The ultimate goal of economic policy is to create and sustain a society motivated towards economic conditions capable of development and of achieving surplus. The success of economic policy is accomplished in rising living standards and sustainable economic growth. However, permanent growth is based on and arises from financial equilibrium at the level of the central and local governments, companies and households, collectively strengthening one another. It is a feat of economic policy virtuosity if a country is able to maintain financial equilibrium and economic growth simultaneously. In the past few years Hungary has been characterized by such a phenomenal performance.

Social welfare and its economic basis, the achievement of surplus and the proportionate distribution of the income and profit generated according to social needs and in a humane spirit, is the responsibility of the politicians in control of economic policy, “in exchange” for being an important source of political stability. This is because the primary criterion of creating a good economic policy is the formation of income conditions aligned to the needs of residents, citizens and families and the maintenance of a hopeful public sense of peace.

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We, Hungarians, have been caught between East and West several times throughout our history and we could also say that we have had to manoeuvre continuously in this situation for 1200 years. Today, we are witnessing the search for a way forward in the European Union and unprecedented economic success spearheaded by China in the East, while in the past 50 years greater social and economic changes have taken place than in the preceding 5000 years. It is in this transforming world that we must find points of orientation and succeed by relying on Hungarian virtues and using a good compass.

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For four decades after World War II (between 1947 and the end of the 1980s), a Soviet-type planned economy introduced under external pressure prevailed in Hungary. When this line weakened, the then “trendy” neoliberal market economy system gained ground. Although the Hungarian planned economy was characterized by a practice saturated with market elements, intended to increase the financial interests of domestic residents, still control by external fundamentals, deregulation and chopping government functions became the general market practice. However, neither the planned economy modelled on the Soviet system, nor the neoliberal market economy model built on the principles of the Washington Consensus suit the Hungarian conditions. The Crisis of the neoliberal model had become obvious by the end of the 2000s. In contrast to this, however, after 2010, a proactive economy influencing state model came to the forefront during the practice of recovery from the crisis.

Recalling the historical events preceding the changes, following the new international trends after 2007–2008, and the successes achieved using unconventional instruments after the 2010 government change, all give a reason for the existence of Hungarian public finance reforms. With institutional thinking coming to the limelight and by demonstration of the new type of instruments, the author scientifically justifies the unconventional methods used in Hungarian public finances. In the author’s opinion, after the 2007–2008 crisis, all over the world evidences suggest an increasing shift in thinking towards the institutional framework and the need of state influence, control and regulation of the economy. There is a strong demand for addressing informational asymmetries, increasing government control and improving the conditions of competition by means available for governments. This analysis provides a scientific outline of this taxonomy.

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Starting from the macro-economic processes of public finance, this article examines the road to reaching financial stability and sustainable economic growth. It outlines the role played by rule-based budgeting in this process. It introduces the regulatory and institutional solutions and explains how, as a logical consequence of being part of a framework, this service can become a useful aspect of financial policy by implementing the respective regulations of the system and of annual budgetary practice. It reaches the conclusion that “elevating” the major stipulations of the rule-based budget framework and the operational rules of the institution safeguarding the implementation into the Fundamental Law of Hungary in 2001 was unavoidable from the aspect of strengthening fiscal responsibility. The article deals with the linkages of the Stability Act, the major characteristics of the work done by the Fiscal Council and the body’s recommendations made in the last few years. Finally, it illustrates with some data the improvement of fiscal (public finance) stability supported by rule-based budgeting.

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Supreme audit institutions (SAIs) must conduct their audits where and when this is most needed, and where the greatest added value is generated. In line with the principles of good governance, when planning audits, in addition to risk analysis results, SAIs ideally also take social expectations into account. The support of good governance is treated as a priority, moreover, the audit focus of SAIs is also impacted by the focus of public management.

The aim of this study is to present the selection methodology supporting audit planning, as well as the characteristics of risk analysis through international examples. The study first presents the key phases and features of the planning processes of supreme audit institutions, while also pointing out how planning can support good governance. Planning comprises several interrelated phases, including the selection of audited areas, the definition of methodology, the preparation of audit programmes and resource planning. In line with the requirements of international standards, SAIs apply risk analysis in the various phases of planning. This section will also present a new trend, namely social participation.

