European Union to strip Hungary of voting rights?
The Council of the European Union is once again planning another hearing about the state of the rule of law in Hungary, in connection with the article 7 procession. Currently, Sweden leads the presidency of the Council since January.
The member states are yet to approve of the hearing. However, according to insider sources, they will not resist. The article 7 procession began all the way back in September 2018, when the European Parliament adopted the Sargentini report, writes Népszava.
Article 7 procedure
Back in 2018, a committee made of members of the European Parliament forwarded a report to the legislative body. They claimed that Hungary breached several founding values of the European Union. Consequently, the country’s voting rights should be possibly temporarily revoked until the situation is remedied.
Since the adoption of the report, no specific steps have been taken. Members of the Council of the EU from time to time organise hearings to see how things are developing. The next significant move would be the articulation of direct measures Hungary should take to end the procession.
The European Parliament made requests for action many times, but to no avail. In a modified issue of the report created last year, the EP called Hungary a hybrid regime, an electoral autocracy.
Rule of law procedure
Another ongoing process against Hungary by EU bodies is the rule of law conditionality mechanism, started in 2020. This procedure is used to determine whether European funds are at risk in the country, due to institutional and/or legal deficits, corruption, etc. If the answer is yes, then that member state is stripped of further EU funding until the necessary steps are made to guarantee the proper use of common funds.
This mechanism is currently in utilisiation against Hungary. However, there is now active cooperation between the EU bodies and the national government to free up the withheld funds. Next week, for example, Commissioner Johannes Hahn, responsible for the EU budget, will be meeting with PM Viktor Orbán to negotiate about further reforms.
Ongoing negotiations
There are two greater issues at hand right now. One is about the independence of courts, the other one is about the independence of institutions of higher education. If Hungary was to remedy the concerns the EU has about judicial independence, EUR 13 million of the frozen funds would become available to use. Judicial issues are one of the 27 topics that the Commission pointed out, which are in need of reform. Upon the completion of these demands, Hungary would gain access to the RRF funds.
Another issue at hand is Hungarian students’ access to the Erasmus and Horizon programs. The majority of country’s universities lost access to apply to these funds, as the EU saw the risk of corruption. This is because the leadership board of these institutions included ministers and other governmental representatives. Hahn warned that if Budapest does not take the necessary steps to rule out possible conflicts of interest by 1 May, students at the involved universities would lose out on these educational programs.
Minister of Justice, Judit Varga has announced on Thursday, that the Commission gave green for the planned judicial reform. Commissioner Hahn is also optimistic about his meeting with the prime minister.
“I have no doubts, an agreement will be reached between the European Union and Budapest,”
he said.
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Despite horror inflation, budget deficit skyrockets in Hungary
Hungary’s cash-flow-based budget shortfall at the end of March was 2,089.7 billion forints (EUR 5.6bn), the Finance Ministry confirmed on Tuesday.
The central budget deficit was 2,019 billion forints, while social security funds were 89.6 billion in the red. Separate state funds posted a surplus of 18.9 billion. The deficit in the month of March came to 564.6 billion, well below the 875.7 billion forint shortfall in the same month a year earlier. The government targets a deficit of 3,400.2 billion forints for the full year.
In 2022, the budget was 4,753.4 billion forints in the red. The ministry noted the war and energy crisis as having “changed the economic environment radically”, adding that families, jobs and pensions would enjoy government protections nonetheless. The ministry confirmed the full-year accrual-based deficit target of 3.9 percent of GDP and a public debt below 70 percent of GDP.
The budget deficit reached 61 percent of the annual planned deficit in just three month, telex.hu wrote.
Lawmakers considerably modified Hungary’s budget
Lawmakers approved amendments to the 2023 budget act on Friday. The amendments were approved with a vote of 131 for, 54 against and no abstentions. This year’s revenue target was raised to 36,375.9 billion forints (EUR 95.5bn) from 31,073.7 billion in the 2023 budget act approved by lawmakers last July. The expenditure target was raised to 39,776.1 billion forints from 33,425.8 billion.
The new deficit target is 3,400.2 billion forints, widening from 2,352.1 billion. The amended legislation contains a provision mandating a reduction in the 2023 accrual-based deficit target if forecasts point to GDP growth over the 1.5 percent assumption. The amended legislation targets a reduction in year-end state debt, relative to GDP, to 69.7 percent in 2023.
