Government and central bank officials including Prime Minister Ferenc Gyurcsány, Finance Minister János Veres and National Bank of Hungary Governor András Simor, delineated measures to be taken in order to reduce Hungary’s risks associated with the current global financial crisis at a national summit held at the Hungarian Academy of Sciences in Budapest on Saturday morning.
Prime Minister Gyurcsány proposed that after steps have been implemented to address the current financial crisis, participants in the summit seek agreement on a timetable for adoption of the euro, on pension reform, on renewal of the social-welfare and local-council systems, just as other countries in Europe have done. The prime minister said that the government would modify the current utilization of EU support in order to strengthen the economy, while prior decisions regarding this funding would be reviewed if necessary. Gyurcsány added that the government hopes that no investments that have already begun will have to be stopped as a result of this review.
Gyurcsány said that the government plans to assist families holding foreign currency-denominated loans by holding loan-repayment installments in check and providing temporary help to those who cannot meet repayment requirement because they have lost their jobs. Gyurcsány noted that this does not mean that the government will assume these debts. The prime minister added that the government also plans to provide assistance to university and college students whose family financial difficulties make it impossible for them to pay tuition. Gyurcsány asked for Hungarians to understand that under the present economic and financial circumstances it is not possible to cut taxes as previously planned.
Prime Minister Gyurcsány said that the days of free banker capitalism are over, while it remains to be seen what will come in place of this system. Gyurcsány said that Hungary has two tasks -- to protect itself and to prepare to build a new world.
Finance Minister János Veres told the summit that depositors’ money is safe in Hungary and that more measures are needed to ensure that the financial requisites for the operations of businesses are met and that frozen financial processes can get moving again. Veres said that a reduction of the deficit is the most important task for creating security in money markets, an undertaking that the government has already begun. The finance minister told the National Interest Coordination Council (OET) on Friday that the government expects Hungary’s budget deficit to be 3.4% of GDP in 2008, compared to an original forecast of 4.0% and subsequently revised forecast of 3.8%.
Veres said that the government forecasts a deficit of 2.9% of GDP in 2009. Veres said that under the present financial circumstances the government is unable to implement its former plan to cut taxes by Ft 160 billion in 2009. The finance minister said that “under the present circumstances it is extremely important that parliamentary parties can come to an agreement on measures can be introduced with the greatest possible degree of support to ensure that over the medium term the country’s budget consistently operates at near balance.”
National Bank of Hungary (MNB) Governor András Simor said during the Saturday national summit that reduced wage increases and more “belt tightening” are necessary in order to increase Hungary’s competitiveness and halt the decline in the number of workplaces. Simor said that investments will have to be made with less external financing, adding that the government has already reduced its financing needs, though may be required to take measures to further moderate this requirement. The central bank governor proposed that the activity of the labor market and work incentives be increased, that the quality of education improved and that restrictions be placed on pensions.
On October 11, Prime Minister Gyurcsány invited government, parliamentary, party, local-council, trade-union and economic officials to attend Saturday’s national summit in order to discuss the measures that Hungary should take to protect itself from the risks associated with the current global financial crisis. (MTI-Econews)