“Budget for the Protection of the Nation”–2012

Matolcsy's ministry has come up with its budget proposal for 2012. It is no ordinary budget. It is the "Budget for the Protection of the Nation" (Országmentési Költségvetés). Because if the prime minister a few days ago announced an "Action Plan for the Protection of the Nation" we might as well make this budget plan a prominent member of the "protection of the nation" family. We also seem to have a "Fund for the Protection of the Nation." I will have to do a little more research on that because at the moment it is not clear to me what this fund is for.

Commentators haven't had much time to analyze the budget proposal; the best thing they could come up with is that it is "realistic." Let's not underestimate the importance of that. After all, until now György Matolcsy hasn't displayed a keen sense of realism. He greatly exaggerated the economic prospects of the country. Originally he predicted a 3% growth for 2012 and that was his conservative estimate. In his more sanguine moments he talked about 6%. Then a few months ago he predicted  a 2% growth, but today he announced a more modest 1.5% and some analysts think that even that is too optimistic.

He is also modest when forecasting the rise in domestic consumption–0.2%. I think we can safely say that the government is resigned to stagnant domestic spending, upon which the Orbán government had pinned its greatest hope for rapid economic growth. Matolcsy has also become more skeptical about employment. I assume we all remember the magic number of one million new jobs in ten years, but in a year and a half the number of employed people has actually shrunk. According to a report released by the Central Statistical Office (KSH) today, the number of unemployed in Hungary totalled 2,719,000 in July 2011. That means 18,000 fewer employed than in the same month in 2010.

What does Matolcsy promise for employment in 2012? Not much. The government is hoping for a growth of 1.5%. If I calculate correctly, that is no more than about 40,000 new jobs. A far cry from the promised 100,000 a year for ten solid years.

But it was perhaps the hike of the VAT to 27% that was received with the most surprise and dismay. The surprise came because Fidesz both in opposition and since the elections loudly proclaimed that they would never think of raising taxes. Raising taxes slows the economy. What the Hungarian economy needs is a lowering of taxes which would result in greater purchasing power. Hence the introduction of the flat tax, which turned out to benefit primarily the upper middle classes without at all helping people in the lower income brackets. The flat tax not only didn't improve consumption, it managed to create a sizeable budget deficit. Hence new taxes have to be introduced.

Most people suspected an impending tax hike, especially since last weekend when Matolcsy arrived with a folder in hand on which one could read the partial title: "Adóeme…" Well, what could the end of the word be? Surely "Adóemelés" (tax hike). And since reintroducing a higher personal income tax bracket after the much touted flat tax would have had been an admission of the failure of the policy, the government, specifically Viktor Orbán personally, opted to raise the already very high VAT (value added tax). Until now on almost all items, including food, there was a 25% VAT, together with Sweden and Denmark the highest in Europe. Now the regressive VAT will be 27%. There are many ways to lead Europe economically.

There will also be other tax increases. Social security taxes covering health costs will be raised by 1%, and the employers will also have to pay more for health coverage of their employees. That goes against all advice given to the government a year ago. Most economists thought that the payroll taxes that were already very high in Hungary should be lowered.

In addition, the central government will let about 5,000 employees go next year, about 15% of the workforce. Matolcsy announced that if a private firm employs any of the former civil servants it will receive a tax break for a year.

A few months ago when the Hungarian government announced that it was sticking to its 2.5% deficit target investors were satisfied. It seems that by now this government has completely lost credibility. After the announcement of the "Budget for the Protection of the Nation" the forint weakened against the euro. And I doubt that next week will be better.

The opposition parties are up in arms. According to LMP "this is the worst austerity package of the last twenty years." LMP might exaggerate. After all, as a result of the Bokros package of 1995 the income of the population fell by 16%. One of LMP's young economic experts used a slang expression to describe the author of the budget: Matolcsy's "medication rolled away." Meaning he has lost his mind. MSZP simply called it "the budget of poverty." Jobbik charged that the government "makes the poor people pay for the crisis."