The latest data released by the National Bank of Hungary (NBH) show Hungary’s state debt stood at 73.3 percent of GDP at end-2022. The amended legislation targets net expenditures on debt servicing of 2,116.6 billion forints, up from 1,805.3 billion in the act approved in July. The new expenditure target for a fund established to protect the regulated utilities price scheme for households is 2,580.0 billion forints, a multiple of the 670.0 billion target in the July act. The amended legislation targets 1,458.2 billion forints in expenditures from the fund to protect household utilities prices and 249.0 billion for private sector support. Compensation of 399.6 billion forints is earmarked for central budget-funded institutions and 144.7 billion for local councils. Support for state-owned companies is set at 178.2 billion forints and for institutions maintained by churches and civil organisations at 150.3 billion forints.
Central budget support for the fund is set at 1,168.3 billion forints in the amended legislation, while payments, contributions and windfall profit taxes from companies in the energy, mining, telecommunications, airline and pharmaceutical sectors will cover the rest of the fund’s expenditures. Expenditures of a fund established to bolster the country’s defence remain at 842.0 billion forints in the amended legislation. Expenditures of the pension insurance fund are set at 5,554.6 billion forints in the amended legislation, up from 4,902.6 billion in the July budget act.
Expenditures on state investments are targeted at 580.0 billion forints, more than double the 257.2 billion in the July budget act. The amended legislation earmarks 17.1 billion forints in expenditures for the newly established Integrity Authority. The July budget act assumed GDP growth of 4.1 percent and 5.2 percent average annual inflation. The NBH put 2023 average annual inflation in a range between 15.0 percent and 19.5 percent in a forecast published earlier in the week.
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Hungarian opposition says government’s budget plan is wrong
Opposition Párbeszéd will not attend the parliamentary debate scheduled for Wednesday about amendment proposals submitted to Hungary’s 2023 central budget, the party’s co-leader said.
Bence Tordai told an online press conference on Tuesday that the assembly “will approve a budget which has already been published in the official Government Gazette which makes the presence of opposition, and even of government lawmakers, absolutely unnecessary”.
He noted that the 2023 budget cut allocations “for almost all highly important sectors and areas including health care, welfare, education, law enforcement and green development”. The wages of civil servants have also been reduced, he added.
Tamás Mellár, a party lawmaker, said that in the current economic situation the government’s objectives of an economic growth and a fiscal balance would not be possible to maintain.
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Hungarian budget ends Jan with HUF 144 bn shortfall
Hungary’s cash flow-based budget posted a 143.6 billion deficit, the Finance Ministry confirmed on Wednesday.
The central budget was 190.8 billion forint in the red, the social security funds had a surplus of 3.6 billion, while the separate state funds also posted a surplus, of 43.6 billion forints.
The ministry pledged to reduce the deficit and public debt further while ensuring resources for key government programmes. The economy should avoid a recession this year and grow by above 4 percent in 2024, it added.
The deficit is targeted at 3.9 percent of GDP this year, while the public debt is set to fall below 70 percent, it said.
The detailed reading of the data showed net revenue from VAT up 15.2 percent at 866.1 billion forints in January from the same month a year earlier. Net revenue from personal income tax rose by 102.1 billion to 371.9 billion.
Payouts for European Union programmes came to 151.1 billion forints in January, while transfers from Brussels totalled 34.6 billon.
Net interest spending came to 158.7 billion in January, 122.9 billion more than in the same month a year earlier.
The average gross wage in Hungary rose by an annual 18.1 percent to 581,900 forints (EUR 1,524) in December, data released by the Central Statistical Office (KSH) on Thursday show.
The average net wage including tax benefits was 400,300 forints, 18.7 percent higher than in the same period a year prior.
For the full year, the average gross wage was 515,800 forints, up 17.5 percent from the previous year, while the average net wage including tax benefits was 355,300 forints, 18.2 percent higher than in 2021.
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Mayor: Government treats Budapest unjust
Gergely Karácsony, the mayor of Budapest, on Friday complained about how the central government treated the capital.
“Where is the equality?” he wrote on Facebook, adding that the government’s relations with the city were “unjust and unsustainable”. The mayor said Budapest had transferred 6.348 billion forints to the central government in the month of January, 348 million more than the amount of support the government promised to contribute towards renovating Chain Bridge.
The central government obliges local governments to make contributions through tax deductions on wages and “solidarity contributions”, he said. “Not only do we not get a single cent from the government, but we must also pay 6.348 billion” forints to the central coffers, Karácsony added.
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Here is why and how the government modified the 2023 state budget
The budget amendment which contains measures to protect capped energy bills has been presented to parliament, the finance ministry said on Thursday.
