Industrialists say austerity package will help only temporarily

Banking

The government's New Balance package of austerity measures will correct Hungary's budget balance only temporarily; it is expected to worsen the country's competitiveness and therefore the government will not be able to withdraw the austerity measures after just one and a half to two years, according to an assessment by the Hungarian Association of Industrialists (MGyOSz) published on Monday.

The MGyOSz accepts the need to raise additional budget revenues in the given fiscal situation. It argues, however, that the government has taken steps to raise budget revenue, without reducing budget expenditures through structural changes. This means that budget expenditures will continue to increase more than revenues as a percentage of GDP after just a temporary pause. The government fails in its deficit reduction program to address the continuing losses of some big state-owned companies, to improve the transparency of public expenditures, to crack down on corruption and to rethink the tasks of government, the association said. The measures will cut growth, and if the economy slips into a downward spiral, there may not be enough money to enliven growth in one-and-half or two years time, needed for the required reforms or to cover the state's co-financing requirement for EU funding. MGYOSZ says elements in the government's program, such as increased payroll taxes, will hurt businesses' competitiveness, reduce employment and increase activity in the grey and black economies. The program will make the tax system more complicated and increase administration fees. Tax changes introduced mid-year will create instability and alarm Hungarian as well as foreign investors.

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