Govt to finalize 2012 budget draft today

The government will finalize the 2012 budget draft at a cabinet meeting on Wednesday, prime minister's spokesman Péter Szijjártó said at a press conference on Tuesday, after Prime Minister Viktor Orbán and National Economy Minister György Matolcsy presented the draft to the parliamentary group of governing alliance Fidesz-KDNP.

The budget aims to complete the establishment of the proportional tax system, to end any chances for tax evasion, to put the pension and health funds "on their feet" and to bring at least 200,000 of some 595,000 Hungarians on the dole back to work through the Start program, Szijjártó said. People who join the Start program will earn a net monthly HUF 48,000 instead of getting HUF 28,500 in social support, he added.

The fiscal deficit will stay well under 3pc of GDP in 2012 and Hungary's state debt will continue to fall, he said.

The government aims to remove Hungary as far as possible from the effects of the eurozone debt crisis next year by reducing the country's vulnerability and financial exposure, and by taking new steps in the direction of stability, he added.

The tax system is expected to be simplified by eliminating tax preferences as well as the practice of adding half of social contributions to the personal income tax base for monthly incomes up to HUF 202,000, Szijjártó said. The same will happen for higher incomes, but in two steps, leaving resources in the system that will be used to compensate those who earn less than HUF 202,000, he added.

The national economy minister will make a proposal on compensation for companies, and talks are underway with business associations, he said. The state is expected to carry part of the burden of a wage increase over a certain degree, he added.

More new tax increases are not expected, Szijjártó said, answering a question.

The government will take steps to correct the chaos, disorder and corruption in the health fund, he said, adding that this would take more than just a single step.

Szijjártó said that to stabilize the pension system, the pension fund would pay only pensions and pension would be paid only from the pension fund. The government will safeguard the value of pensions, he added.

The parliamentary group of governing alliance Fidesz-KDNP were in agreement on fiscal goals as well as goals for the country next year and ensured their support for the main aims of the budget, Szijjártó said. Further details of the budget draft were not discussed at the meeting as these will be debated in parliament, he added.

Asked whether the government had drawn up three budget drafts, assuming HUF/EUR exchange rates of 260, 280 and 300, Szijjártó said the government had to be sufficiently flexible to respond to changes in the international environment. "We can't bury our heads in the sand" like the last government, he added.

Asked whether the possible elimination of the Simplified Business Tax (eva) and the Simplified Public Contribution (ekho) had come up, Szijjártó said he did not know of any such decision.

Fidesz parliamentary group leader János Lázár did not participate at the press conference, but remained at the meeting to discuss a restructuring of compensation for MPs, Szijjártó said.