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Days of welfare state are over

The welfare state is living its final days in Hungary, people will have to place greater emphasis in future on self sufficiency and the various forms of savings, National Bank of Hungary (MNB) vice president Julia Király said at a conference on the future of the pension system in Budapest on Wednesday.

Király said Hungary has been operating a welfare system for based on government expenditures that are too high compared with the country's level of development. Under the current plans, the level of government expenditures will be cut substantially by 2012, partly as a consequence of the crisis.

The MNB vice president said the level of employment must be increased in the country in order to secure the sustainability of the pension system.

Considering the population's financial position, Király termed indebtedness a major problem. Servicing loans make up 14% of personal income on average in the case of households in Hungary, while this figure is 11% in the euro zone.

Speaking for the major opposition party Fidesz, former finance minister Mihály Varga criticized the government's plan to convert private pension funds into private insurers, and said the next government will correct this as one of its first moves.

Varga also said expanding employment is a key issue for the sustainability of the pension system, as is the country's demographic situation and outlook. This is a problem for all European countries. Researchers expect population numbers in western European countries to grow by 2060, primarily through immigration, while the population of the new EU member states of the CEE region will decline, Varga said. He noted that already the retiring of people born in the baby boom of the early fifties will pose a great challenge to the pension system, Varga said.

Among the main tasks, Varga listed increasing employment, application of employment incentives on a wide scale, cutting taxes to a perceptible extent, improving the predictability of taxation and expanding the family support system.

Finance Minister Péter Oszkó said the crisis-management government has aimed to favor the active population and those willing to exercise self-provision and to broaden these groups.

Oszkó said the balance between the active and inactive groups of the population has been tipped since the system change in Hungary, as a result of which a far narrower active group has to sustain a wider inactive group. Action plans and election promises also tried to favor the inactive to a greater extent.

The government has tried to change this and encourage activity through its measures, the finance minister emphasized, noting that government's moves to favor employment and the active population have been severely restricted by the fact that both the government and the population are seriously indebted.

The government has been striving to take the austerity measures in a way that they will not significantly undermine potential growth, activity and employment.

Major steps have been taken to restructure the pension system, the government has withdrawn the 13th-month pension, raised the retirement age and reduced early retirement, the finance minister said. These moves have set the pension system on a stable, sustainable path, keeping pension expenditures under 10% of the GDP by 2060. (MTI-ECONEWS)