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Editorial: Congratulations Fidesz, now choose well

History

The following editorial appears in the October 17-30 print edition of the Budapest Business Journal.

Prime Minister Viktor Orbán has been enjoying a well-deserved celebration of the October 12 municipal elections, in which Hungarians overwhelmingly chose members of his ruling Fidesz party. Now that the noise of campaigning is out of the way, Orbán says it is time to make the tough choices that will guarantee Hungary’s future prosperity. It is worth asking whether his party’s tough choices will be the right ones for the country.

In their campaigning before the elections, Orbán and members of his party were touting their economic success, a bit prematurely it would seem. Growing automotive production and exports had been pumping up Hungary’s GDP this year, but both fell flat recently as a general slowdown in Europe seems to have deflated the demand for cars over the summer. Hungary is getting a (thus far) small taste of the lesson that the Czech Republic learned rather painfully during the financial crisis a few years back: Car factories hire, but they can also lay off.

Nonetheless, the government seems convinced it knows how to grow an economy, and it says it will do this through the annual budget, which was delayed until after the elections. We are now expecting to see the government budget in its final form some time around October 20.

There have been hints in the media about what this budget will contain, including vocational training, a tax cap for car makers, something vague to do with banks and cuts in already bare-bones social spending.

Rather than try to guess what the government will finally decide to do, we will offer some helpful suggestions, on the off chance that our country’s leaders have run out of ideas and are reading this column.

We would like to see:

• A simplified tax structure. Hungary has the highest VAT in Europe and a bizarre array of special sectoral taxes that are off-putting to anyone considering doing business here. Making taxes transparent and payable is an obvious fix that no leadership in Hungary has had the stomach to pull off.

• Support for good education. Orbán has hinted at a new program to have students undertake on-the-job vocational training as soon as they get past grammar school. Trades are useful, especially for ensuring that everyone has basic employment, but Hungary has also been famous for its excellent higher education. These days, universities seem to be receiving less support and suffering more unnecessary government meddling. As a result, many of the best and brightest are opting for schooling abroad.

• An end to renationalization. The country has already blown through more than 85% of its 2014 budget, which means we need to tighten our belt. One way to do this is to ask whether the government really needs to get into private enterprise by buying companies, including utilities. Sure, the government loves to be able to say: “Look, we’re keeping utility prices down for the average worker!” But are we not supposed to notice that the average worker has to pay more taxes to support the utility that lost money because it sold fuel at below-market rates?

• Leave the banks alone. Bankers are richer than most of their customers, and their free-spending ways helped bring on the financial collapse of 2008, which makes them a fun target for populist anger. They also provide the loans and credit that a healthy economy needs to survive. Special taxes and borrowers’ relief can provide some quick cash for the government and consumers, but if it means driving out banks, the move is shortsighted.

These are some of the tough choices we would encourage. We’ll be watching to find out what choices our leaders make. 

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