According to its Strategy adopted by the Hungarian National Assembly, the State Audit Office of Hungary (SAO) considers as its mission to promote the transparent and sound management of public finances with its value creating audits performed on a solid professional basis, and thus to contribute to good governance. The goal of the SAO’s audits is to provide well-founded, professional and objective answers with regard to current economic and social problems, by focusing on appropriate issues at the appropriate time. For this purpose, the SAO renewed its planning system from 2011. The second part of the study presents the planning processes of the State Audit Office, developed on the basis of international standards. In order for the audits of the State Audit Office to support good governance to the greatest possible extent, the various planning phases have a hierarchic structure and rely heavily on information from the organisation’s risk database.

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The change in international standards unfolding from 2007, the independence and transparency criteria applying to supreme audit institutions and the enhanced enforcement of objectivity and professionalism requirements called for the methodological renewal of the State Audit Office. Auditing guidelines and standards define the fundamental principles and norms adhered to by the SAO, which provide the basis for the quality of its audit work and reports. These principles and norms provide the framework that enables the auditors of supreme audit institutions (SAIs) to preserve their independence and the probity of their work. The effects of the renewal apply to and are felt in some form in all audit phases and organisational levels. By developing its new, quality-driven operations and by completing its methodological renewal, the State Audit Office has become a supreme audit institution which, as a professionally indispensable constitutional organisation enjoying the trust of Hungarian citizens, can support the operation of a well-managed state.

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In addition to its primary task of achieving and maintaining price stability, the Magyar Nemzeti Bank (Central Bank of Hungary – MNB) views the reduction of Hungary’s external vulnerability as a key priority. For that reason in the spring of 2014 the central bank introduced the Self-Financing Programme, in the context of which its policy instruments were restructured in order to crowd bank liquidity out of the sterilisation instruments and redirect it to the market of liquid securities. The Programme has met its initial goals as the external vulnerability of Hungary has decreased significantly. Between spring 2014 and December 2016 the Hungarian government repaid EUR 11 billion of its foreign currency debt from forints, the foreign currency ratio of government debt lowered to around 25 per cent from the previous 50 per cent, while gross external debt decreased also significantly. While the primary goal of the Programme was to reduce Hungary’s external vulnerability, the measures were also intended to facilitate the easing of monetary conditions in an unconventional way. The yield-impact of the Self-Financing Programme could be around 75–90 basis points which makes that the Programme supplemented the yield-effect of central bank interest rate cuts with a magnitude of one half of their effect between 2014 and 2016.

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The question of this article is how it was possible for the Hungarian economy to set on a growth trajectory after a W-shaped crisis despite a continuous and severe withdrawal of external resources. The country’s net external debt relative to GDP dropped by nearly 30 percentage points within five years, representing a 5–6 percentage point reduction per year. Why has the economy not suffered an even greater setback as a result of such a rate of “loss” in financing resources? Is growth possible without resources? Obviously not.

This paradox was resolved when sources of financing were re-channelled into the internal supply of sources. The reason is that financing is similar to an electrical network: if connections are weak, power is lost. The country’s excessive openness caused a significant loss of power (as tackled in this study), so the closing and reconnection of the money circuits to the internal resource supply (as amply illustrated in this study) increased the “power supply” to the economy.

Numerous actions taken by the national bank and the government took the country in this direction. From the area of financial regulation, the authors have selected the steps of allowing the moderate weakening of the Hungarian forint, the conversion of Swiss franc loans into forint loans, and the Funding for Growth Scheme (FGS). With regard to government measures, the focus is placed on cutting employment taxes, promoting community work, curbing monopoly profits, and channelling retail savings into financing sovereign debt. All this has set the economy on a trajectory where self-healing mechanisms have had an opportunity to start. Applicable financial funding of the national economy was an important key in answering the question raised in the article. Nevertheless, our other conclusion is that there is much to be done in the financing of corporations in a similar direction of funding.

