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.
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.