… This year, the government is also keeping caps on energy bills up the level of average consumption while reducing the public debt and the budget deficit,” the ministry said in a statement. Given the emergency situation, the government has amended the 2023 budget by government decree, bearing in mind guidelines already adopted by parliament and the backing of the Fiscal Council, and it has submitted the relevant bill to parliament, with a new revenue target of 36,358.4 billion forints (EUR 91bn), up from 31,073.7 billion, and a spending target of 39,758.6 billion, up from 33,425.8 billion.
The deficit is set to widen to 3,400.2 billion forints from 2,352.1 billion, while the public debt is targeted at 69.7 percent of GDP, down from an estimated 73.5 percent in 2022. The fund for protecting capped energy prices is set at 2,610 billion forints, up from 670 billion in the original law passed last July. Central budget support for the fund is set at 1,198.3 billion forints, while payments, contributions and windfall profit taxes from companies in the energy, mining, telecommunications, airline and pharmaceutical sectors would cover the rest of the fund’s expenditures.
- Read also: Hungary increases military spendings in 2023
The fund for boosting the country’s defence is unchanged at 842 billion forints. The 2023 budget law targeted economic growth of 4.1 percent and annual inflation averaging 5.2 percent. The current bill assumes average annual inflation of 15 percent this year. The ministry said the bill seeks to raise reserves in the budget to 255 billion forints from 170 billion, adding that inflation is expected to fall to the single digits by the end of the year.
Socialist budget committee head calls for hearing finance minister over 2023 budget
The (Socialist) head of parliament’s budget committee has called on the finance minister and members of the Fiscal Council to appear before the committee to discuss the amendment to the 2023 budget. Zoltán Vajda said in statement on Thursday that from the outset the Socialists had argued that the 2023 budget passed in the summer was unsustainable and an amendment was needed.
The budget adopted by decree in December, he said, was not a proper budget and public money was not being spent in a transparent manner. Until the new budget is adopted, it will not be clear how taxpayers’ money is being managed, he added. Vajda said clarity was needed regarding the fund for protecting energy subsidies and the purchase of Vodafone’s Hungarian unit. Also, information is needed regarding “the stealthy introduction of the euro”, as well as government support for Erasmus+, with funding for the latter already a part of the budget by decree, he said.
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Hungarian government triggering crisis?
Opposition Momentum on Friday slammed the government over the amendments it has submitted to the 2023 central budget, saying that next year’s budget will be one “triggering, not managing a crisis”.
Next year’s amended budget envisages GDP growth of 1.5 percent, a declining budget deficit and falling public debt, the finance ministry said in a statement on Thursday.
Momentum in response said the budget is not sufficient in tackling the deepening economic crisis and stopping the deterioration in the standard of living of Hungarians and the inflation triggered by price caps. “This budget will be one of austerities and uncertainty,” the party said, adding that it contained target figures that could not be kept.
“And because of the mistaken government measures, the standard of living of Hungarian families will further deteriorate and the situation of SMEs and municipalities will become more critical,” the party said, demanding that the “irresponsible and corrupt” government “should face up reality and tell people the truth”.
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No new Eurocity trains between Budapest and Vienna, Prague, Berlin, Warsaw
The government withdrew the relevant international public procurement tender but is still committed to buying 50 new Vectron locomotives. Below you may read the details.
The government decided to buy 39+10 new trains of at least seven carriages, capable of 230 km/h speed and able to partake in international traffic. The project would have meant 380 new carriages, meaning that 2/3rd of Hungary’s railway long-distance fleet could have been renewed, iho.hu said.
The Hungarian State Railways (MÁV) would have used the new trains between Budapest and Vienna, Prague, Berlin, later Budapest and Warsaw, Belgrade as Eurocity lines. Furthermore, they would have replaced some outdated domestic intercities, as well. However, the government withdrew its prior decision on 29 December without an explanation.
The decision means the budget will save hundreds of billions of forints.
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However, they still plan to buy 115 modern electric locomotives from Siemens Mobility for maximum HUF 70 billion (EUR 175 million). The financial source comes from a Eurofima loan.
Modernising the trains in Hungary is crucial. One option is to do so with the help of internal resources and knowledge. That is why the government launched the so-called IC+ program. As a result, 92 modern railway trains were modernised in 10 years.
Here are some photos:
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Hungarian government dedicated to keeping household utility bills low
Hungary’s government on Thursday issued a decree amending the 2023 budget, the finance ministry said.
