“Matolcsy’s poison kills slowly”: The latest austerity measures prevent economic growth

Today yet another “non-austerity” program. The first article that appeared about such a possibility appeared on Origo. That was around 6 a.m. Less than four hours later, after an emergency meeting of the cabinet, Economic Minister György Matolcsy came out with the latest version of the 2013 budget. He announced additional tax revenues amounting to 367 billion forints on top of the 397 billion that he reported on October 5. All in all, we are talking about 764 billion forints.

It is not the calculator’s fault

Economists who carefully study the government’s numbers knew soon after the announcement less than two weeks ago that the European Union would throw this version of the Hungarian budget back and would ask the Hungarians to rethink their phony numbers. Although it is likely that Brussels will accept this latest “non-austerity” package, experts on the Hungarian economy claim that the projected economic growth for next year is still too high. This is especially true in light of the fact that the German government just revised Germany’s projected 2013 growth downward to a modest 1% from the previously anticipated 1.6%.

Brussels is trying to speed up the process of getting a Hungarian budget in place. Originally, the European Commission promised an answer to the first Matolcsy effort by November 7,  and here we are in the middle of October and the reaction is already public knowledge. The Orbán government must have known Brussels’ opinion earlier than yesterday or today because one would suspect that putting together a complete austerity package in four hours would be impossible even for a better functioning ministry than Matolcsy’s. What is also interesting is that although analysts were thinking in terms of 150-200 billion forints worth of adjustments, today’s version of the package contains additional revenue of 367 billion forints, that is, almost double the presumably necessary amount.

But how much is it really? According to Index there are too many items in the proposal that are far too unorthodox and uncertainty still abounds. But the real problem is that the newly introduced measures will further slow economic growth. Most people I heard on the subject predict that the recession will continue next year, and I read about a broker who exclaimed that “if this going to go on there will not be economic growth for ten years” in Hungary. Another analyst, Csaba Gaál, gave the following title to his article: “Matolcsy’s poison kills slowly.”

So, what are these poisonous items? (1) Cutting the extra bank levy in half, which was promised for next year, is being postponed. (2) The financial transaction tax will be doubled from 0.1 to o.2%. (3) The transaction tax on the Treasury will be also doubled from 0.1 to 0.2%. (4) There will be a new tax on underground utility cables. (5) Only 80% instead of 100% of  revenues will be able to be deducted from the local business tax (iparűzési adó). (6) The tax rate will be hiked on “cafeteria.” “Cafeteria” in Hungarian means a non-taxable benefit in the form of a voucher for cold or hot meals. (7) The Hungarian Internal Revenue Service will individually check receipts up to 2.5 million forints.

Tamás Bauer, an economist and deputy chairman of DK, immediately called a press conference and announced that this new austerity package “undermines the growth of the business sector.” There can be no growth without credit, and the banks’ lending capacity is close to zero as it is due to the very heavy bank levies that now will continue for an unspecified period. The taxation on “underground cables will decrease the profitability of important foreign companies.” I assume he is referring here to the German-owned Magyar Telekom. Instead, the government should keep the so-called “half super-grossing” and introduce higher taxes on the well-to-do. It’s hard to find a good description of “super-grossing” or “half super-grossing,” but I learned this much: “Super grossing is a method introduced by the previous government in July 2009; the idea is that, for transparency, employees should see details of their whole salary (that is, gross wage plus employer’s social security contributions). The present government ended the concept of super grossing in 2010 and it will be gradually phased out by 2013.” I suspect that super-grossing increases the tax burden on people within certain income brackets. But perhaps someone with more knowledge of taxation could help us out.

The Hungarian National Bank is concerned about the continuation of the bank tax, and the banks are up in arms. They learned about the new plan from today’s newspapers. The forint weakened, and OTP’s stock lost almost 4%.

It is the very unfair flat tax that caused the bulk of Hungary’s problem in the first place, but retreating from the current tax system would be an admission that the Orbán government’s whole economic policy failed. Instead they lay the blame on the European Union.

Last Friday Viktor Orbán already claimed that if Hungary were on her own she wouldn’t need a 400 billion forint adjustment. Half of that would have been plenty, but Brussels is a real ogre. Then came Matolcsy who accused the European Union of double standards. The EU simply doesn’t like Hungary. For example, the Commission didn’t accept Hungary’s figures for higher revenues resulting from the connection of cash registers to the central taxation office while it accepted Bulgaria’s figures. I wonder why not? As György Bolgár said this afternoon, he wouldn’t suggest that Matolcsy play lotto. After all, up to now all the numbers his ministry submitted to Brussels were wrong.

