Page 60 - AEI Insights 2018 Vol 4 Issue 1

AEI Insights, Vol 4, Issue 1, 2018

Second, the Government seeks to limit utility prices in order to ensure that further disposable
income is available, especially to families, which can be reinvested through consumption.
Utility prices in Hungary have risen sharply and were eating up a significant portion of a
family’s total income, inflicting significant burden on lower income households. Consider the
following example: A single person household doing administrative work could earn 150 000
Hungarian Forint (HUF), which is significantly above the minimum wage. The heating bill
alone living in the capital could mount up to at least 20 to 30 000 HUF during the winter
(October/November to March/April depending on weather). Paying for utilities, rent or loan
repayment for a residence and fuel could leave families with little to no funds for discretionary
spending. The Government sought to tackle this issue with its ‘rezsicsökkentés’ programme
(translates to utility price reduction). The method by which the programme achieves its goal is
by mandating that the utility bill for a yearly period cannot be more than 93.5 per cent (in the
case of natural gas) of the bill for the same usage during the previous yearly period. (Jogtár,
2013) The specific reduction is mandated by law each year. While the method employed might
look needlessly complex, it was adopted with a clear goal: to prevent utility providers from
using any technicality to pass on the costs to consumers. Furthermore, the Government has
been particularly hostile to foreign energy providers as it perceives them to syphon funds out
of the country: High utility bills not only tie up financial resources, negatively impacting
consumption, but much of the profits are repatriated by foreign utility providers, benefiting
their home countries rather than Hungary. It is hardly surprising that a nationalist party such as
FIDESZ finds such a state of affairs to be egregious.

Third, the Government considers increasing employment to be crucial, instead of relying on
welfare spending, especially as many people have lost their jobs during the economic crisis.
Once again, the Government adopted an aggressive strategy of significantly increasing the
country’s public works programme to make a dent in unemployment. From 2013 to 2016 alone
the number of people employed by the public works program grew from 115 thousand to 180
thousand, (Központi Statisztikai Hivatal / Central Agency for Government Statistics) and the
program in general has ballooned significantly compared to its pre-economic crisis size. People
enrolled in the public works programme primarily do menial labour seeking to benefit their
community, often part-time, and usually for below the minimum wage, e.g. collecting rubbish,
repairing public spaces, etc. The unemployment system has been redefined to push people
towards public works rather than seeking unemployment benefits.

The EU has been critical of most of these measures. However, looking at these criticism one
cannot observe the malice perceived by the government. The European Union at its core is
based on a simple principle: Europe is strongest when states cooperate. A fractured Europe
cannot offer effective solutions to common concerns and a shared rule-setting is necessary to
protect the interests of European citizens. In the absence of common institutions much of
Europe would be preoccupied with competing with each other, losing much of the continent’s
potential for global influence. Unsurprisingly, Brussels has not been receptive to the
Government’s rhetoric of following its ‘own way’ in opposition to common EU policies. The
EU has formulated a number of criticisms towards the Hungarian policies discussed above.
In the economic realm the EU is not primarily opposed to the spirit of the welfare policies as
the government would like one to believe, but rather is critical of their execution, voicing fears
that they might exert a disruptive influence on the common European economy. A central
component of EU economic policy is to avoid another Greece, i.e. the financial meltdown of a
member-state due to unsustainable economic policies. In regards to the expansion of the public
works programme, the EU is primarily critical of its potential to distort the Hungarian labour
market. While the government heralds the programme as a solution to high unemployment, the

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