Next year’s budget envisages GDP growth of 1.5 percent, a declining budget deficit and falling public debt, the ministry said. It targets a budget deficit of 3.9 percent of GDP, the ministry said, adding that growth over the 1.5 percent assumption should be used to reduce the deficit.
Year-end public debt is targeted at 70.2 percent of GDP.
The budget increases the utilities protection fund to 2,610 billion forints (EUR 6.5bn) from the originally planned 670 billion, the ministry said. Central reserves have also been increased to 255 billion forints from 170 billion, it added. The budget also allows for raising all pensions by 15 percent, the ministry said, adding that spending on pensions in 2023 will exceed 6,150 billion forints.
It is dedicated to keeping household utility bills low, the ministry said. The protracted war and the “sanctions-fuelled energy crisis” are a threat to Hungarian families, the Hungarian economy and jobs, it added.
The ministry said the most important task of 2023 would be protecting families and jobs, preserving the value of pensions, keeping the caps on household utility bills in place and preserving Hungary’s peace.
Read also Hungary increases military spendings in 2023
Hungary increases military spendings in 2023
Next year’s budget ensures the continued reform of Hungary’s Armed Forces and will enable the country to bring defence spending up to 2 percent of GDP a year earlier than originally planned, in line with Hungary’s commitment to NATO, the defence minister said on Wednesday.
Hungary’s Defence Fund guarantees that the country will be able to purchase all equipment necessary for effective defence and “restore the prestige of Hungarian troops,” the ministry cited Kristóf Szalay-Bobrovniczky as saying in a statement.
The Armed Forces will prioritise R+D+I, and contribute to a robust economy by boosting the defence industry, he said. In line with NATO requirements, over 20 percent of defence spending will go towards development in 2023, he added.
Next year, development will focus on soldiers’ individual and operational equipment, the integration of the equipment purchased so far, and the introduction of new strike technology, he said.
Defence innovation is in the interest of Hungary’s national security as it eases the country’s dependence on imports and boosts supply security, he said.
Defence development will also improve Hungary’s position within NATO, Szalay-Bobrovniczky said, noting that Hungarian Gripens had protected the Baltic airspace for four months this year, and the Kosovo KFOR mission operated under Hungarian command. One of the four task forces set up in response to the Ukraine-Russia war was created in Hungary, under Hungarian command, he added.
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Hungarian govt targets 3.5 pc / GDP deficit, 1.5 pc growth in 2023
Hungary’s government aims to reduce the budget deficit to 3.5 percent of GDP in 2023 from this year’s deficit of 4.9 percent and expects the economy to grow by 1.5 percent following the 5 percent expansion expected this year, the minister of economic development said on Thursday.
Energy prices impose an extremely heavy burden on the budget, Márton Nagy told a conference organised by the Oeconomus Foundation for Economic Research in Budapest, adding that the state’s energy costs were expected to come to HUF 2,500 billion (EUR 6.1bn) next year.
The budget would be balanced or would have a surplus without the drastic price increases, Nagy said, adding that the deficit could be attributed entirely to high energy costs.
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Hungarian Socialists call for budgetary cttee to hear finmin
The Socialist head of parliament’s budgetary committee has initiated a session of the body with a hearing of the finance minister over the government’s amending next year’s budget.
Speaking at a press conference broadcast on Facebook on Thursday, Zoltan Vajda slammed the government for “bypassing parliament” when changing the budget, saying that budgeting was “not the government’s internal affair”.
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Vajda insisted that the budget could not be amended through government decrees and that the government should submit a new draft “based on the real situation” to parliament. He also noted that he had called the original draft, submitted last summer, “fictitious” and had said it had “nothing to do with reality”.
Next year’s budget was planned with an inflation rate of 5.2 percent, whereas “this figure could be three or even four times as high”, he said, adding that the growth target was 4.1 percent while “the economy could even shrink”.
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Hungarian budget deficit reaches HUF 3,466.4 bn
Hungary’s cash flow-based budget, excluding local councils, had a 3,466.4 billion forint (EUR 8.4bn) deficit at the end of November, the finance ministry said in a preliminary release of data on Thursday.
The deficit widened by 876.0 billion forints from the previous month.
The central budget deficit reached 3,367.2 billion forints at the end of November. The social security funds were 389.7 billion forints in the red, while the separate state funds had a surplus of 290.5 billion.
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The full-year cash flow-based budget deficit target is 3,152.7 billion forints.
The ministry said the balance of the 2022 state budget was sustainable and the deficit target of 4.9 percent of GDP achievable.