As for the present problems of the Hungarian budget, I think it is worth recalling that one of the first acts of Orbán’s government was the purchase of a large chunk of MOL, a private oil and gas company under Hungarian management. Shortly afterward the government bought Rába, a company that makes trucks and military equipment. Currently they are negotiating with the German-owned utility company E.ON. If a government is strapped for funds it shouldn’t be nationalizing private companies. It shouldn’t be building football stadiums either for a country where practically no one attends the games because the players are so bad.

And finally, I heard an interesting interview this afternoon with László Békesi, finance minster in the Horn government. He suspects that the earlier announced plan to postpone the salary increase for teachers carried too much political risk. As I wrote earlier, I suspect that the majority of teachers voted for Fidesz and this move would certainly turn them away from Orbán and his party. Therefore, Békesi thinks that the government decided to shelve this idea and fulfill its earlier promise to the teachers. That is one of the reasons that the size of the new austerity package is so large. The head of the teacher’s union has a different opinion. We will see.

There are still analysts who think that even these latest measures will not be enough and that sometime in the near future we will find out that another 100 billion is missing. I wouldn’t be at all surprised.

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45 comments

  1. Hungarians come in first place in one thing–their tolerance for stupidity, especially when it is buttressed by mother, Catholic church, and the ravings of a nationalistic maniac.
    What a toxic trifecta!!

    I once thought that Hungarians read.
    I was wrong. Hungarians can’t learn from others’ mistakes because…well,
    because they’re ‘special’; different in a unique sort of way. So, you see,
    even though Hitler and Germany was only 70 years ago; and it was written up 1000 different ways to Sunday, it means nought that a raving nationalist sent his country not only to defeat…but wasn’t finished until it was in complete ruin.

    Hungarians must ‘see’ it for themselves…

  2. OK This is going to be a little boring.

    Eva: Super grossing is a method introduced by the previous government in July 2009; the idea is that, for transparency, employees should see details of their whole salary (that is, gross wage plus employer’s social security contributions). The present government ended the concept of super grossing in 2010 and it will be gradually phased out by 2013.” I suspect that super-grossing increases the tax burden on people within certain income brackets. But perhaps someone with more knowledge of taxation could help us out.

    Well I am not a tax specialist, but I use to work in salary administrations environment.

    Supergrossing (according to the explanation above) is showing on the salary slip all salary related costs for the employer (yes and not employee) to the employee.

    The argumentation of transparency is that the salary costs consist mainly of three parts:

    (1) Net salary (employee receive this from their employer)

    (2) Employee related taxes and pension and social securities (deducted from the gross salary and paid by the employer to the tax and social security organizations)

    The Net Salary and Employee related taxes are together the Gross Salary

    (3) Employer related tax and pension and social securities (x% of the Gross Salary and paid by the employer to the tax and social security organizations).

    The Net Salary, Employee related taxes and Employer related taxes ans Social Security are together the Super Gross Salary or total salary cost to the Employer (excluding Company Car, mobile phone and other extra’s).

    Under the previous governments till 2006 as a rule of thump each part was approximately 1/3 of the total costs to a Gross Salary of HUF 400,000. For Gross Salary over that amount the total salary costs were 2.5 times the Net Salary.

    At that time my people were always telling me that their salary was not to Western Standards, until I explained the above situation and re-calculate their total salary costs. For example a EUR 1,000 net salary become EUR 3,000 total salary costs (exchange rate used 240). And that EUR 3,000 is what a normal gross salary was in the Netherlands in 2004.. In the Netherlands Gross salary is more or less Super Gross Salary (depending in which group of companies (such as construction and steel production have additional costs) you belong to).

  3. The whole concept a disaster, fundamentally wrong from day one.

    Concentrating on minimizing debts for any price, results, that the whole economy halting to standstill, with no room for maneuvers, whatever happens in the world of macro-economy.
    Pulling out every forint of working capital from action, spending the reserves and robbing the people dry means, that there will be no development in the foreseeable future, which means, there will be no growth, no revenues, no BNP what deserves mentioning either.
    Like when someone cut back on the fuel when crossing a desert – you really can save money on that, never mind, that it takes ten times longer – enjoy the view, that’s all you have!

