Hungarian austerity measures - the Orbán-package

Hungarian austerity measures - the Orbán-package Savings of HUF 900 billion ($4.6 billion) should be attained by 2013 as Hungary’s government promised to “attack” the country’s high public debt by cutting welfare benefits, disability pensions, public transport and pharmaceutical subsidies, while revenues would be boosted through measures such as a new electronic road toll. The government said the moves would drive down public debt to 65-70% of the GDP by the end of 2014 from about 80% now. But investors said the plan was a big disappointment, short of specifics, and there was also disappointment that a proposed cut of the corporate tax would be postponed, while the controversial financial sector levy will be retained at full rate for three years instead of two. Budapest’s main stock index fell by 3 per cent, and the forint weakened by about 1 percentage point against the euro. Markets also reacted negatively to news that a planned cut in the corporate income tax rate from 19% to 10% in 2013 and 2014 would be delayed for all but the smallest companies. The government said it would also retain a controversial levy on the financial sector for an additional year, meaning it will not be phased out before the end of 2012. Hungary's government collected over HUF 180 billion ($ 918.4 million) from the new bank tax last year, and similar amounts are now earmarked for 2011 and 2012. "This is a disappointment," Banking Association chairman Tamás Erdei told Reuters. "We had a common understanding that the bank tax would be aligned with the European Union's bank tax from 2012. There were no negotiations between the government and us before they announced this measure."

Last Updated on Friday, 30 August 2013 09:11