Meanwhile, it noted that pensions had increased again in November by 4.5 percent following earlier top-ups of 3.9 percent and 5 percent, bringing the overall pension hike this year to 14 percent.
Hungary’s 2.5 million pensioners have also received a bonus worth a total 23.5 billion forints, the ministry said.
Government spending on pensions reached a 4,421.0 billion forints by the end of November, the ministry added.
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Should the Hungarian government give 181m EUR to its citizens instead of Ukraine?
The radical Mi Hazánk (Our Homeland) party is submitting a proposal to parliament, calling on the government to withdraw its decision to financially support the operation of the Ukrainian state.
“Those 75 billion forints [EUR 181.4m] would be in much better place at the Hungarian families and companies unable to pay their utility bills,” deputy party leader Dóra Dúró told a press conference on Wednesday.
The aid will “directly finance” the war, and Mi Hazánk rejects “all financial support of Ukraine’s military goals,” she said. She slammed the Ukrainian government as “extremely corrupt”; “there is no guarantee that that money won’t line the pockets of anti-Hungarian Ukrainian politicians,” she said.
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Hungarian Socialist MP calls for 2023 budget rethink
The Socialist head of parliament’s budgetary committee on Wednesday called on the government to submit a new budget, arguing that “pushing through” the budget as early as July had been a “mistake” in a volatile economic environment.
Zoltán Vajda told a press conference streamed on Facebook that he had invited Finance Minister Mihaly Varga to the committee’s meeting to discuss the country’s financial situation, but the committee’s Fidesz majority removed the hearing form the agenda.
Vajda called the current budget for 2023 “fictitious”, noting the law calculated with FY inflation of 5.1 percent next year, insisting that in reality it could go as high as 20 percent. While the budget forecasts a 4,2 percent GDP growth, the economy could actually dip into recession, he said. Meanwhile, the budget calculates with an exchange rate of 370 forints per euro, whereas the Hungarian currency currently hovers around 430 forints, he said.
When three such fundamental components of the budget deviate from expectations, a new budget must be passed, he said.
Hungarian govt welcomes approval of ‘budget of utility bill cuts, defence’
The finance ministry on Tuesday welcomed parliament’s approval of the 2023 “budget of utility bill cuts and defence”.
The budget will enable the government to strengthen Hungary’s protection, limit the impact of the “wartime energy crisis” and keep household utility prices low, the ministry said in a statement. “We regret that the left cannot be counted on even in the current wartime situation and that they did not vote for the budget of utility protection and home defence,” the ministry added.
The statement said the protracted war in Ukraine and related European Union sanctions had led to significant price increases, soaring energy prices and high inflation throughout Europe. The government’s top priority is to keep Hungary out of the war and to protect Hungarians from being made to pay the price of the war, it said. The government’s most important task right now is to preserve Hungary’s peace and security, ensure the security of its energy supply and protect the caps on household utility bills, the ministry said.
That is why, it noted, next year’s budget contains a utility protection fund and a defence fund whose combined expenditures will exceed 1,500 billion forints (EUR 3.7 bn) which will be financed by the taxes on excessive profits and other revenues. The 2023 budget guarantees the continuation of the government’s family support measures and the 13th month pension, as well as pension increases pegged to inflation, the ministry said.
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Socialists slam 2023 ‘budget of uncertainty’
The opposition Socialist Party has slammed the government’s 2023 budget passed by lawmakers on Tuesday, calling it “a budget of uncertainty and pillage”.
Bertalan Tóth, the party’s co-leader, told a press conference that the last three months had proved that ruling Fidesz “has deceived its voters”.
The Socialists had submitted multiple amendment proposals to the draft budget, he said, noting that his party has called for more funding for health care and higher wages for hospital workers and teachers. The Socialist parliamentary group had also pushed to exempt local councils from having to pay market utility prices and called for pension increases, he added.
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Since Fidesz had rejected these proposals, the Socialists did not support with their votes next year’s budget which Tóth said would threaten the livelihoods of millions.
Zoltán Vajda, the (Socialist) head of parliament’s budgetary committee, said the budget contained “dire austerity measures”, arguing that the taxes on excessive profits would be passed on to customers, the changes to the itemised tax for small businesses (kata) were actually a tax increase, and the caps on household utility bills “have basically been gutted”.
He said the 5.2 percent inflation rate, the 4 percent GDP growth rate and the euro exchange rate of 375-377 forints per euro envisaged in the budget were “already unrealistic”.
