Liberals Insist On Budget Spending Cap, Socialists Give In

The SZDSZ continues to reject the PM's recently unveiled tax plans, but the cabinet seems to be open for the liberals' (still vague) idea about determining a spending cap for the budget, index.hu has reported.

Gyurcsány was reportedly so pleased with today's talks with his former allies that negotiations between the two parties will continue at lower levels in the future.

For the sake of boosting economic credibility the budget gap should be as close to 3.0% as possible, Fodor said, adding that to this end his party initiates the freezing of extraordinary spending and both the general and special budget reserves. (Hungary's official deficit target is 3.8% of GDP for 2008 and 3.2% for 2009.)

The first proposal in the liberals' four-point package is the introduction of a budget spending ceiling. Fodor said this motion enjoys the support of opposition parties Fidesz and the Hungarian Democratic Forum (MDF), as well and the government has not rejected the proposal on spot, either.

Gyurcsány acknowledged that they were admitting on this issue, adding that the proposal on a spending cap should be approved by Parliament in a two-thirds vote, which means he would like to see Fidesz backing up the SZDSZ on this matter.

The second point was the Socialists' tax proposals, which the SZDSZ continues to reject, including the recently announced ‘Robin Hood' tax on energy companies.

The liberals believe that the government would do better if it rethought the tax system with an environment conscious mindset focused on energy saving aspects.

Gyurcsány said the SZDSZ would like to see a more pronounced shift towards a flat-rate tax regime, an issue the Socialists (MSZP) would be willing to discuss “only if it does not entail substantial social sacrifices". The government, he said, wants to revamp the personal income tax system so that everyone who is able to work could get a job.

This notion could chime together with the liberals' intentions, as well. Fodor said it was intolerable that the PM would not touch the spending side of the budget. He said spending needs to be curtailed, and proposed to implement changes in the pension and social welfare systems, as well.

In respect of the latter, Fodor mentioned that family allowances should be granted only for those who really need it.

Gyurcsány told a press conference that the MSZP's experts evaluated the economic policy proposals made by the SZDSZ over the past few years and attached cost calculations to these, as well. The documents have been handed to the liberals and in time the Socialists plan to make these public. This could prove to be a strong card in the hands of the Socialists in future talks with the SZDSZ that will be conducted at faction level from now on.

Gyurcsány has also announced that the 2009 draft budget will be submitted within days. He has noted that this will be the first budget that will comply with the EU's Maastricht criterion on the budget deficit (3.0% of GDP)."
 
Source: Portfolio Online Financial Journal