Another austerity program introduced in Hungary, but they call it a “freeze”

It was not quite a month ago, on June 20, that Mihály Varga, minister of national economy, triumphantly announced that he “convinced the European Commission that no further austerity measures are necessary for Hungary to keep the 2.9% deficit target” that would ensure the receipt of investment funds from the European Union. Previously the Commission had expressed its misgivings about the feasibility of achieving the prescribed goal. According to Varga, the Commission was impressed by the recent positive results of the Hungarian economy: low inflation and rapidly decreasing unemployment figures.

So, great was the surprise that, after all, the government ordered a freeze of 110 billion forints worth of government expenditures in order to make sure that the deficit target is met. Varga tried to calm the nerves of Hungarians by saying that the freeze “will not affect families and businesses.” So, what will it affect? It looks as if Investment Fund expenditures will be substantially affected and several projects will be postponed. Across all ministries there will be an almost 40 billion forint spending freeze. Reserves for extraordinary measures, like floods, snowstorms and such, will be greatly reduced. The freeze will lower the GDP by .036%. He emphasized that these measures are not really necessary; they are only precautionary.

Yet Varga gave himself away once he began listing the reasons for the freeze. He explained that the favorable economic developments of late had actually had a negative effect on the state’s budget. For instance, a lower inflation rate than expected reduced excise tax and VAT revenues. Moreover, he added that “Hungary is facing some possible punitive measures from the European Union” which would affect certain funds coming from Brussels. Commentators judge that figure to be close to 100 billion forints. As for lower tax revenues, Varga could have added that due to the newly introduced state monopoly of tobacco the state lost about half of its former revenues from this source. Varga of course did not want to mention the substantial expenditures on the nationalization of several large private concerns. In addition, thirteen infringement procedures are currently underway, the latest being an impending fine to the tune of 60-90 billion forints over the tenders for the toll system introduced about a year and a half ago. All in all, the budget is not in great shape.

According to Levente Pápa, an Együtt-PM politician who deals with economic matters, the government has loosened the purse strings of late. The public works program was greatly expanded just before the national election. The same will be true in the coming months, this time because of the municipal elections in October. Sándor Burány of MSZP, who usually responds to issues connected to the economy, also called attention to the so-called “prestige projects” undertaken for the election year.

This morning Viktor Orbán explained the reason for the freeze. This year’s budget is tight, “at the very edge” of 3%, and thus it is a good idea to make it clear to the whole world that Hungary will hold the deficit under the maximum allowed. Then he tried to teach the Hungarian public, which is not too sophisticated when it comes to economics, that “Hungary must continually take up loans in order to finance its earlier loans and it is not immaterial under what terms the country gets these loans. Interest rates are greatly influenced by whether investors consider the budget stable.” Hence the freeze.

At this point the servile reporter who conducts these Friday morning interviews asked Orbán whether it hurts that the building of stadiums must be suspended. Naive man. Orbán announced that “luckily” one does not have to worry about these projects. There is always money for the prime minister’s pet projects. Moreover, he said that some of the expenses connected to stadium construction will occur only next year. Let’s worry about them then.

It is certainly worth taking a look at yesterday’s Magyar Közlöny (Official Gazette) which contains the details of this latest adjustment of the budget figures. The three ministries affected most are the Ministry of Human Resources (9,671.1 million), Ministry of National Economy (8,378.3 million), and Ministry of Agriculture (5,552.0 million). It is true that the Prime Minister’s Office will be able to spend less money from here on (1,446.5 million), but that is a relatively small cut, especially if we compare it to the 3,785.5 million taken away from projects financed by the European Union.

Even more interesting is appendix #2, which lists the exemptions. These are projects that the ministries cannot touch while adjusting their budget figures. One of the first is the prime minister’s protocol expenses. But no one can chip away at the enormous “government communication” budget either. Although I did not know that Viktor Orbán was keen on horses, the “development of the Horse Center in Szilvásvárad” is also exempt. The reconstruction work in the Castle District (Szent György tér, Mátyás templom) must go on. The Ludovika Campus reconstruction, including sports facilities, will continue uninterrupted. This is where military officers and civil servants will receive a proper Fidesz education. Monetary gifts for excellence in sports must remain the same as before. And then we have an incredibly long list of stadiums and sports facilities: Győr, Debrecen, Bozsik Stadium in Budapest,  Ferenc Szusza Stadium also in Budapest, Pécs, Nyíregyháza, Zalaegerszeg, Kaposvár, Kecskemét, Paks, Pápa, Békéscsaba, Mezőkövesd, Siófok, Dunaújváros, Gyirmót, Ajka, Balmazújváros, etc. etc. etc. Too long to list them all.

