Hungarian Public Finances and Economic Policy

Pál Péter Kolozsi – Csaba Lentner – Bianka Parragh

The Pillars of a New State Management Model in Hungary

Cohesive society, trust and social cooperation are among the social arrangements and meta-institutions required for building good institutions and a well-managed state. Before the global financial crisis, Hungary was characterized by unsustainable public finances, a flawed and irresponsible fiscal policy, and consequently, weak economic fundamentals. This represented a suboptimal state management, with the basics of cooperation between the state and the economic actors were seriously damaged. For this reason, by the beginning of the decade, the renewal of state management and, above all, public finances had become imperative. The first step was the adoption of the Fundamental Law (new constitution), including a chapter on public finances.

József Varga – Sándor Kenyeres

Current Questions of the Transformation of Hungarian Taxation

In this paper the authors provide an international comparison of the Hungarian tax system. The main claim made in this publication is that although taxes are relatively high in Hungary compared to the regional competitors, and this seriously affects Hungary’s competitiveness, the recent years have seen a number of positive developments in changing the tax system and eliminating the asymmetries of consumption and work-related taxes. This paper provides an in-depth analysis of the transformation of the Hungarian tax system between 2008 and 2017. It sets forth a set of possible tools for reducing the shadow economy and presents the significant measures taken to that effect in Hungary. At the end of the paper, the authors provide an analysis of the paradigm change envisaged in 2018, which will have a substantial impact on the future, and briefly discuss the most important upcoming changes in taxation.

Péter Novoszáth

New Hungarian Economic Philosophy to Improve Households’ Financial Situation

As a result of the neoliberal economic philosophical doctrines that spread in the 1980s, decreasing attention was paid by researchers and other experts in the European Un-ion to developments in households’ financial position and consumption in boosting economic growth. This is despite the fact that the examples set by the increasingly faster growing countries, especially India, China, Brazil, Mexico and South Africa, seem to markedly confirm that developments in incomes and household consumption have an increasing role in the acceleration of economic growth. As globalization and the 2008 economic crisis undermined the financial position of households in the European Union, and thus also in Hungary, and a growing part of the population was thrust into increasingly deeper poverty, so people started to become once again aware of the actual consequences of deterioration in households’ financial position on developments in economic growth.

Márton Járosi – Pál Kovács

Energy Policy of Hungary

In Hungary, the energy sector was modernised on the basis of public ownership after World War II. Hungary’s large, centrally controlled and vertically integrated energy systems were established at that time. Simultaneously with the regime change, west-ern-based energy orientation also began in the energy sector and in 1990 it continued with the implementation of privatisation. Hungary’s accession to the European Union provided grounds for and reinforced the process ideologically. This was followed by full liberalisation called “market opening”. The policy of the second Fidesz government, formed in 2014, is characterised by the restoration of an energy policy serving national interests. This process is described in the article in a European perspective.

Petronella Molnár – Szilárd Hegedűs

Municipal Debt Consolidation in Hungary (2011-2014) in an Asset Management Approach

The purpose of this study is to present Hungarian debt consolidation, its root causes and features in terms of local governments’ asset management. As an additional aim, it intends to reveal the characteristics of the Hungarian municipal system, the causes that led to debt consolidation and the rule-based measures taken to prevent future indebtedness. The study focuses on the effects of debt consolidation on asset management in the Hungarian municipal system, and particularly on the operation of cities with county rights, as they have important regional duties. There are 23 of them with roughly 2 million inhabitants, thus in the aggregate they represent as many people as the capital city. This article reveals the reasons underlying the difficult financial situation of local governments, the solutions and subsequent impacts on municipal assets.

András Bethlendi

Sovereign Defaults and How to Handle Them

This study shows that since the Keynes-White dispute in the middle of the 20th centu-ry, the global economic policy thinking is clearly determined by White’s views up until today. In the global monetary system, debt restructuring solutions are subordinated to the global economic order, and not to national economy policies, as shown by the recent examples of Greece, Hungary and Ukraine. According to this thinking, basically the debtor is held liable for imbalance and over-indebtedness. Obviously, the system cannot solve balance of payments problems between countries and the ensuing debt crises. The free movement of goods and capital is given an absolute priority.

András Kecskés

Investing Safely and Lucratively: What is New in Hungarian Investment Law?

The aim of the article is to give an overview of the development of laws on investments in Hungary. The paper aims to establish the concept of investment in Hungarian law. A key finding is that there is no general, all-encompassing investor concept in Hungarian law, as the definition may vary depending on the act reviewed. The paper outlines the changing role of the central bank in Hungary. As hedge funds have an important role in the financial sector, a brief overview is given of the regulatory changes relating to them. The conclusion of the paper is that the Hungarian trends in investments follows the general worldwide trends.

Bálint Teleki

The Role of Agencification in the Post-2010 Financial Stabilization in Hungary

Agencification has had a major role in the institutional development and handling of the financial crisis in the European Union. In this article it is examined whether this institutional trend, alongwith the institutionalistapproach ofRodrik, has played asimilarrole in post-2010 financial stabilization in Hungary, and if so, exactly how it affected the pro-cess. The focus is on public administration, which was renewed on the Fundamental Law enacted in 2011, and providing a basis for the new legal and institutional framework for the regulation and supervision of the financial markets.