    While the level of the debt may decrease, the cost – nearly certain – does not: just remember, how the value of the Forint fell practically in a few hours a couple of times during the last years, with no solid economy behind it bound to happen time and again.

    Something else worth to remember.
    A few decades back, likewise Orban, one of his soul-mates were also obsessed with eliminating the foreign debts of the state, just like him they have done everything to reach this goal, and they succeed!
    It really happened, see, it’s doable!

    Did everybody lived happily ever after?
    Well, sort of not everybody, no, but still…

    All in all, I’m not entirely convinced that we should follow him…
    Even if:
    “He organized a referendum and managed to change the constitution, adding a clause that barred ……. from taking foreign loans in the future. The referendum yielded a nearly unanimous “yes” vote.”
    – You see, the way to get there was similar too, he didn’t needed two-third, though.
    You can read this great “Success Story” all by yourself, I include a link.
    http://en.wikipedia.org/wiki/Nicolae_Ceau%C5%9Fescu
    The paragraph called “Foreign debt” contains the economic references.

    Before I’ll forget: his name was Nicolae Ceaușescu.

  4. Eva: Only 80% instead of 100% of revenues will be able to be deducted from the local business tax (helyi iparűzési adó).

    Now this is something I do not understand. The definition of calculation of the local business tax (LBT) is revenue (as per profit and loss account) minus direct sales costs and material costs is the tax basis of the LBT.

    I always said the LBT is the business killer. Services companies, such as audit, tax adivisory and bookkeeping firms were not able to deduct LBT, as they did not have material costs and therefore, paid 2% of the turnover as additional tax.

    Production companies could deduct 100% of the material costs. Mind you if it is only 80% of the material costs they could deduct, than I expect a major problem as most production companies have low margins.

    Btw Mercedes, Audi will not be effected as they “made” a deal. .

  5. Spectator: “Something else worth to remember.
    A few decades back, likewise Orban, one of his soul-mates were also obsessed with eliminating the foreign debts of the state”

    How did I know whose name will be coming up? Nicolae Ceaușescu. I have a few friends from Romania who often remind me of the similarities.

  6. Ron; “LTB.” If I remember correctly this particular local business tax was very controversial. The question was whether it was legal or not under union law. Then–again if I remember right–the clever guys in Brussels decided it was OK because in Italy there was something similar.

    Apparently it is a terrible tax. But I know very little about taxes. I always problems filling out the tax returns myself.

  7. To come back on the Super Gross Salary issue.

    As a result a lot of people and companies went into a black or grey economy. And the Government lost a lot of income.

    Until they introduced the EVA company. 20% tax over income and simplified accounting. It was an instant success. Currently, the tax rate is 37% and as result it lost its appeal.

    So the government introduced the

    KAVA (small tax payer itemized lump sum tax) is a new tax system whereby you pay a lump sum tax (fixed monthly fees) of HUF 50,000 per month, half of it if the coy is not the owner’s main job. Limit is annual income is HUF 6 mio or lower.

    KIVA (small business tax) is an option if the workforce is smaller than 25 employees and have an annual revenue of below HUF 500 million, and then you pay a payroll tax of 16 percent and not the current 27 percent.

    For anybody who want to have this, you need to make a decision quickly, as the deadline is December 20, 2012, so effectively you need to make a decision before the middle of November and apply for it in the beginning of December.

    http://www.budapesttimes.hu/2012/10/06/eva-meet-kata-kiva/

  8. This is really off topic but I think that I must mention it. As we have been talking about Hungarians are being very aggressive I was thinking that almost every day I read about pedestrians being run over by cars. Just today I think I read about three different cases. Now I just learned the exact numbers for 2011: 123 dead pedestrians! Incredible

  9. Eva S. Balogh :
    Ron; “LTB.” If I remember correctly this particular local business tax was very controversial. The question was whether it was legal or not under union law. Then–again if I remember right–the clever guys in Brussels decided it was OK because in Italy there was something similar.
    Apparently it is a terrible tax. But I know very little about taxes. I always problems filling out the tax returns myself.

    Yes this tax was controversial from its inception (before 1995). The tax was originally introduced in Sweden, but abolished within a year, as it was killing businesses. However, at that time, Hungary picked it up and introduced it to Hungary, and it became very political, because it was impossible to abolish it.

    However, some deals were be able be made with Local Communities, some gave a ten or more years statements for not introducing this tax in the community. You had to pay a fixed amount into the local development fund, which companies were happy to do as these were fixed up-front agreed amounts.

