Index – Economy – Mihály Varga is polished in Brussels before falling into the vaults

The Minister of Finance has been given a clear mission: he must ensure that spending reviews affecting the budget are coordinated and implemented. Therefore, you must create an organizational unit within your ministry organization that is responsible for coordinating the expenditure review. This measure affects four years: at least 10% of government expenditures for 2021 and last year’s final accounts; In this year’s budget, expenditures on health care, family support, housing, and related tax benefits; Next year’s budget will examine spending on education and public investment.

Details here!

the Hungarian newspaper According to the Expenditure Review, the purpose of the Expenditure Review is a detailed examination of the adequacy of public spending, “with particular regard to its positive social impact, its contribution to growth, its impact on the budget balance and the medium-term sustainability of expenditures.” The Finance Ministry’s Working Group should focus on two areas overall within this year’s budget:

1. Overview of the structure of public health expenditures and their alignment with policy objectives, and formulation of proposals for more efficient resource allocation. The goal is to achieve savings of at least 3 percent and reserves for efficiency gains in each area of ​​expenditure.
2. Review expenditures related to family and housing allowances, the structure of relevant tax benefits and their alignment with policy objectives, and formulate proposals for more efficient resource allocation. The aim is to achieve savings of at least 3 per cent in individual expenditure sub-areas and, in connection with this, the efficiency increase reserve.

Mihály Varga must report spending reviews quarterly.

Brussels and beyond

After the announcement, the Finance Ministry denied in a statement that it was preparing for cuts. they say,

Contrary to the claims of left-wing news portals, it is not the government, but only Brussels and the left that want austerity. Public spending is reviewed at the request of Brussels.

The ministry also notes that the government is setting up a public expenditure review working group at the request of the committee and following its country-specific recommendations: “In May, Hungary called for further strengthening of the budget balance and requested energy support measures in place by the end of 2023. We strongly reject that Brussels You want austerity and you want to cancel public spending cuts.”

The background may be that, according to the Brussels decision taken in March 2020, the finance ministers of the member states decided to suspend the EU budget rules due to the pandemic. Thus, the member countries do not have to restrain themselves so that the budget deficit remains below 3 percent of GDP.

According to the news, the excessive deficit measure will be repeated next year based on the Brussels regulation. But Mihaly Varga can’t deliver that. After all, by doing so, they will admit that they cannot meet the deficit target of 2.9 percent of GDP in 2024, introduced just days ago, if they do not intervene. The matter remained the same in their statement, he said, “Public spending will be reviewed at the request of Brussels.” Furthermore, it is also important to add: Prior years must be reviewed because base years modify items.

Previously, it was a world economy It also mentioned that radical amendments may be necessary in the budgets of the countries of the region if Brussels continues to insist on returning to standards, “and this may be a comprehensive test for the nervous system of the finance ministers of the countries of the region.” According to their compilation, “regional budgets are creaking, and deficits can disappear almost everywhere.”

According to the analysts interviewed, it will be difficult to maintain the deficit target next year without changes:

Moreover, according to the experts who spoke to the index, there may still be serious questions raised during the sales tax general revenue budget. “It is difficult to maintain a budget without revision,” they concluded. According to Peter Ferrofax, senior analyst at ING, it is certainly welcome that the government is thinking ahead and doing something in terms of the spending side of the budget.

No details yet

According to Zoltán Árokszállási, Senior Analyst at Equilor Befektetési Zrt. The government’s decision is generally welcomed. At the same time, since this is not its purpose, it does not imply an immediate improvement in the balance of the budget, on the other hand, the specific measures,

In the decision, the government also stipulates a savings level (three percent) for health care, housing and family allowances, and also stipulates that experts from other government agencies (such as ÁSZ, the Central Bank) as well as outside experts should be invited to the review body.

However, it is not yet possible to know exactly what measures will ultimately result from the decision, even years later. All we know is that, depending on the area of ​​expenditure, a review should be prepared by the end of this year or by the end of next year in which the exact extent of efficiency improvement and savings can be achieved in the areas listed in the Hungarian Gazette (health care, housing subsidies, family subsidies, state investments , education).

The leading analyst also added: The decision refers specifically to Hungary’s RRF (Recovery and Resilience Instrument) plan submitted and approved by the EU, in which Hungary has undertaken budgetary reforms. With this decision, the Hungarian government can present to the federation a specific timetable for its implementation, which is necessary to implement the above reforms. At the same time, this decision does not deal with rule of law disputes with the committee, so from this point of view (which would be really important from the point of view of access to funds) it does not represent progress.

(Cover photo: Mihaly Varga on March 5, 2023. Photo: Kata Nemeth/Index)