Strict limits on the Hungarian budget

According to political and economic observers the Gyurcsány government will submit a legislative proposal to parliament that may be the most important step it has taken so far. To begin with, it would insert a new sentence into the constitution: "the Parliament and the government will exercise its budgetary powers in such a way as not to endanger the country’s fiscal balance." In the last seventeen or so years every government has fallen prey to the practice of spending above the country’s means prior to elections. Overspending and then tightening. Right now, of course, Hungary is going through a rather painful tightening period, resulting in high inflation and slow economic growth.

A new office would be created to ensure that the parliament and government adhere to their constitutional obligations. The name of the office would be Legislative Budgetary Office (Törvényhozási Költségvetési Hivatal). In an effort to make it politically neutral, its head would be named for a twelve-year period. The office would have access to all data available to the minister of finance or any other ministers. This office would become a reality by 2008, and by 2009 it would have ninety-six employees. Apparently, its yearly budget would not be larger than 1 billion forints, which would include salaries, rent, computers, software, and three official cars.

It will be a challenge to prevent this new office from falling prey to the parties as so many other so-called politically neutral institutions (see the boards of public television and radio, for example) have. The original plan was that a professional body would suggest a number of people for the post of the president and out of these nominees parliament would choose one (with a two-thirds majority necessary). However, in the last minute this suggestion was dropped in favor of a "softer" version whereby an eight-member parliamentary committee will select candidates.

There are other important provisions of the proposed legislation. One is to link the rate of change of government debt to the GDP. Its real value cannot grow out of proportion to the growth of the GDP.

Prime Minister Gyurcsány and Finance Minister Veres informed the press Sunday morning about the details, adding that there was agreement among the parties. It sounded too good to me. Indeed a few hours later András Tállai, the Fidesz politician in charge of such budgetary questions, announced that although the Fidesz supports the goal of budgetary stability this proposal is not the right legislation, and this is not the right time to vote on such legislation.

Because of the parliamentary schedule the legislation can’t get to the floor before February, but the government was sure in a hurry to make the announcement, which most likely came as a surprise to the Fidesz. We will hear a lot about all this between now and February.