Hungary should keep residency bonds, says Varga

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Although Hungary’s Cabinet Chief János Lázár hinted last week that Hungary could stop selling residency bonds, Minister for National Economy Mihály Varga said the system should not be scrapped but re-evaluated, according to Hungarian news agency MTI.

Speaking at an awards ceremony for businesses, Varga stressed that the residency bond is a government debt instrument which needs to be reassessed due to changes in the circumstances surrounding the financing of Hungaryʼs state debt, but that it should not be scrapped. 

“We believe that if we can draw in cheaper financing resources, and issue bonds with lower interest, then we must change the conditions of the [residency] bond,” the news agency cited Varga as saying. “If we donʼt use it in its current form in the coming period, itʼs worthwhile keeping it in our armory, to keep it among those instruments that could play a role in financing,” the minister added.

Just a day before the minister’s speech, Lázár, who is in a ministerial position himself, said during his regular weekly press conference that the Hungarian government was planning to stop selling residency bonds, according to reports, as the program is no longer needed in the wake of the countryʼs upgrades by rating agencies. Lázár said the investment type would be phased out of the country by 2021 if sales of the bonds halt by the end of this year, though already sold bonds will be left intact, according to reports.

Dialogue on the sale of residency bonds started after radical nationalist party Jobbik gave an ultimatum to governing party Fidesz, saying that it would only support the latterʼs amendment to Hungaryʼs Fundamental Law (Constitution) - which would enshrine in law the governmentʼs rejection of the EU’s planned refugee resettlement quotas - if the residency bond system is abolished. Jobbik leader Gábor Vona argued in Parliament that if the government is closing Hungaryʼs borders to “poor migrants,” it should not let “rich migrants” enter the country either.

At the same time, Lázár said last Thursday that the government had begun re-evaluating the program half a year ago, insisting that any decision to abolish the bonds would be unrelated to the Jobbik ultimatum, online news portal index.hu reported.

Prime Minister Viktor Orbán said in a radio interview last Friday that the government will submit a bill to Parliament by yearʼs end based on a re-evaluation of the countryʼs financing in light of the recent rating upgrades, MTI recalled. The issue of residency bonds will be “among many other questions” addressed in the bill, he added, according to MTI.

The Hungarian government has been selling residency bonds for non-EU citizens, granting them “a permanent residence card in one step,” as well as the buyer’s “dependent children” and “dependent parents,” with no Hungarian address requirement, according to the programʼs website residency-bond.eu, which offers information for those interested in investing in the program.

“Hungarian Residency Bond Program is getting popular: number of residence permits issued increases constantly. While only 430 bonds were sold by the end of 2013, more than 2,210 bonds were sold by the end of 2014,” the website says. The vast majority of those purchasing the bonds so far have been Chinese citizens, index.hu reported last week.

Index.hu recalled that the system of residency bonds, which was established and launched by Antal Rogán, head of the Prime Ministerʼs Cabinet Office, has received widespread criticism for the involvement of offshore companies and opaque constructions, with numerous questions over who ultimately benefits from the bond sales - charges which the governing party Fidesz has rejected.

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