Jobbik for once is right: Fidesz's economic policies blatantly favor the well-to-do and discriminate against the poorer strata of society. I'm curious how long the Hungarian people will take all this without a murmur.

The government seems to be afraid of the very Hungarian people it is claiming to protect. Seventy trade unions are planning a series of demonstrations where they say they could easily amass about 30,000 people. The police denied permission, claiming obstruction of traffic or, in another instance, preventing members of parliament from doing their work. But the demonstration in front of parliament was scheduled for Saturday! Surely, the government simply doesn't want to see 30,000 people in one place. On Monday we will find out what the court thinks of the police's decision.

And finally, here is a video. Unfortunately it is in Hungarian, but one doesn't have to know the language to understand its meaning. It is about the sinking of Atlantis, the imaginary island described by Plato. The leaders of Atlantis simply don't want to admit that the water is rising and here is the end of their kingdom. We know whom the authors of the video mean:

 

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Jano
Guest

Thanks for the video Eva!:)
Btw do you think that there’s some spin doctor coming up with these names (I mean “Budget for the Protection of the Nation”, “Table of the constitution”, “Government of the national unity”, etc.) or are these Orbán’s creation. Actually who thinks that there are people out there who doesn’t find these ridiculous???

Paul
Guest

I don’t want to come over as some Monty Python nerd, but the video is actually a clip from Terry Jones’ film ‘Erik the Viking’, starring John Cleese, among others.
Erik travels to Hy-Brasil, a mythical island just to the west of Ireland (but enjoying a strangely superior climate!) in order to get the Horn Resounding (if you really want to know why see http://en.wikipedia.org/wiki/Erik_the_Viking).
Tradition has it that the island will sink if blood is ever spilled on the island’s soil, and, sure enough, one of the Vikings (oddly, in our context, named Loki) kills another during a fight, blood is spilled and the island begins to sink. The island’s king, Arnulf (played by Jones himself) refuses to believe his island is sinking, even as he sinks beneath the waves.
I can’t hear the audio as this computer doesn’t have speakers, but I assume some wag has dubbed Hungarian OV-appropriate dialogue on it?

Paul
Guest

And talking of which, I rather like ‘The Table of the Constitution’ – it has a distinctly Pythonesque ring about it!

Paul
Guest

2,719,000 unemployed – is this correct?
There is shock over here that unemployment has just reached 2.51 million, and we have six times Hungary’s population!
Nearly 3 million unemployed out of a population of 10 million must be something like half the workforce.

Member

Hy-Brasil is sinking !!!


Paul
Guest
Whist surfing re Hungarian unemployment, I came up with this site: http://www.socialwatch.eu/wcm/Hungary.html. Incredibly depressing reading re poverty in Hungary, but I highly recommend reading this (it isn’t long). And those of us who are so critical of OV should note that this report is dated 2010, so this is the result of the 20 years previous to ‘Year Zero’ – and significantly affected by the austerity measures brought in by the MSzP government. One of the drivers behind OV’s rise to power is people’s negative reaction to the usual capitalist/neo-liberal response to hard times – austerity programmes designed to hit the poor hardest (we are having to cope with one of these pieces of lunacy in the UK right now – welfare payments cut, whilst bankers continue to get multi-million pound ‘bonuses’). Surely it is high time that those of us on the progressive/liberal left stood up and rejected such programmes? Not only is this something we should be against by default, but it would also prevent the poor bastards suffering under these evil ‘we’re all in it together’ programmes drifting to the extreme right out of sheer desperation. The progressive political position on this issue should be quite straightforward:… Read more »
Guest

Paul–I was unable to get to your link, which sounds like important reading….And thanks to all who verified the Monty Python conncection.