    Actually the OTP went to Brussels over this amount, due to the non-tax deduct ability of its salary costs, and therefore, they argued it was another turnover tax, such as Value Added Tax. The court decided that was not the case. I believe it was a major error made by the Court.

  10. Eva S. Balogh :
    This is really off topic but I think that I must mention it. As we have been talking about Hungarians are being very aggressive I was thinking that almost every day I read about pedestrians being run over by cars. Just today I think I read about three different cases. Now I just learned the exact numbers for 2011: 123 dead pedestrians! Incredible

    Are you surprised? Look at this video from Liveleak. Horrible. Btw it is from 2008.
    http://www.liveleak.com/view?i=14b_1212060025

  11. Eva S. Balogh :
    Ron, please tell me how Hungarians are able to find their way through this maze of incomprehensible taxes.

    They do not find a way. They wait until the tax inspector come, and pay their penalty. Tax inspector happy, he/she gets her bonus (no kidding). Until the next time.

    My wife mentioned to me that Index had a report about a letter that went out to all governmental institutions to penalize more.

  12. Ron :

    Eva S. Balogh :
    Ron, please tell me how Hungarians are able to find their way through this maze of incomprehensible taxes.

    They do not find a way. They wait until the tax inspector come, and pay their penalty. Tax inspector happy, he/she gets her bonus (no kidding). Until the next time.
    My wife mentioned to me that Index had a report about a letter that went out to all governmental institutions to penalize more.

    Found it.
    http://index.hu/gazdasag/magyar/2012/10/15/birsagok/

  13. Any constructive ideas……………………..from the oposition or its a ” muro de los lamentos” only

  14. Eva S. Balogh :
    Ron, please tell me how Hungarians are able to find their way through this maze of incomprehensible taxes.

    To elaborate more on this topic.

    Hungary is not fundamentally wrong on taxes, only on how they implement it and how they control it.

    Prime Minister Balkenende from The Netherlands was in Hungary, just before Hungary entered into the EU in 2004, and at a round table discussion the CEO of Dutch Multinational said the following. Hungary has beautiful and good laws, but there is no way these laws could work as the laws are not made for the people, but for the government.

    The same principle is applicable for taxes. The people do not see they tax HUF’s at work. Only the EU Euro’s. So in their mind: Why pay taxes?. Do they will not get anything back?

    A friend of mine is CEO of Company (Service) in Hungary. He has about 30 people working for him, but only he and his secretary are receiving a normal salary, the rest has a vehicle to invoice to the Company. He want to change this, but nobody wants to change. All his “employees” are fiddling with their income.

    In Holland, and I am pretty sure in other EU countries as well, if you work for longer than 6 months for the same company you deemed to be working in a employment ship, and therefore, you will be taxed as an employee. Not here in Hungary. I know people who are working for a company for more than 10 years and they still invoice out.

  15. Eva S. Balogh :
    This is really off topic but I think that I must mention it. As we have been talking about Hungarians are being very aggressive I was thinking that almost every day I read about pedestrians being run over by cars. Just today I think I read about three different cases. Now I just learned the exact numbers for 2011: 123 dead pedestrians! Incredible

    A little anecdote to show how Hungarian ‘character’ impacts your insight: A lady I know always crosses
    the street–any street–with her nose up in the air, and never looking either way for the traffic. I saw her do this one day and asked her about it. Her reply was:
    “Let them look out for me!”

  16. Ron :

    Eva S. Balogh :
    Ron, please tell me how Hungarians are able to find their way through this maze of incomprehensible taxes.

    They do not find a way. They wait until the tax inspector come, and pay their penalty. Tax inspector happy, he/she gets her bonus (no kidding). Until the next time.
    My wife mentioned to me that Index had a report about a letter that went out to all governmental institutions to penalize more.

    Found it.
    http://index.hu/gazdasag/magyar/2012/10/15/birsagok/

    It first was awating moderation, and after a few hours it disappeared.

  17. A bit OT:

    I found this really strange site in German, but with a lot of English links too, on the power of Jews: http://einflussreicheleute.wordpress.com/

    The subtitle is:

    “Seit über 10.000 Jahren Erfahrung in Versklavung
    Die Vorteile eines zinsbasierten Geldsystems zur Beherrschung und Ausbeutung”
    Roughly translated:

    More than 10 000 years experience in slavery – advantages of usury for domination and exploitation

    It has info on famous Jews, from Marx and Trotzky to Lantos and Soros …

    Maybe Karl Pfeiffer can say something on this.

