Hungary’s candidate for prime minister Gordon Bajnai's policy program contains several cost-cutting measures in addition to those already announced, such as the elimination of annual bonuses for public sector workers as well as for pensioners, and the reduction of sick-leave to 60% of wages.
The program outlines expenditure reductions not only in 2010, but also in 2009.
The program would freeze nominal public sector wages for two years, and a wage supplement to be paid in the second half of 2009 would be reconsidered. Instead of an annual bonus, public sector workers would receive an “incentive supplement” linked to expected GDP growth and whether or not the deficit target is met.
The program would cut local council support while at the same time boosting efficiency.
The retirement age would be raised to 65 years as early as possible, by increments of six months every year. A pension supplement for 2009 would be paid only on January 1, 2010, and the supplement for 2010 would be scrapped.
Pensioners' annual bonus, equivalent to a full month's pension, would be eliminated from 2010, though it would be replaced by a supplement pending on GDP growth and meeting the deficit target. The same benchmarks would also be used for indexing pensions in a new way, preserving their value in real terms.
Family subsidies would be frozen for a temporary two years and the maximum age of children eligible for the subsidies would be reduced from 23 years to 20 years. Child-leave support would be reduced to a maximum of two years after a transition period.
Home purchase subsidies would be suspended from July 1. Gas and district heating subsidies would be reduced in 2009 and gradually eliminated in 2010. Energy efficiency subsidies would remain in place.
Subsidies for public transportation and the media would be reduced.
Co-payments on EU funding for farmers would be reduced.
It is noted in the document that the program does not contain all measures planned by the new crisis management government, but only those that are unavoidable painful measures and the require the soonest approval by Parliament or the government.
The new government aims to guard as many Hungarian jobs as possible, the document says.
The document acknowledges that GDP could fall more than the 3.5% projection, which could cause the general government deficit to grow compared to the measures announced by the government in February.
The document names three challenges for the country: creating financial stability, keeping the budget deficit in hand and making the adoption of the euro a mid-term goal. Hungary must restructure the operation of the state to lower expenditures and taxes and reduce the burden for employers and employees. It must also provide "financial first aid" for Hungarian economic players and stimulate the economy, first of all by helping with EU-supported investments.
With the approval of the measures, the confidence among Hungary's foreign financers should improve and the forint's exchange rate should stabilize in a short period. In the mid-term, Hungary's high real interest rate should also fall.
The expenditure reduction measures must be of such a degree that, together with other economic policy measures, it will ensure the balance targets in the convergence program can be met.
Governing socialist (MSzP) MPs have until Sunday to show their support for the program by signing the document and returning it to Bajnai. Liberal (SzDSz) MPs will decide whether or not to support the program at a meeting on Monday. (MTI – Econews)