Critics say new fiscal measures to hamper growth

Budapest, October 17 (MTI) – The National Bank of Hungary and opposition parties rejected the government’s 367-billion-forint (EUR 1.3bn) fiscal package announced on Wednesday as being detrimental to economic growth.

The press office of the central bank said the measures would have a negative impact on economic growth. It said that as central bank governor Andras Simor said recently, reducing the burden on banks is a way of inducing growth and the government’s measures are going against this aim.


Leader of the main opposition Socialist Party Attila Mesterhazy said they urged the government to reduce the banking tax to the average level in the EU and to phase out crisis taxes (introduced in 2010) from 2014.


Istvan Tukacs, a Socialist lawmaker, said the government should withdraw the 2013 budget bill, as it has lost credibility in light of the multiple adjustments announced.


The small opposition LMP party said the government was introducing one austerity package after another but banks and companies affected by them will transfer the burden on to consumers.


The radical nationalist Jobbik party said the measures announced on Wednesday mean that the government had “caved in to the EU” and “has chosen complete capitulation”. For this reason it should resign, Janos Volner, the party’s economic spokesman said.


The leftist Democratic Coalition (DK) said the measures were detrimental for growth. Tamas Bauer, the party’s deputy leader, said steps to improve the fiscal balance were necessary, but not by undermining growth in the business sector.


The European Commission and the International Monetary Fund’s representative in Budapest declined to comment on the new round of fiscal measures announced earlier by the economy minister.


Simon O’Connor, a spokesman for the Commission, told MTI the measures would be assessed together with those of other member states in a regular autumn report to be published on November 7.


Economy Minister Gyorgy Matolcsy said the measures were needed to end the European Union’s excessive deficit procedure against Hungary and ensure that Hungary would not lose any of its cohesion funding.


Among the new measures intended to keep next year’s budget deficit on track, the government will not halve the bank tax in 2013 as earlier promised and the financial transactions tax will be set at 0.2 percent rather than the earlier planned 0.1 percent.


In response, O’Connor said “obviously the Commission fully expects Hungary…to maintain their commitments in the context of the excessive deficit procedure. (…) Beyond that I have no particular comments.”


Iryna Ivaschenko, the IMF’s representative in Budapest, also declined to comment for the time being on the measures announced.