  18. bernard de raadt :

    Any constructive ideas……………………..from the oposition or its a ” muro de los lamentos” only

    Yes, we do. Abandon the flat tax. The introduction of the flat tax was the original sin. Structural changes are needed. For example the overhaul of the whole system of transportation. Especially the free use of public transportation for people of retirement age. That’s is a very bad policy. If something is free people tend to use it indiscriminately. Yes, the present beneficiaries wouldn’t be happy but perhaps they would travel less for no good reason and walk a little more that might be beneficial for their health.

  19. Re: ” free use of public transportation for people of retirement age”

    Eva, I have to disagree here! Right now in my German home town there is a discussion about free use of local public transportation for everybody – well the town is not too big, so this means only free buses, but still …

    The old university town is so narrow, that cars are more than a nuisance and it’s impossible or expensive to find a parking space near to the center.

    Students e g already pay a lump sum per semester which includes a free bus pass.

    Re: Flat tax.

    This really is one of the roots of the problem – just as the ridiculously high AFA/VAT on everything. Basic needs like food should be low-taxed just like basic income should be tax-free.

    The funny thing is that Fidesz politics here resemble the US Republicans’ ideas – vulture capitalism at its best …

    Since we live in Hungary a lot of the time, but travel regularly for a month or so to Germany, it’s extremely obvious to us that inflation is rampant.

    Last time I bought sunflower oil, the price was around 450 HUF – now 6 weeks later the “special offer” is 520, regular price almost 600 e g and I could go on …

    Basic food seem to have an inflation rate of 20 % or more – poor people!

    One of the crazy aspects of this is:

    If you have enough money you can wait until something is on offer and then buy in bulk – things like oil, flour, sugar or coffee – often you’ll get “3 for the price of 2″and next week Tesco offers 1000 HUF back when you spend 10 000.

    But if you’re poor, don’t have 10 000 HUF or more inyour pocket and don’t have a car to go to the Tesco, but have to buy at the small local supermarket, you’ll pay through the nose …

  20. Wolfi/Eva Re: ” free use of public transportation for people of retirement age”

    It is not only for the people of retirement age. Somebody working is entitled to have two return tickets (anywhere within Hungary) per year. This was valid at least in 2004.

    MAV has some (in 2000) 200 tariff groups, at that time Malev had 300 plus tariff groups.

    Hungary has no money, and therefore, these communistic relics should be abolished.

    As to the flat tax, I do not consider it the original sin. The original sin is outsourcing the Hungarian way. In the early 90 massive firing took place and than the same people were re-hired on invoice basis. That is the original sin. The government lost a lot of income, but agreed somehow to let this situation exist. Even banks helped these “businesses” with providing financing.

  21. Eva S. Balogh :
    Spectator: “Something else worth to remember.
    A few decades back, likewise Orban, one of his soul-mates were also obsessed with eliminating the foreign debts of the state”
    How did I know whose name will be coming up? Nicolae Ceaușescu. I have a few friends from Romania who often remind me of the similarities.

    I have similar experience, Eva, recently last week called one of my friends – living now in Hungary, but he spent the first 30 years of his life in Romania – escaped some 25 years ago – he said he’s getting déjà vu sensations day by day, and he recognize the alarming tendencies appearing in every aspect of the daily life, ‘slowly but surely we are getting there’ he told me.

    I haven’t ever been there, but once I flew over Ploiești, Romania during the eighties, at night, and the captain called our attention, that if we can’t see a single thing down there, we don’t have to worry about our eyesight,- the blackout serves only energy saving purposes.
    In one of the richest energy-fields of Europe…

  22. bernard de raadt :
    Any constructive ideas……………………..from the oposition or its a ” muro de los lamentos” only

    Besides of what Eva told you already, I would further recommend to:
    – backtrack on ‘prestige ‘investments – MOL, Rába, and the kind
    – stop the ‘vanity’ investments – football stadiums for nonexistent crowd of nonexistent sport, for one example,
    – throw out the narrow minded education-strategy and invest heavily in quality education instead – our only way to gain advantage in the coming times
    – invest in quality ecologically produced food products and the adjoining agricultural bases – instead of creating oligarchs of cronies and falsifying products (paprika, honey, etc., or just a few days ago surfaced ‘pork colored to beef’)

    I would add, as a personal interest: instead of the forced ‘nationalist’ national image would be a high time to go out and show to the world what really valuable in Hungary – and this is not the ‘Kalocsay’ racing-overall, believe me…

  23. Eva, spectator; I think the parallel with Ceaușescu is a good one, as far as describing Orban’s dictatorial tendencies. Whether we are getting there where Romania was in the 80s? Good question. Time and circumstances are different. It was a lot easier to concentrate absolute power in the 80s in Romania than in the 2010s in Hungary. What “saved” the country so far from becoming a clear case of a totalitarian state is being part of the EU, and Orban needing the money from the EU. I believe if Hungary wasn’t part of the EU, the country would already look like today’s Ukraine (though its looking more and more like that every day).