This how the Ludovika Campus will look like

This is what the Ludovika Campus will look like

But there are other sacrosanct items worth mentioning: aid to art collections of churches, aid for the teaching of religion in schools, financial assistance to priests and ministers serving localities with populations of less than 5,000, financial support of priests and ministers serving abroad, aid for the Piarist order, aid to the Hungarian Reformed school in Debrecen, aid to religious organizations abroad, and finally financial aid for the organizations of ethnic minorities.

It is perhaps not surprising for those who are familiar with the Orbán government’s modus operandi that the largest amount is being taken away from the ministry that looks after healthcare, education, and culture. At the same time the government is spending billions and billions on at least three dozen stadiums all over the country. There is no question where this government’s priorities lie.


  1. Btw 50% reduced collected taxes on tobacco. Ok now I understand why so much smoking shops stopped. But i do not see a reduced smoking habit.

    Btw I believe within a short another cut need to be found.

    Nokia is reducing its presence in Hungary.

    Reducing the debt of Hungary went down through the toilet. It makes the country more vulnerable for interest swings.

    So the aforementioned 1800 will be add to the 113,000 lost jobs this year alone.

  2. Re smoking. Of course, people still smoke as much as before but they get their cigarettes from the black market or make their own. This latter is even more harmful than professionally made ones because they are unfiltered.

  3. “…the Orbán government’s modus operandi that the largest amount is being taken away from the ministry that looks after healthcare, education, and culture.”

    “Left”, “Right”, “Center”–the asinine discussions proceed anon, while Orban makes a mockery
    of Hungary and Hungarians before everyone’s very eyes! (Has a Felcsutian ever had so much fun before?)

    The geat Hungarians, with Intelligence to match their Ethics…


  4. In 2012 the EU threatened to cut $660 million or €C500 million in what is called Cohesion Fund commitments from Hungary, and effectively the Orban government did the same thing it’s doing now. In October of 2013 the EU again threatened these funds to the tune of €250 million withheld by the EU as a fine, it was eventually paid.

    Between 2007 and 2013, Hungary was entitled to receive about 8.2 trillion forints (€27 billion) in EU aid for development programs, the amount actually paid is probably somewhat less. The money, which the European Union provides to Hungary and other EU countries in central Europe, is for transport, environmental, water treatment and health projects, among others and which are seen as vital for the economy.

    The money is not provided to Hungary because the developed nations of the EU are such loving nation states. It is provided to allow what the IMF now calls the German-Central European Supply Chain to function. The read about this go to

    In this document the IMF in passing compares the economic relationship between three Central European states (including Hungary) and Germany to that of the USA and Mexico. Although I do believe its only fair to say that the EU has been more generous in its aid to Hungary than the US has been to Mexico. Last year the US gave Mexico $757.7 million for very similar things as the EU provides to Hungary via the Cohesion Fund commitments.

    Also Hungary might be controlled by the political gangster Orban, but faces none of the insane drug wars that Mexico does nor does Hungary have comparable levels of deep poverty. We have a saying in the US there is no such thing as a truly free lunch, you pay one way or another. Hungary pays the developed nations by providing low wage production for everything it gets in aid even if a good amount is wasted by the Orban government.

