said. The extension of the rate freeze directly helps more than 300,000 families with over 1,360 billion forints (EUR 3.7bn) in credit, he said. The freeze saved them 80 billion forints in 2022 and 60 billion in the first half of 2023, he added.
The measure also affects more than 28,000 SMEs, with close to 1,000 billion forints in loans, and has saved them 80-85 billion forints since its introduction in November 2022, he added.
As regards the war in Ukraine, Gulyás said Pope Francis’s apostolic visit to Hungary late last month reaffirmed the government’s position that urges an immediate ceasefire and peace as “the only morally right one”.
With the pope being pro-peace, “we can say that Hungary’s stance received the strongest possible moral support,” he said.
If the Vatican is preparing a peace plan, as the pope indicated, Hungary will support that peace mission, Gulyás said.
The extent of the destruction, he said, was “already unfathomable”. “Hundreds of thousands have died, and only a ceasefire can save lives,” he added.
Meanwhile, Gulyás said the amendment of the law on the judiciary ensured that Hungary would comply with all requirements for the disbursement of European Union cohesion funds “within weeks”.
He insisted that although the “demands were baseless”, Hungary had complied and often exceeded EU demands. “In about a month’s time, we hope to be able to send invoices to Brussels and get payments in return,” he added.
The funding would flow from sections of the EU’s budget for the 2021-2027 financial cycle that do not fall under the rule-of-law conditionality procedure but from its Resilience and Recovery Facility set up against the economic fallout of the coronavirus pandemic, Gulyas said.
The government aims to ensure access to all resources, he added. “There is serious opposition to that in Brussels and among Hungary’s leftist opposition, but we ask them to stand on the side of Hungarian teachers, health care and the economy,” he said.