  24. I just received the September report of the Dutch Embassy. Here are some highlights:

    Wages in Budapest compare to Bangkok
    As to the wages, a recent study by UBS found that hourly wages in Budapest are relatively low. The survey examining 72 cities looked at four professions in manufacturing and 11 in the services sector. The average net USD 4.60 per hour earned in Budapest is on a level with pay rates in Bangkok and Beijing.

    Hungary falls considerably in Global Competitiveness Index
    Following a major downfall, Hungary ranks 60th on theWorld Economic Forum’s Global
    Competitiveness Index (GCI 2012-2013). WEF now shows also on an interactive map which countries in the world are the most competitive. Hungary’s international competitiveness has worsened considerably over the past year. While last year Hungary ranked 48th in the GCI 2011-2012, this year it came in only 60th, the latest report by theWorld Economic Forum shows. The severity of Hungary’s decline in the ranking is show that of the first 70 countries only Sri Lanka slipped more than Hungary (16 places).

    Hungary remains one of the main beneficiaries of Cohesion Funds
    According to the report of the EC on the use of the EU funds in 2011, Hungary was the biggest beneficiary in terms of Cohesion Funds/GNI, with EUR 3.6bn. in absolute terms, Hungary is the third behind Poland and Spain. As to the agriculture and environment related payments, Hungary received about EUR 1.5bn. While the latter figure is the 9th highest amount, in relative terms (per GNI) Hungary was ranked second. According to the report summarised by Bruxinfo, Hungary’s direct contribution into the EU budget was EUR 836.4mn, and together with custom and levy revenues totalled EUR 937mn. As a result, the net balance was EUR 4.5bn.

    Social partners want more EU funds on boosting economy
    Both employers’ and employee representatives urged that a bigger part of the EU funding available be spent on boosting the economy at a meeting of the National Economy and Social Council (NGTT). The meeting reviewed Hungary’s utilisation of EU funding so far and between 2014-2020. Deputy state secretary of the National Development Ministry Enikő Földi said the total amount of EU funding available to Hungary between 2007 and 2013 is HUF 8,200bn or EUR 29.3bn including co-financing. By the end of June 2012, the value of the supported projects exceeded HUF 6,460bn. The amount of funding disbursed based on invoices plus the own funds of successful applicants reached 34% of the total amount, Földi said.

  25. Sorry another highlight.

    Employment figures improve temporarily
    The average unemployment rate in Hungary was 10.4%in the 15-74 age group in June-August, down from 10.5% in May-July and from 10.8% in the same period a year earlier, data published by the Central Statistics Office (KSH) show. There were 455,700 unemployed in Hungary in the 15-74 age group on average in June-August, down 3,100 fromMay-July and down 7,100 from a year earlier. After rising to 500,000 – a new peak – in January-March 2012, unemployment gradually fell back to about 5,000 below the level around which it fluctuated between April-June and October-December of 2011.
    The number of unemployed still exceeded the level before the 2008 autumn crisis by nearly 140,000. Analysts believe that this improvement is due to seasonal work in the Summer and thus will increase in the rest of the year.

    What about the 1 million new jobs?

