The position of Fidesz - Hungarian Civic Union on the collapse of the 2004 budget

Dátum: 2004-01-23 12:18:00, eredeti URL: http://archiv.fidesz.hu/index.php?Cikk=19331
KCMDB-be feltöltve: 2024-05-04 19:26:36.473616, Feltöltő: fidesz_hu_scraper_v2

"This is a budget in which, for the first time during recent years, the notion appears that we cannot spend more than what we've got. Only a little bit more. With that 3.8 percent deficit. This is the 3.8 percent which I fix as a figure that I will stick to by all means for I would like a realistic, correct position for the Hungarian economy...If we take the 3.8-percent figure seriously, and if we watch it with caution in order to avoid deviating from it, than this will calm down everyone, including the investors, because they will see that this is a goverment which is determined."

(Prime Minister Péter Medgyessy in an interview on public television, 8 December 2003)

Background:

The 3.8 percent projected budget deficit was one of the cornerstones of the government's communication on the 2004 budget. Barely a month after this comment, however, the prime minister announced the sacking of finance minister Csaba László, effective 15 February 2004. Finance minister-designate Tibor Draskovics was forced to admit during his introductory press conference that that "real" budget deficit exceeds 4.6 percent. Moreover, he added, this figure which may only be reached by implementing an austerity package of HUF 120 billion (ca. 450 million euros). Later, the prime minister himself admitted that there had been a "lack of coordination" with regard to economic policy and that drifting actions led to a loss of confidence among investors and other actors of the economy.

It has become obvious that that this year's budget is not based on genuine figures and cannot be maintained. Never before in Hungary did a budget crash a week after being set in motion. Now it happened, due to the government laying budget foundations, for the second time consecutively, on imaginary figures. For 2003, the socialist-led government set out an unrealistically optimistic growth expectation of 4.5 percent, against the stark reality of just 2.8 percent, and also significantly underestimated the budget deficit: it ended up being 5.6 percent, instead of the originally planned 4.5 percent target figure. For 2004, adjusting the 3.8-percent target figure to 4.6 percent with the additional austerity package means that adopted state expenditures exceeded original limits by HUF 300 billion (ca. 1.13 billion euros).

Why did it happen? Because the socialist-led Hungarian government has no responsible economic policy. As socialist party chairman László Kovács himself admitted a few days ago in an interview, the government had been hesitating because it had been waiting for the global economic boom. Fidesz is of the opinion that no responsible government predicates its economic policy on waiting for the jackpot. The government has been misleading both itself and the country. Its statements about the state of the economy were untrue when they introduced the 2003 and 2004 budgets. (Or, if the prime minister had genuinely been unaware of the budget deficit, the question arises to what extent he may be regarded as a responsible statesman.) The new finance minister must have as its most urgent task to create a budget which reckons the reality and which rests on real economic developments. We cannot talk about confidence, reliability and security, essential features for Hungary at this moment, while citing hypothetical figures.

The collapse of the budget in such a short period of time is unprecedented. Although the Parliaments budgetary committee intended to hear the prime minister, as well as the incumbent finance minister on the subject earlier this week, neither of the two showed up at the hearing. Therefore, since Parliament would not ordinarily convene until 15 February, Fidesz has initiated an extraordinary session of the legislature for 26 January, where explanation will be sought from the prime minister for the unexpected volume of the budget deficit. Fidesz will also be waiting for answers from the prime minister whether the government is intending to delay Hungary's entry in the Euro-zone (planned for 2008), on how the sudden accumulation of state debt may be curbed, as well as on the details of the HUF 120 bn austerity package.

Budapest, 21 January 2004