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The revolution in economic and fiscal policy that has been brought about since 2010 and the revolution in monetary policy implemented since 2013 have provided reasonable grounds for strengthening the regional competitive position of Hungary. The business climate in Hungary has changed for the better, a tendency which was indisputably triggered by the innovative and effective role undertaken by the state. The efficient role of the state was embodied in its concept innovation, meaning a changed viewpoint at the root and branch level of economic policy. From a monetary aspect, the state’s contribution to economic productivity and a monetary policy that builds on unconventional instruments to provide a long-term stimulus to the economy have proven its commitment to economic development using innovative methods in line with an economic policy that establishes a goal structure with new criteria and a new composition. This study focuses on monetary policy and analyses the effects of the successful measures and innovative methods which have enhanced competitiveness and stimulated the economy.

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In all Member States social security systems are used to help secure social goals such as protection against poverty. In the majority of European Union (EU) countries public schemes also play a core role in securing levels of pension benefits and health services that to a reasonable degree allow people to maintain the living standards from their active years into retirement. After 2010 the objective of comprehensive pension reform in Hungary was to return to the two-pillar pension system, based on social solidarity on the one hand and voluntary contributions on the other, which is in place in eighteen EU Member States, from the former Hungarian three-pillar system which is hopelessly threatening the budget balance, and is financially unviable in the short, medium and long run. Having accomplished this transformation, the government is committed to maintaining and supporting voluntary private pension funds parallel to the state-run social security pension pillar. In the second half of 2010, as a result of the world economic crisis and the restriction measures linked to it, a major crisis evolved which required a series of immediate measures from the new Hungarian government formed in that year. How did the new government manage to consolidate the Hungarian pension system? You can find more details in this article.

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Since 2010 Hungary has implemented a major turn in its fiscal policy which was followed by a fundamental change in its monetary policy resulting in a new era concerning the growth of the Hungarian economy. These changes form the basis of an economy being simultaneously characterised by balance and growth. Over the last six years the position of the Hungarian economy has been improving significantly especially concerning the quantitative aspects of competitiveness, the results of which have been recognized by financial and capital markets in addition to international organizations and the major credit-rating agencies. However, a faster and more sustainable convergence requires an improvement concerning the qualitative characteristics of the economic resources as well. For an outbreak from the moderately developed economic status it is essential to speed up the catch-up process with additional reforms focused on competitiveness. Along with the relevant international best practice and the theoretical background, the new volume of the book series of the Magyar Nemzeti Bank entitled “Competitiveness and Growth” presents also the necessary measures for that “competitiveness revolution”.

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The standard operational mechanism of economies was substantially overwritten by the economic crisis of 2008. Due to the relative abundance of resources and the lenient banking practices prior to the crisis that focused on bonuses, there were no barriers to lending, which was possible both in foreign or in the national currency. The financial problems that followed the outbreak of the crisis ended the previous lending practice, and the abundance of resources was replaced by poor liquidity, which – along with the macro-economic predicaments – further complicated the struggle by companies to keep their heads above water. The indebtedness of the private sector, increasing input costs, the tightening of the markets and the decline in consumption caused such difficulties in financing enterprises both at a national and international level that after several years a solution had still not been found for them. The negative effects hit the most those small and medium-sized enterprises that had only limited or no access to the international capital markets. The aim of this present paper is to show the transformation of Hungarian small and medium-sized enterprise financing based on the academic literature and the results of questionnaire-based research, and to highlight the main problems and the reactions to them that point the way to recovery. A further goal of the paper is to present the future path for financing the sector and the factors that will influence this path through an improvement in the tax system or support for credit.

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One of the major trends in the world economy in the past two decades was the ascent of China. The fast-growing Chinese economy is already the second largest in the world with an outlook to take the first place from the United States within ten years. Moreover, China is already the world’s largest trading nation. At 3225 billion dollars, its volume of trade surpassed the trade volume of the United States in 2010 (Scott– Sam, 2016). With its economy growing, China is also becoming more ambitious. U.S. – China trade approaching 600 billion dollars in 2015, China’s economic ties with the United States are already strong. Within the framework of its new land and maritime silk road initiative, China is now reaching out to Europe. As one of the largest economies and markets, and new global companies like Huawei and Alibaba, China is an important trade and economic partner. On the other hand, it is also a potent competitor for markets and resources. Is the ascendance and expansion of China an opportunity or threat? Does China naturally look for partners for mutual benefits and development or does it seek to control the world? Probably both. We attempt to help the reader answer these questions for themselves by looking at various aspects of Chinese expansion towards Europe including investment, trade, Chinese companies in Europe, and some characteristics of Chinese economy and society that may guide its path of future development.

