Sometimes it is enough to look at a picture taken after a meeting to know whether the gathering was a success from the point of view of the organizers. The photo taken of Ferenc Gyurcsány surrounded by a number of people as they are leaving the government compound at Dobogókő speaks volumes. Gyurcsány is satisfied. We don't know too many details of the two-day discussions, but it seems that the party and the government are behind him. They came to some broad conclusions about the strategy the government should pursue over the next couple of years. As predicted, Oriens' plans for reorganizing the current economic structure found no sympathy among the politicians present. However, there was broad agreement on two issues. First, they were satisfied with the government's efforts of the last two years in decreasing the deficit. Second, although budgetary restraint should continue, the focus should shift to economic growth. There was agreement concerning the methods of achieving this goal: more jobs, more investment, changes in taxation, modest welfare reform, and positive changes in education.
They decided that the amount of money allocated to social benefits cannot decrease. The Swiss indexing of pensions will be kept. However, the money spent on social welfare must be used more effectively: fewer welfare checks and for a limited amount of time.
The question is where the money will come from to spur growth. Gyurcsány mentioned five sources: eliminating as much as possible the black and grey market. Even last year the budget managed to receive an extra 100 billion forints as a result of this effort. They are planning to increase the number of tax payers. They insist on a lean budget. They will look around to see where they could limit the number of tax exemptions. And last, they are planning to restructure the tax system, most likely increasing VAT while lowering personal income tax and taxes and benefits paid on behalf of employees. They decided against a property tax. I am pretty sure that deep down Gyurcsány would have preferred the introduction of this form of taxation but as he said "neither the country nor the majority of parliament would support its introduction."
Consultation on changes in the tax system will continue all summer; they plan to introduce the new tax law in the fall. Next week the whole parliamentary delegation will be informed of the details of the two-day conference.
One obvious question is whether enough money would find its way into the government coffers as a result of these measures. And will the measures be enough to jump start Hungary's sluggish economic growth? Gordon Bajnai, the very successful minister of economics, would like to see an economic growth at least 2% higher than the European average. Otherwise, the country's convergence in the near future is pretty hopeless. But can the government, by lowering the very high taxes and benefits the employers currently have to pay, entice investment and encourage expansion? That is a huge question mark. Most economists say that it is not enough. In order to evaluate the government's plans one must see figures; until then we must suspend judgment.