  26. Ron :
    I just received the September report of the Dutch Embassy. Here are some highlights:
    Wages in Budapest compare to Bangkok
    As to the wages, a recent study by UBS found that hourly wages in Budapest are relatively low. The survey examining 72 cities looked at four professions in manufacturing and 11 in the services sector. The average net USD 4.60 per hour earned in Budapest is on a level with pay rates in Bangkok and Beijing.
    Hungary falls considerably in Global Competitiveness Index
    Following a major downfall, Hungary ranks 60th on theWorld Economic Forum’s Global
    Competitiveness Index (GCI 2012-2013). WEF now shows also on an interactive map which countries in the world are the most competitive. Hungary’s international competitiveness has worsened considerably over the past year. While last year Hungary ranked 48th in the GCI 2011-2012, this year it came in only 60th, the latest report by theWorld Economic Forum shows. The severity of Hungary’s decline in the ranking is show that of the first 70 countries only Sri Lanka slipped more than Hungary (16 places).
    Hungary remains one of the main beneficiaries of Cohesion Funds
    According to the report of the EC on the use of the EU funds in 2011, Hungary was the biggest beneficiary in terms of Cohesion Funds/GNI, with EUR 3.6bn. in absolute terms, Hungary is the third behind Poland and Spain. As to the agriculture and environment related payments, Hungary received about EUR 1.5bn. While the latter figure is the 9th highest amount, in relative terms (per GNI) Hungary was ranked second. According to the report summarised by Bruxinfo, Hungary’s direct contribution into the EU budget was EUR 836.4mn, and together with custom and levy revenues totalled EUR 937mn. As a result, the net balance was EUR 4.5bn.
    Social partners want more EU funds on boosting economy
    Both employers’ and employee representatives urged that a bigger part of the EU funding available be spent on boosting the economy at a meeting of the National Economy and Social Council (NGTT). The meeting reviewed Hungary’s utilisation of EU funding so far and between 2014-2020. Deputy state secretary of the National Development Ministry Enikő Földi said the total amount of EU funding available to Hungary between 2007 and 2013 is HUF 8,200bn or EUR 29.3bn including co-financing. By the end of June 2012, the value of the supported projects exceeded HUF 6,460bn. The amount of funding disbursed based on invoices plus the own funds of successful applicants reached 34% of the total amount, Földi said.

    Very informative, Ron.

    Now, why do you suppose that MSZP, DK, and LMP don’t rub the EU differential of 4.5 billion euros, into Orban’s nose–ie. publicize it in all the major papers–when he mentions–as he often does–that Hungary does not need the EU?

  27. Petofi: Very informative, Ron.
    Now, why do you suppose that MSZP, DK, and LMP don’t rub the EU differential of 4.5 billion euros, into Orban’s nose–ie. publicize it in all the major papers–when he mentions–as he often does–that Hungary does not need the EU?

    I think they regularly do this. But nobody wants to publish it?

  28. On the latest poll just out, Fidesz support has strengthened.

    Now what, on god’s green earth, has happened lately
    that could possibly construed as a Fidesz “success”
    warranting growing support?

    It seems that, in Hungary, ‘moron-ism’ is infectious…and spreading wildly.

    God help us all–

  29. petofi :
    On the latest poll just out, Fidesz support has strengthened.
    Now what, on god’s green earth, has happened lately
    that could possibly construed as a Fidesz “success”
    warranting growing support?
    It seems that, in Hungary, ‘moron-ism’ is infectious…and spreading wildly.
    God help us all–

    Fidesz indeed has strengthened its support, but MSZP too, but Jobbik weakened. So I guess some Jobbik voters turned to Fidesz in the meantime.

    For reference, there is a chart in Nepszabadsag: http://nol.hu/belfold/a_valasztas_ota_nem_volt_ilyen_eros_az_mszp

  30. petofi :

    On the latest poll just out, Fidesz support has strengthened.

    Now what, on god’s green earth, has happened lately
    that could possibly construed as a Fidesz “success”
    warranting growing support?

    It seems that, in Hungary, ‘moron-ism’ is infectious…and spreading wildly.

    God help us all–

    I think there is a fairly easy explanation. Jobbik’s support has decrease. These people moved over to Fidesz.

  31. It’s odd to me that in Hungary teachers support Fidesz and in the US, they are largely Democrats and union supporters. Why don’t teachers support MSZP in Hungary?

  32. Name :
    It’s odd to me that in Hungary teachers support Fidesz and in the US, they are largely Democrats and union supporters. Why don’t teachers support MSZP in Hungary?

    Honestly, to me it’s odd, that people support the today’s Fidesz at all!
    A the beginning when they were young ‘liberal democrats’ it was a clear choice to thee most, while the Fidesz today more ‘nationalist socialist’ than anything else, as far as their original ideology as anyone could get.

    Sometimes I even get the idea, that Orban actually working on some self propelled windmill project – a turncoat with that speed must have industrial strength, already…

  33. Name :
    It’s odd to me that in Hungary teachers support Fidesz and in the US, they are largely Democrats and union supporters. Why don’t teachers support MSZP in Hungary?

