György Kopits on Hungary’s budget situation

That the current election campaign has so far has barely damaged the budget is surely connected to Hungary’s tight financial situation. That commendable state of affairs is certainly also due to the existence of the Budget Council. Since January 2009 the council has been checking that Hungary’s finances do not get out of hand again.

Always alert

The establishment of the council took place in the framework of the loan agreement with the IMF of autumn 2008. Its first president was the economist György Kopits who, like the two council members Gábor Obláth and Ádám Török, was elected by parliament without any dissenting votes – a rare occurrence given modern Hungarian parliamentary practice. Although it does not have the power of veto, the council watches over the transparency and sustainability of the Hungarian budget.
Last Wednesday Kopits spoke at en event organised by Swisscham Hungary about Hungary’s budget situation and his impressions since being in office.

The need to know it all

Right at the start he regarded creating the greatest possible transparency as decisive for success. “If a minister no longer knows what is going in the kitchen, then that is problematic,” Kopits said, recalling the situation when he first took up the appointment. His efforts concerning transparency were also about tracking down possible irregularities before they explode.

Politics poisons purse

In addition to transparency and sustainability Kopits has also called for the depoliticisation of budget policy. It should follow fixed rules and be framed independently of what phase of the legislative period the country is currently in, Kopits said. He named countries including Switzerland, Brazil and Chile as positive examples of success in this respect. After pursuing an “irresponsible budget policy” from 2001, Hungary is on its way to recovery following the salutary shock of the world economic crisis, Kopits said.

Making it add up

The long-time IMF manager described the 2010 budget as “very realistic”. That is hardly surprising since his council watched critically over its conception. Of the total of roughly 1,400 amendment proposals the council analysed around 300. “It was a huge task,” Kopits said. In the case of proposals for an increase in spending it was important for politicians to put corresponding proposals for counter financing on the table. It is important for politicians to know how big their financial room for manoeuvre is, he stressed.

No slackening

Kopits’ motto on budget policy is “zero tolerance of fiscal alcoholism!” – an image he came up with and that has since found its way into international specialist literature on economics. As in the case of withdrawal treatment from alcohol there cannot be any compromises in budget recovery, he said. “If following radical budget treatment, you slacken just a little while making some kind of excuses, you soon face the same problem as at the start,” Kopits said.

Pricing promises

He would even support checking the financial viability of the parties’ budget-related ideas at the election campaign stage. With some regret the economist noted that a corresponding proposal has not been successful. “Unfortunately we are only authorised to inspect existing legislative proposals critically.” In any case the room for manoeuvre of any Hungarian government in the coming years is very limited, he said.

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