Cost of living in Hungary, tight government, tight belts

Cost of living in Hungary, tight government, tight belts
By Euronews
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This Sunday, voters are electing a new parliament in Hungary by a new set of rules. The right-wing Fidesz party currently in power could keep its two-thirds majority of seats or continue with a simple majority. Then again, could the divided left wing opposition take the helm? Up until election day, euronews looks at the main aspects of campaigning.

In this report, we go into economic concerns. Four years ago, after a sweeping electoral victory, Fidesz started to rule the country by unorthodox means. What’s come out of the government’s controversial economic policy, what impact have tax and social welfare reform had? Who has benefited from reductions in energy bills and housing loan opportunities? First, a report from our correspondent, then insight from a business journalist.

Smacked hard by the global financial crisis five years ago, Hungary’s government did not impose austerity plans. Instead,young parents Johanna and Gabor today enjoy tax breaks, because they have children, and a 30 percent cut in energy prices.

Yet there’s nothing left over from their modest salaries by the end of the month.

Gabor said: “Only I have a full time job, and, since now we are four, our income has to cover more.”

What eats the most is the 35-year mortgage. Like many others, they got it in Swiss francs, before the crisis, when the franc was weak and loans were cheap. As that changed, today they’re paying double. So: no going out, no new clothes.

Johanna said: “The monthly mortgage comes to 300 euros [equivalent to the minimum wage], which we otherwise might be spending on personal purchases. It’s not just rough on us; considering all the others who don’t buy things, domestic consumption is down, weakening the economy.”

Financial stability got a boost, however, with a one third reduction in foreign currency borrowing by individuals.

An extraordinary measure by the government ordered banks — for a limited time — to let people settle the whole mortgage in one go, at the original interest rate; that was great for the minority with the cash on hand. The majority is a completely different picture.

Official European statistics place four out of Hungary’s seven regions among the 20 poorest of Europe. Northern Hungary has the country’s lowest standard of living.

Example: Alsógagy, population 120. Out of those, only ten people have jobs. A few villagers do community work. They have to in return for keeping their unemployment benefits going after an initial three months. Istvan is one such case, but, with the 170 euros he gets, he simply can’t support his family.

Istvan said: “I would need 230… 260 euros; I just can’t provide enough on the current benefit.”

Alsógagy has 15 communal workers.

All the young have already left.

The mayor explained the biggest problems: a lack of infrastructure; no public transport, no factories, and agriculture dominated by the ‘big fish’.

Hungary needs big fish — like the car industry, a major employer. Thanks to its contribution to national income, the Hungarian economy managed to grow in all but one of the last four years.

Spending discipline has kept the budget deficit within three percent since 2011.

In one bold sweep, the government nationalised 10 billion euros in private pension funds to reduce the public debt. It still is relatively high: 78 percent of GDP.


Our Hungarian election coverage coordinator Gabor Kovacs spoke by video link with business journalist Andras Mihalovits in Budapest.

Gabor Kovacs, euronews: “Andras, can you sum up what the most important aims of this government were when they took office four years ago?”

Andras Mihalovits: “First and foremost, they wanted to reduce public debt. Then came economic growth, and reducing unemployment, which is high in Hungary.”

euronews: “When the government took office they promised to create one million jobs in ten years. Four years have passed; what are the results so far?”

Mihalovits: “Unfortunately, very few, and Hungarians are unhappy with this. Many young people — more than 300,000 have gone abroad to find a job, and a huge number of the unemployed are registered as ‘communal workers’ — working for municipalities for a tiny salary. Statistics look good because of those two things, but keeping the promise of one million jobs still far in the future.”


euronews: “Investments are the key for the Hungarian economy and boosting the number of jobs. Has the government attracted foreign investment?”

Mihalovits: “The rate of investment in Hungary is very low. Small businesses are not investing because they are restrained by taxes and paying off loans. Big multinational companies aren’t investing; they complain about legal uncertainty — notably that, in the last four years, overnight the government slapped extra taxes on entire sectors. They didn’t like that, and in the last couple of years the level of investment has fallen to near zero.”

euronews: “Where does the country stand compared to the others in the region?”

Mihalovits: “Well, Hungarians were very proud a couple of years ago that they were the regional leader — for attracting investments, for low unemployment and for economic growth. This, unfortunately, now lies in the past, and Hungary is increasingly falling behind. Studying the investment figures, we see that this could even be chronic.”

Hungary Elections 2014

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