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This paper presents the achievements of the “Rule of Law Revolution” and the role of the Constitutional Court in the different stages of Hungary’s rule of law evolution. Special attention will be placed on the current Hungarian practice of rule of law, the topics of rule of law, constitutionalism and the division of powers within the framework of legal and political constitutionalism will be discussed. The paper also will summarize the views that criticized the activism of the Hungarian Constitutional Court, and those that have laid down the groundwork for the expansion of political constitutionalism after the 2010 Parliamentary elections. Finally, the challenges of rule of law and constitutionalism will be examined, with regard to the role of the Court as the principal organ for the protection of the Fundamental Law in the context of Hungary’s membership in the European Union.

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This essay intends to show the main characteristics of the two phases of the development of Hungarian constitutional justice. The first part examines the operation of the Constitutional Court in the first two periods starting from its foundation. The first period under the chairmanship of László Sólyom may be characterized as having approaching cases from the perspective of natural law, moving away from the statutes of the Constitution then in force (the invisible Constitution), while in the second period, under the chairmanship of constitutional judge János Németh, decisions were based on the interpretation of the text of the Constitution. The second phase of the Constitutional Court is analyzed by presenting decisions made in taxation cases and in employment and civil service dismissal cases, and it deals in detail with the controversial decision relating to the Magyar Nemzeti Bank (the National Bank of Hungary, hereinafter the MNB).

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Due to the effect of historic economic events Hungary learned to react quickly and effectively since this was the only way for the country to remain at the forefront of the global competition of nations. In this continued and long-lasting preparedness, there took shape the values and requirements, such as intellectual and moral excellence and the knowledge enhancement, that are found in the country’s Fundamental Law, which is at the same time the national creed. The National Bank of Hungary, too, has placed its faith in this creed, as since its establishment it has striven to represent national sovereignty. The significance, social recognition and independence of the National Bank of Hungary among the national institutions also involves responsibility and obligations for the central bank. It is evident that independence is not the central bank’s objective, but its instrument that provides the possibility for it to serve the public good, benefit the whole of society and contribute to social wellbeing. The bank carries this out in such a way that it assumes a committed role in developing financial culture and awareness, and the economics and social thinking that form their foundation as well as the related system of institutions and infrastructure. This study highlights the role of educational and teaching reforms, and how attention must be paid to the knowledge connections of novelties in economic sciences that counterbalance the challenges of the globalised world economy and management organisations, and this requires a new approach and practice in Hungary. The various fields of economics satisfy a significant demand and are among the most popular fields of study chosen in Hungarian higher education not only for working in the corporate sector, but also at an institutional level.

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Collegium Talentum, a support system for Hungarian talent beyond the border, has been operating since 2011 in the Carpathian Basin. The aim of the programme is to train young researchers to become scientifically well-grounded specialists by both national and European standards, to attract fresh blood to academic institutions, and to inspire them to convey national cultural values in addition to having a scientific career. The programme supports the progress of 90 young doctoral students, thus significantly contributing to mitigating the crisis caused by the lack of intellectuals beyond the borders. More than 300 intellectuals from all over the Carpathian Basin have been involved in the programme to date, and a successful network has been organized of professors and researchers committed to national values.

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This paper will follow the ethnic and demographic changes of Hungary across the changing aspects of Hungarian history. It will discuss the issues of war, devastating sicknesses, migration and emigration.

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The fact that after World War II, during a historical period internationally considered as fully legitimate, a Hungarian autonomous entity was established in Transylvania that has not been possible to be eliminated by any fair and legal means, should be the focus of an ongoing fight for Hungarian territorial autonomy in Romania. This autonomous entity is able to provide the necessary structural, administrative and political framework for the Hungarian ethnic group and can also ensure security in the region. The structural build-up of Szeklerland as an autonomy is an important priority task. The option of depriving the Szekler region of its national and ethnic autonomy must be rejected and the boundaries of the entity should be modified and finalized in agreement with the Romanian nation.

