Weak Hungarian economy seriously hit by the crisis

In Hun­gary, the focus of cur­rent pub­lic dis­cours­es is the country’s crit­i­cal sit­u­a­tion due to eco­nom­ic reces­sion. In fact, Hun­gary is extreme­ly vul­ner­a­ble because the econ­o­my has already been in bad shape for the past cou­ple of years. Con­trary to all oth­er new mem­ber states, Hun­gar­i­an growth, real con­ver­gence and gross fixed cap­i­tal for­ma­tion has been slug­gish since acces­sion; unem­ploy­ment and infla­tion as well as inter­est rates were ris­ing, and pub­lic debts have been increas­ing (diverg­ing from and not con­verg­ing to the Maas­tricht lim­it of 60 per­cent of GDP). In par­al­lel, a huge pub­lic deficit was accu­mu­lat­ed in 2006 (above 9 per­cent) which the gov­ern­ment start­ed to cut back via restric­tions on the expen­di­ture side but with­out any major reform on the rev­enue side. The restric­tions and now the effects of the cri­sis are seri­ous­ly felt by the major­i­ty of the pop­u­la­tion. Lay­offs are report­ed every day, and the great num­ber of cit­i­zens who are indebt­ed in for­eign cur­ren­cies find them­selves now in huge trou­ble, as the exchange rate of the Euro sky­rock­et­ed from 230 Hun­gar­i­an Forint ( in August 2008) to well above 300 in Feb­ru­ary 2009.

The prob­lem is aggra­vat­ed by the fact that Hun­gary has a minor­i­ty gov­ern­ment which already lost a lot of its cred­i­bil­i­ty and legit­i­ma­cy; more­over, it is unable to find ways out of the cri­sis. The gov­ern­ment took up huge (total of twen­ty bil­lion Euros) con­cert­ed loans from the Inter­na­tion­al Mon­e­tary Fund, the World Bank and the Euro­pean Cen­tral Bank which is an addi­tion­al bur­den on the coun­try – with­out any clear strat­e­gy how to spend the mon­ey (worth one fifth of Hun­gar­i­an GDP). The law on the bud­get for 2009 already col­lapsed in the begin­ning of Jan­u­ary and – although tech­ni­cal­ly it remained in force – since then the key macro­eco­nom­ic fig­ures nec­es­sary for a poten­tial new bud­get are revised (and dete­ri­o­rat­ing) near­ly every day. The Prime Min­is­ter is try­ing to tack­le the sit­u­a­tion via a series of con­sul­ta­tions with the oppo­si­tion, the trade unions, the for­mer and present Nation­al Bank pres­i­dents, etc. Although such con­sul­ta­tions strength­en democ­ra­cy, these moves actu­al­ly reflect the lack of a clear vision of how to mit­i­gate the painful effects of the cri­sis and how to find ways lead­ing back to bal­anced growth, new jobs and bet­ter social cohesion.