Although parliament is just beginning discussion of the government's planned economic reforms, according to information that leaked out earlier the cabinet, on the advice of its economic experts, has rejected the program of the Reform Alliance. The government is pretty certain that there will be enough votes to defeat the program put forth for discussion by SZDSZ and MDF. Of course, the government is right. Fidesz in no way supports the program. Thus a very small minority will vote for its acceptance: at most about 25-30 people. But, of course, then comes the second round: the government's own proposal.
The government rejected the Reform Alliance program because its economists, after studying the proposals, came to the conclusion that if the program were introduced economic growth would slow by an additional 0.5% in both 2009 and 2010. By 2011 the problem would be even greater: 1.0%. They claim further that the program would take a deficit currently under 3.0% and increase it to 3.4%. The other problem is that inflation under the Reform Alliance program would be higher than that anticipated by the government. In the next three years inflation would be 0.7-0.8% higher than current projections. In addition, although the number of jobs would increase in the private sector the overall number of actively employed people would be lower than today due to cuts of about 8-10% in the public sector.
Péter Róna, an American trained banker and economist currently residing in Hungary, projects even worse results. According to him the Reform Alliance program would give rise to a serious decrease in the population's purchasing power. As opposed to the Ecostat/Hungarian government projection of a 3.5% decrease in GDP Róna thinks that the Hungarian economy will shrink by 5%. But, he continues, if the plans of the Reform Alliance become a reality that number might be as large as 7 to 9%.
In addition to these opinions there is an article by an economist who in the last few years has supported SZDSZ's reform zeal. Yet the very title of Károly Attila Soós's piece tells his opinion of introducing "reforms" that are basically nothing more than a series of severe austerity moves: "Wrong refoms at wrong time!" (Népszabadság, March 16, 2009). He goes so far as to say that even the government's very mild reforms will be counterproductive in the midst of an economic crisis. He considers raising the value added tax (VAT) harmful, hurting the poorer strata of society and lowering consumption. The cartoon that accompanies the article tells a lot. The caption reads: "It was neglected a bit but perhaps the therapy will help!" János Kóka, head of the SZDSZ caucus, seemed to like the boxer metaphor because today in parliament he talked about László Papp, the famous Hungarian boxer, who won gold medals in 1948, 1952, and 1956. What would have happened to him, asked Kóka, if someone had tied Papp's hands and put a stocking on his head? This is obviously what is happening to Hungary thanks to a government that is too afraid to jump into the middle. Kóka also compared the Hungarian economy to an overweight athlete who smokes and carries a forty-pound sandbag on his back.
Once he finished with the athletes, he moved on to medicine. Hungary is sick. At first, people thought that the country had a mild cold, but then it turned out that it had the flu, and by now it is clear that it has pneumonia! The government has been doing nothing for six solid months. Kóka announced that if the Reform Alliance's austerity program is accepted "it will hurt much and many," but these drastic reforms are necessary to win the game or get well again. He did admit that perhaps SZDSZ had a hand in Hungary's economic woes, but only insofar as they didn't insist on greater reform plans while in a coalition with the socialists. He seemed to have forgotten the botched healthcare reform (in SZDSZ hands) and the Fidesz inspired referendum that put an end to even that.
I'm inclined to side with those who say that in the middle of an economic crisis one doesn't venture into unknown territory with possibly grave consequences. One doesn't even know the extent to which Hungary will be affected by the global financial crisis. It has problems of its own making, of course, which the government is working to remedy. But the hit to the Hungarian economy will also depend on the depth of the crisis in the countries that are Hungary's trading partners. No deep reforms in Hungary will address that issue.