  5. Half of the fostered workers were dumped after the April election:

    2014 [2013]

    January: 198.3 [33.5]
    February: 200.3 [27.2]
    March: 209.1 [92.1]
    April: 211.8 [139.3]

    May: 98.8 [149.9]

    May 2014 [2013] in thousands:

    Employees in enterprises with at least 5 employees: 1,850.2 [1,816.2, 1.87% y/y growth]
    + Fostered workers in such enterprises: 10.2
    Public employees: 694.7 [674.2, 3.04% y/y growth]
    + Fostered workers in budgetary institutions: 87.9
    Non-profit institutions: 89.4
    + Fostered workers in non-profits: 4.4

    Total, without fostered workers: 2,638.1 [2,561.9, 2.97% y/y growth]
    Total with fostered workers: 2,736.9 [2,711.8, 0.93% y/y growth]

    Remark: The numbers do not add up: 4.4+10.2+87.9= 102.5 > 98.8

    Summary tables in

    Click to access let21405.pdf

    published on July 18, 2014

  6. The Orban government

    is going to alter, again, the “Foundation Document” of the
    Holocaust Memorial Center,

    p. 11469, Magyar Közlöny 2014. évi 99. szám, July 18

    will give an additional 667 million forints to the Hungarian Railways (MAV) for
    Maria Schmidt’s “House of Fates”, aka Holocaust Misinformation Center.

    p. 11424, Magyar Közlöny 2014. évi 98. szám, July 17

    will give additional funds to Lezsak’s “Volk [?] College” in Lakitelek
    (I think you can find a lot about Lezsak’s anti-Semitism on these pages)

    p. 11426

  7. But it works, people still love Fidesz. The best I heard a couple of days ago was that “Matolcsy is a communist agent, sure he is crazy, but that is because the communists are so smart, they are still able to place their people in the government. Poor Orban has too many issues on his hand, can’t deal with all of them.” Other people said to me that KSH (the Statistical Office headed by trusted fideszniks) makes up its numbers so the numbers look worse (!) than they do in actuality; according to these humble Magyar Nemzet readers there was no recession in Hungary in the last years at all, only KSH is still full of communists who forge statistics and make Hungary look bad.

    Based on the decisions, what is happening essentially is that the religious education/arts etc. whose budgets remain intact (increased y-o-y) slowly supplants secular culture/education whose budgets have been cut already several times in the recent years. The return is great as the religions provide Orban with an extremely useful national network of loyalist foot soldiers, who, coincidentally fight Jobbik which harbors a lot of anti-christian, neo-pagan elements and in any case Jobbik supporters are more working class people and traditional religions tend to identify with the conservative power which represents the higher classes (ie. Fidesz). Meanwhile, not to forget about it, the left has zero access to rural people, or any information about them, of course even if the leftists were going out of their way to befriend the religions (like Horn and MSZP did), they would always be hated as the communist. Check-mate.

  8. @Misi

    “KSH (the Statistical Office headed by trusted fideszniks) makes up its numbers so the numbers look worse (!) than they do in actuality”

    This is a good joke.

    What about this:

    MNB (Central Bank) erases important statistical data from its website.

    Are you looking for the numbers? They are gone.

    They are gone retroactively – click on the date, then on “Adatok” on

  9. @Istvan: “Also Hungary might be controlled by the political gangster Orban, but faces none of the insane drug wars that Mexico does nor does Hungary have comparable levels of deep poverty. ”

    This only means that there is still a way to go further down… and Hungary will.

    ” Hungary pays the developed nations by providing low wage production for everything it gets in aid even if a good amount is wasted by the Orban government.”

    The problem is not that Orban “wastes” the EU aid, but that the EU aid is used to fatten up the Orban’s cronies, instead of helping the country. The EU aid, instead of helping the poor and the country in general, is helping the new conservative ruling class to get rich and push the poor further down. It is not decreasing inequality in the country, it is actually increasing it. It is not helping Hungary to catch up with the West, it is used to distance the country further and further from the West.

    Yes, the EU may not be a charity organization and it may have its own agenda (simplistically assuming that it only follows the interests of its strongest members states and corporations). But out of the two “evils” (the West vs. Orban), Orban and his policies are much worse for the country.

  10. I don’t understand all this EU bashing. Orban’s ideas are toxic: Hungarians (and many bloggers here) seem to adopt his line.

    The EU is a monster, modern, development for the wrinkled, hapless old states of Europe.

    –Is it not better to have no borders?
    –Is it not better to have a single currency?
    –Is it not better to be able to find work in other countries and to be able to send money home?