Member

This is a better summary of the empolment information:
portal.ksh.hu/pls/ksh/docs/hun/xftp/gyor/fog/fog21107.pdf
It’s in Hungarian, but the grid also has English headers.
It seems what Eva quoted is a “nemzetgazdasag” summary from the KSH site. I’m not an expert, but it is based on some kind of representative sample, only a subset of all employers to show trends. Also this number (2,719,000) is the “employed” not the “unemployed”.
The number of employed people was 3,832,000, the number of unemployed was 463,000 (may-june 2011). The unemployment is hovering on the 11% mark pretty much during the whole time under Orban the 5th.
These number apply to people between ages of 15–74.

Paul
Guest

How can you be unemployed when you’re over the retirement age?!
Gretchen – sorry, you need to remove the full-stop at the end.
The link (minus full-stop) is:
http://www.socialwatch.eu/wcm/Hungary.html

Kirsten
Guest

Paul, there are several definitions of working age, this 15-74 is used to include all people that still work at that age (these exist). The pensioners who do not search for work, are not counted as unemployed; the pool of people being active in the labour market (as employed or unemployed) is rather small for 65-74. The unemployment rate for 15-74 should not differ much from that for 15-64.

Kirsten
Guest

I think Mutt is right, the unemployment rate is calculated from a different population. The statistic Eva cites includes only firms with 5 and more employeed people (legalább 5 fős létszámú vállalkozások) and should be designed to gather wage data. In the press release there is no mention of the number of unemployed but of the employed (2.7 million) that are covered in this statistic:
http://portal.ksh.hu/pls/ksh/docs/hun/xftp/gyor/let/let21107.pdf
The official employment and unemployment data are those that Mutt cites.

Eva S. Balogh
Guest

Jano: “do you think that there’s some spin doctor coming up with these names (I mean “Budget for the Protection of the Nation”, “Table of the constitution”, “Government of the national unity”, etc.) or are these Orbán’s creation.”
There is a guy whose name is Árpád Hab… something or other (sounds very much like Hablaty (smiley) who is apparently responsible for these names.

pusztaranger
Guest

As far as I know, the “Table of the Constitution” was the idea of theater director Imre Kerényi.
“There will also be other tax increases. Social security taxes covering health costs will be raised by 1%, and the employers will also have to pay more for health coverage of their employees.”
I found this table on how the tax increases affect net wages in comparison to 2010. Low and high incomes are dramatically affected. This is scary stuff.
http://www.tmcfirst.hu/blog/ujabb-jovedelemvaltozasok/

Eva S. Balogh
Guest

Jano, the spin doctor’s name. It is not Hablaty but Habony. Close enough. For those of you who don’t know Hungarian “hablatyol” means “talks nonsense, lies.”

Member

pusztaranger’s link clearly shows (and thank you for that) how well Orban looks out for all Hungarians. As it was pointed out many times on this blog, those who earn less than 300,000 FT (1,000 EU) are hit big time. In fact less you earn below 300,000, harder you were hit.
Anyone above that threshold takes home more money, and more you earn more you take home. If you earn around 10,000 EUR a month you will take home 2,255 EUR more. Nice.
Maybe the opposition parties should make large size posters from that worksheet, and post them around the city as well as on billboards. Maybe, jut maybe HUngarians would wake up. The Fidesz Tax Break. THis is what Hungarians voted for.
I would also be interested to hear how is the new marketing group working out for Fidesz? Do you remember back in the Winter when Fidesz hired a London firm to help with their outreach, in order to position Hungary’s new ruling party in a better light in the International community. We still do not know how much it cost, and we still did not know about the results.

peter litvanyi
Guest

Dear Paul,
re “Whist surfing re Hungarian unemployment, I came up with this site:…”
I totally agree with every word you wrote. All this is so clear.I would say Orban Viktor is the last chain of the link. Thanks.
Sincerely:
Peter Litvanyi

peter litvanyi
Guest

correction, last link in the chain rather; I really need to run now.

Birkin Bag Hermes
Guest

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What the Hungarian economy needs is a lowering of taxes which would result in greater purchasing power.

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