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In a dictatorship of the kind built by the Soviets, power was exercised in every sector in the form of brutal, blatant and uncontrolled governance. The ideology termed, in most places, Marxism–Leninism was imposed on the people as a kind of a “state religion”. From nurseries to universities, from adult education to the media, the official doctrines were hammered into people’s heads and claimed to give answers to just about any question. The Communist Party wished to use schools to create obedient citizens. The 1950 curriculum set the objective of “teaching pupils to become conscious, disciplined citizens of the People’s Republic, who are loyal to the working class and build Socialism.”

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Zoltán Kodály’s principles in music education have had a major international influence across the world. He is universally recognized as one of the greatest figures in music teaching. Zoltán Kodály was a Hungarian composer, folk music researcher, and a pioneer in music education. Zoltán Kodály believed that musical aptitude is a characteristic of every person and that, ideally, a music education should begin as early as possible in a person’s life – first at home and later within the school curriculum. Kodály elaborated the structured and sequential system of music education that would make music accessible to all students in Hungary. His concept has gained international interest and remains in use in many countries’ music education, not only in Europe, but all over the world. On the basis of his concept we tested students’ music reading skills with the aid of the latest computer-based assessment technologies.

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In folk cultures the complex system of folk customs regulated and determined the everyday lives and festivities of the members of long-established communities. As a consequence of the social and economic changes that have taken place over the past century, the entire system of traditions has been reshaped and it has become part of our everyday lives to continually pass on folk customs between nations and cultures. The passing on of traditions played a key role in peasant society for many centuries, and was influenced by a number of factors. Today, however, the place and role of the generations have been transformed by this process. In contrast to past centuries, the present day is characterised by the development of technology. The information society has brought a substantial change to people’s lives, and today most of traditional folk culture is only a historical relic. Traditions can, nevertheless, still fulfil their role if we can pass them on to the coming generation, and so it is the responsibility of all of us to maintain and carry on traditions.

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The book Three-Dimensional Economy introduces a paradigm change in the economic thinking. It puts the elements of traditional economics into a new, value based approach. The book appoints human being as base and goal of economic activity, the system is embedded into the dimension of moral. The third dimension consists of values connected to moral, this way economy becomes a whole, integrated system.

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This review puts under the microscope the book by György Matolcsy, Governor of the National Bank of Hungary, and the successful economic policy lurking behind it. This monograph is richly illustrated with elements from economic history and familiarises the reader with Hungary’s achievements in the field of fiscal and monetary policies, and their academic taxonomy.

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A collection of interviews with Mihály Patai, Chairman of the Hungarian Banking Association, László Parragh, Chairman of the Hungarian Chamber of Commerce and Industry, and Professor Csaba Lentner, Head of the Institute for Public Finance of the National University of Public Service, has been published by Éghajlat Kiadó under the title Hungary in the Changing World. In the book, Hungary’s economic policy is discussed from the change of regime and the collapse of the Socialist planned economy to the present day, seen from the perspective of the three above-mentioned leading economists. This original and unconventional book examines problems in a complex manner and provides proposals worthy of consideration by political and economic leaders.

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As in numerous other places all over the world, unconventional instruments have come to the fore in Hungary since 2010 in fiscal policy and since 2013 in the monetary space. Changes in public finances have revealed the need for the writing of a scientific taxonomy to support practical mechanisms and its inclusion in the university curriculum. The main framework of a scientific taxonomy of Hungarian public finances, a taxonomy placed in a Hungarian historical and in an international context, is given in Public Finances and the Study of the General Government, Volume I, while a more detailed study of public finances, including financial and governmental management, taxation and control, is given in the volume entitled Fiscal Policy and the Management of Public Finances. Below is a review of these extremely significant books and the scientific taxonomy they reveal.

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Dr Péter Bertalan’s monograph, A ‘Bittersweet’ Story. The Privatization of the Hungarian Sugar Industry in the Light of Globalization and Geopolitics reveals the economic history of an era with scientific fastidiousness, but nevertheless in a readable and understandable style, by depicting an authentic picture of the privatization of the Hungarian sugar industry after the transition to democracy. Although his inquiry focuses on a single industry and, in particular, the Kaposvár sugar factory, he is not analysing a unique phenomenon. He places the bittersweet story of the sugar factory in a broader context, and points out the deeprooted conflicts and complex processes which accompanied the change of regime.

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