    The EU is a club. As a member you have responsibilities to that club. Not everything will go your way but overall you are better for being a member of it.

    Hungarians like everything their way. They like agreements that they can tweak to their advantage. They like to make deals they can squirm out of and then tout their ‘genius’ at doing so.

    Hungarians–the sick, twisted, members of the human family. (Every planet must have one.)

  11. Petofi, I totally agree with you – but you forgot one very important point:

    The EU is also instrumental in keeping peace between the countries of Europe!

    Remember that every generation in Europe had at least one big and several smaller wars until the middle of the last Century.

    Not too much OT:

    Tomorrow is the anniversary of Graf von Stauffenberg’s failed bomb for Hitler and the Putsch that was planned by the German aristocratic officers – too little, too late and unsuccessful …

  12. Wolfi,

    How much better a basis for peace can you have than uniform laws and accepted practices, in addition to ever improving economic conditions for your workers. Of course, the EU must expand its power of oversight over rogue countries like Hungary whose very policies promise civil unrest–first in their own country, and then spreading to adjoining states.

    Hungary must be taught, and forced, to heel like the rabid dog it is. (Boy, I like to give it to the faux pride of Hungaricos!–If you must be PROUD, can you not at least be proud of acceptable actions and civilized beings…?)

  13. I am still trying to assess how effective this EU bashing in Hungary is. I have just returned from Hungary after a week spent in Budapest and Velence. I could see all over the place those big boards indiciating how much EU subsidies were spent to build whatever facilities. I am only wondering what the country would look like without EU funding.

  14. Yes that money from the EU is gladly accepted …

    Now they’ve “built” a bicycle road (i e flattened a dirt road and put up some signs …) and the sign proudly proclaims:

    The EU financed this with 123 456 789 HUF (of course I made up that number – but it really is down to the last Forint …).

    PS and OT:

    It promises to be the hottest day at the Balaton yet this year – 33 degrees Celsius aka 91 Fahrenheit, so I’m sitting in my airconditioned living room writing this while my wife is watching Game of Thrones …

  15. EU subsidies are paid in Euros since this is the official currency of the EU, whether Member-States are in the Eurozone or not. This explains why the amounts in Forints will never be round.

  16. thestampede: right, without the EU there would have not been any public investments in Hungary in the last five years.

    However, most people do not really enjoy the extra benefits of a newer water treatment facility (the quality improvement is not so huge) or a renovated railway.

    At the same time most people know the funds are exaggerated (like the EU funds of over a million euros on a single educational ‘laboratory facility’ at the Balatonfüred highschool), so funds are associated with stealing.

    Most importantly, all people feel the force of the EU-mandated free trade: local jobs tend to disappear (whether in manufacturing or agriculture) and most big workplaces are owned by foreigners.

    People in rural places where there are finite opportunities anyway, everybody knows several negative stories which they associate with the EU.

    People can get as many new town centers and ‘innovation facility and related structures’ (a new, mostly empty office building occupied by municipal pseudo-entities) they will still remember how this or that factory closed because due to the EU we cannot increase duties on Chinese imports. The EU cannot really win in Hungary and other laggard countries.

  17. Trafikov – As a Belgian, I can tell you that most of our big national companies have been bought out by foreign groups some while ago, sometimes with the simple loss of decision centers, sometimes with some relocations, sometimes with simple shutdowns. This is how things go when the market/country is a mere 10 million people vs 60 million in France for example. Today, any foreign investment in Belgium is welcome and this still happens occasionally even though labor cost here is much much higher than in Hungary. As far as EU funding is percieved in Hungary, the EU is not exactly to blame but the Hungarian authorities are, even though I agree the EU should demand that the money spent yields more return on investment.

  18. Trafikov: “we cannot increase duties on Chinese imports. The EU cannot really win in Hungary and other laggard countries.”

    If that is finally what will make Hungary rich and people satisfied, please ask your big boss to retreat formally from the EU. Nobody will prevent fyou rom leaving, just do so. Perhaps surprisingly for you, it would solve a lot of problems for the EU also. And hopefully the duties you earn on Chinese products will suffice to pay for the tariffs then imposed on your exports.

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