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Hungarian report
by Euro Reporter
2012-07-13 10:23:33
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Hungary’s ‘outlandish’ policies threaten IMF deal

Hungarian government measures to address the country’s deteriorating economy and the Cabinet’s slumping popularity result in a “diminishing” likelihood of an international bailout agreement, Eurasia Group said.  “Despite the imminent start of talks, the government remains comfortable pushing an outlandish and unconventional policy agenda, contradicting both the substance and the spirit of the negotiations they are about to enter into,” Mujtaba Rahman, analyst at Eurasia Group in London said in an e-mailed note today.

Hungary will start aid talks with the International Monetary Fund and the European Union on July 17 after legislators in Budapest amended a central-bank law that blocked negotiations for seven months. Prime Minister Viktor Orban asked for aid in November as the country’s credit grade was cut to junk and the forint fell to a record against the euro.  The extension of a proposed financial-transaction tax to the central bank and plans to cut labour-related levies in 2013, which threaten the budget outlook, “exacerbate the ongoing trust deficit that exists between the government and its potential creditors,” Rahman wrote.

The central bank being subjected to the transaction tax renewed the clash between the government and the Magyar Nemzeti Bank. The plan is “illegal” because it infringes on central- bank independence and the tax only generates temporary revenue for the budget, Governor Andras Simor said on July 2.  The forint has advanced 9.3 percent against the euro this year on optimism Hungary will sign a deal, recovering from a 15 percent slump in the second half of 2011, the biggest among global currencies. International lenders will probably request changes including in the financial-transaction tax, the 2013 budget, property and wealth levies, as well as the personal income taxes, Rahman said. Orban’s ability to meet the conditions of an agreement will be “severely constrained” by the 2014 elections as the government’s popularity falls, according to the note.


Hungary must strive to better understand population shrinkage

The growth of ethnic Hungarian communities beyond the borders is an important goal, and any problems that prevent such growth must be investigated, the state secretary in charge of the policy of the nation said on Wednesday. The Hungarian population in the Carpathian Basin is on the wane, and even though the main reasons are understood – such as migration, assimilation and the low number of births – an assessment should be made of other causes, Zsuzsanna Repas of the Ministry of Public Administration and Justice told a conference marking World Population Day. Policy proposals are also needed in order to reverse the negative trend, she added.

Head of the Central Statistical Office (KSH) Gabriella Vukovich said the problem could best be handled by improved coordination of family and work, but this required a change in social attitudes. She noted that the population of Hungary has been decreasing since 1981, in a long-lasting trend unique in the world.

KSH Demography Research Institute senior advisor Pal Peter Toth said a demography policy based on forming a consensus between political parties and spanning over several government terms is required, coupled with a family support policy that serves this aim. He suggested that good practices in other European countries should be taken into consideration. The largest ethnic Hungarian communities among the neighbouring countries in Romania dropped from 1.6 million to 1.2 million while in Slovakia it fell from 0.5 million to 450,000 in ten years.


Install more wind power – create more jobs

EWEA (the European Wind Energy Association) held its "4th Annual Wind Energy in Hungary policy workshop" in cooperation with the Hungarian Wind Industry Association (MSZIT) and the Hungarian Wind Energy Association. Dr Benedek Jávor (Chairman of the Parliament Sustainable Development Committee) gave a key note speech after which more than one hundred industry professionals took part in sessions dealing with Hungary's challenging regulatory environment and exchanged information on the technical conditions needed for a properly functioning market for wind power. Dr Jávor stressed the importance of a careful re-consideration of the current 2020-2030 energy policy's emphasis on increasing the role of nuclear and coal as "a greener energy mix can be achieved at lower costs and risks."

Speaking in the opening session Ruta Baltause, the European Commission representative, reiterated the necessity for Hungary to meet its EU commitments on the development of renewable.
In spite of its relatively modest target, Hungary is already struggling to keep pace with its own objectives. According to its National Renewable Energy Action Plan Hungary should have reached 330 Megawatt (MW) of renewable energy installed by the end of 2011, but the latest progress report notes that only 293 MW are installed. This represents more than 44 million Euros in lost investment for Hungary. This gap is all the more regrettable as the wind industry is not only resilient in the crisis, but it also has the potential of creating numerous quality jobs. Between 2007 and 2010 the EU sector grew 33% while the EU's GDP was in decline. In 2010 the wind industry employed 238 000 people. EWEA projects that this figure will reach 520 000 in 2020 and the contribution of the wind energy sector to GDP is set to double over the next decade.

With over 300 employees, family-owned Lakics Ltd demonstrated that in an open market the wind industry can generate a significant number of jobs, even in a country with relatively low wind penetration. Speaking in the closing debate, Pierre Tardieu, Regulatory Affairs Advisor for EWEA, concluded: "In light of the potential job creation by the industry, Hungarian decision-makers should see the implementation of the EU renewable Directive as a chance rather than a threat in facing the current economic downturn. A stable and ambitious legal framework designed to meet these objectives would go a long way in delivering the potential of the wind industry to the Hungarian economy.”

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