Share this story
Close X
Switch to Desktop Site

Hungary, in Axing Socialist Perks, Tells Citizens to Tighten Belts

AS one measure of how much it must still shed of its socialist past, Hungary plans to reduce maternity leave from three years to four months.

The government also wants to charge university tuition fees for the first time, end subsidies for people with children, cut welfare payments, and slap an additional 10 percent on car purchases. Wage hikes for public workers will be limited and nominal fees will be charged for national health care.

About these ads

Such austerity steps, ironically, come from a socialist government.

They were announced earlier this month to help Hungary, once the capitalist darling of the former East bloc, cope with its worsening deficits in trade and government spending. The controversial package included a 9 percent devaluation of the national currency, the forints.

''Hungary is drifting towards an unmanageable crisis,'' Prime Minister Gyula Horn told parliament March 12. ''We are not going to join the line of governments that simply increase the debt by hundreds of billions [of forints].''

Thousands of people protested the changes on March 14, and two ministers (welfare and state security) resigned. Economists, however, support the measures, which aim to reduce a projected $3.5 billion state budget deficit, which equals about 10 percent of Hungary's gross national product.

''These measures were unavoidable and long overdue,'' says Laszlo Csaba, research director at the Kopint-Datorg market-research institute in Budapest. ''If the deficit had been allowed to continue growing at the current rate, it would have become impossible to finance it.''

Hungary has attracted nearly $7 billion in direct foreign investment, almost as much as the rest of Central and Eastern Europe combined, and has the highest per capita income in the former Warsaw Pact. Under the former communist regime, Hungarians had wide freedom to own small businesses, travel abroad freely, and own property. But during the late 1980s when the economy was stagnating, the government borrowed heavily from the West.

The conservative coalition that ruled Hungary from 1990 until last spring failed to take measures to address the debt and trade deficits, which grew dramatically as major West European trading partners entered recession. Hungary's internal debt more than doubled from 1990 to 1994.

About these ads

The proposed cuts in the state welfare system are expected to be approved next month by parliament, where the governing coalition holds over 70 percent of the seats. Particularly controversial, however, is the dramatic reduction in maternity leave. That proposal stands some chance of losing.

THE junior partners in the ruling coalition, the Alliance of Free Democrats, support the measures, but within the dominant Socialist Party, which includes a trade union faction, critics want to keep the longer maternity-leave program.

One argument for keeping it is that Hungary's population has been declining for many years, despite an influx of ethnic Hungarian immigrants from neighboring Romania and, more recently, Serbia.

The new measures are likely to encourage investors, who have been concerned over the Jan. 28 resignation of Finance Minister Laszlo Bekesi, who had long advocated austerity measures.

''The Bekesi period was an important learning period for the Socialist government,'' says Karoly Fekete, senior political analyst for a Budapest consulting firm. ''The prime minister finally sees that he must support austerity measures.''

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.