Speaking in front of Parliament’s Economic Committee, Economy Minister György Matolcsy said the freezing of EU Cohesion Fund commitments for Hungary (which decision has recently been lifted) was the consequence of what the previous administration did between 2002 and 2010 and not the 2010-12 period.
With regard to the disappointing Q1 GDP numbers, the minister noted that no far-reaching conclusions should be drawn from the data. "The first half will probably be minus too," he projected. "Inflation is indeed high in Hungary today. But you should take a look at the structure of inflation: obviously the exchange rate, fuel and agriculture had an impact, and VAT too, but that was a one-off effect," he explained.
Responding to the opposition’s criticism that the cabinet failed at reducing public debt, Matolcsy said the country’s forint debt was cut by HUF 1,400 billion thanks to private pension fund assets (which were de facto nationalized - editor’s note). He reiterated that the debt-to-GDP ratio will be lowered from around 80% to 78% this year and further to 76% in 2013, while the debt of eurozone member states will climb to 90%.
The minister admitted that the government wanted a larger debt reduction but it did not succeed because "we were under financial attack."
Later he elaborated, explaining that Hungary was "target of a preconceived financial attack."
"Between October 2011 and the spring of 2012 Hungary was under a financial offensive," Matolcsy said referring to the series of downgrades by credit rating agencies.
Hungary was attacked because several measures of the cabinet hurt interests, e.g. it has drawn HUF 3,000 billion worth of funds into public burden sharing over a four-year period.
"On 17 November at 4 P.M. we thwarted an attack by Standard and Poor’s," Matolcsy cited a statement released by the Economy Ministry on that that last year, in which it announced seeking a new financial assistance programme with the IMF.
"If the credit rating agencies and banks had known in the spring of 2010 how large the actual deficit was, our rating would have been different and the CDS spread would have stopped at a different level. But they shut one of their eyes, some closed both, so that they would not have to see that Hungary is in huge trouble," he explained how he perceived the events in 2010.
"We have put a HUF 3,000 bn burden on the financial sector and other corporate sectors; over four years we will put HUF 3,000 bn worth of public burden sharing into the budget. And we will achieve this not via austerity programmes, but measures that hurt interests," Matolcsy added.
Addressing the new financial transaction tax that is to be introduced next year, the minister said "we are now trying to find a very secure revenue source for the budget. [...] Everybody’s following suit now, although I’m sure every solution will be different."
Matolcsy said he was happy to see debates about the new levy. In the past few days, Mihály Varga, Hungary’s chief aid negotiator and business mogul Gábor Széles both warned about the risks attached to the new tax.