    It’s a class thing. Fidesz propaganda convinced the middle classes (and those aspiring to be) that Fidesz was their friend and their natural home.

    I suspect that ‘middle class’ in Hungary is far more income and aspiration based than in (eg) the UK or the States, where it is more to do with culture/education. (Although in the UK these days we have at least two ‘middle classes’ – many who think of themselves as ‘middle class’ haven’t got a thought in their heads or a book in the house.)

  34. wolfi :
    Last time I bought sunflower oil, the price was around 450 HUF – now 6 weeks later the “special offer” is 520, regular price almost 600 e g and I could go on …

    When shopping in Auchan two weeks ago, it was a shocker finding out the sudden price increase on one famous Hungarian brand of sunflower oil. Then the following week, the same brand went on offer for 460 HUF!

    MIL explains that it was due to shortage of sunflower harvest. This is the same scenario of eggs shortage during Easter season!

  35. We see a lot of sunflowers out East, and they looked pretty good to me.

    The Hungarian ‘special offer’ is as bewildering as the Hungarian ‘discount’ for larger sizes!

  36. spectator: “Sometimes I even get the idea, that Orban actually working on some self propelled windmill project – a turncoat with that speed must have industrial strength, already…”

    Where I lived in Southern Hungary almost all windmills were selfpropelled………..but of course the folks here are the experts……

  37. Paul: “I suspect that ‘middle class’ in Hungary is far more income and aspiration based than in (eg) the UK or the States, where it is more to do with culture/education.”

    No kidding?????? How wrong you are……

  38. Louis Kovach :
    spectator: “Sometimes I even get the idea, that Orban actually working on some self propelled windmill project – a turncoat with that speed must have industrial strength, already…”
    Where I lived in Southern Hungary almost all windmills were selfpropelled………..but of course the folks here are the experts……

    I hate to disappoint you, Luis, but I even have seen windmills propelled by wind!
    No kidding!
    I even dare to say, that is has a great deal to do with the fact, that they called – surprise, surprise: windmills!

    But, of course, I never lived in Southern Hungary, so, how would I know…

    Perhaps, it’s one of the ‘unorthodox’ solutions what your PM keep bragging about all over?
    It could really be something, what make all those decadent capitalist to turn green of envy!

    Thank you for the correction, Luis, I really appreciate a learned comment!

  39. Ron :
    To come back on the Super Gross Salary issue.
    As a result a lot of people and companies went into a black or grey economy. And the Government lost a lot of income.
    Until they introduced the EVA company. 20% tax over income and simplified accounting. It was an instant success. Currently, the tax rate is 37% and as result it lost its appeal.
    It was 30% just a year ago. It was bumped up to 37% around this time last year.

    That tax increase has been a devastating blow to my family. With the extra tax burden we are barely able to make ends meet now in this weak economy. Every month is a struggle. I’m sure lots of other Hungarian families are in a similar situation.

  40. comment corrected for better formatting

    Ron :
    To come back on the Super Gross Salary issue.
    As a result a lot of people and companies went into a black or grey economy. And the Government lost a lot of income.
    Until they introduced the EVA company. 20% tax over income and simplified accounting. It was an instant success. Currently, the tax rate is 37% and as result it lost its appeal.

    It was 30% just a year ago. It was bumped up to 37% around this time last year.
    That tax increase has been a devastating blow to my family. With the extra tax burden we are barely able to make ends meet now in this weak economy. Every month is a struggle. I’m sure lots of other Hungarian families are in a similar situation.

  41. buddy :

    Ron :
    To come back on the Super Gross Salary issue.
    As a result a lot of people and companies went into a black or grey economy. And the Government lost a lot of income.
    Until they introduced the EVA company. 20% tax over income and simplified accounting. It was an instant success. Currently, the tax rate is 37% and as result it lost its appeal.
    It was 30% just a year ago. It was bumped up to 37% around this time last year.
    That tax increase has been a devastating blow to my family. With the extra tax burden we are barely able to make ends meet now in this weak economy. Every month is a struggle. I’m sure lots of other Hungarian families are in a similar situation.

    You better talk to your accountant. I believe the KATA is for you the best solution. Tax rate is 10% at maximum turnover.of HUF 6 mio. Do you know if you can set up multiple KATA for one person?

  42. Thanks I will, but the 6million limit looks like a dealbreaker. Still, thanks for the advice. I hadn’t heard about this new programme.

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