Hungary, land of welfare and early retirement

Often cited as the key cause of the country’s economic stagnation, Eurostat figures have confirmed that welfare spending in Hungary is the third largest in the European Union. Of a population of ten million, six million people receive welfare benefits of some kind each year, with total spending amounting to more than half of its GDP, writes Index.hu, based on reports on Portfolio.hu and in Napi Gazdaság. Meanwhile, a recent GfK survey recently found that around two-thirds of working Hungarians take early retirement, the second highest proportion in the EU.

According to data collected by EU statistics office Eurostat in 2006, Hungary distributed 51.9% of its GDP among residents and companies. This figure was larger only in Sweden and France. As for other countries in the region, Slovenia was 12th on the list, followed by Poland in 16th place.

According to data collected by EU statistics office Eurostat in 2006, Hungary distributed 51.9% of its GDP among residents and companies. This figure was larger only in Sweden and France. As for other countries in the region, Slovenia was 12th on the list, followed by Poland in 16th place.

The Hungarian state spends Ft 8,187 billion (roughly €33 billion) on welfare benefits each year, including education and health care, amounting to 60.3% of total spending, Index.hu writes. These payouts benefit six million people, 60% percent of the population.

The majority of welfare spending goes on family allowances. The state pays an average of Ft 21,600 after two million children every month, regardless of their parents’ income. The total allowance depends on the number of children and parents in the family and any disabilities. The state also pays allowances to mothers to encourage them to have children. These include the gyed for two years after the child is born and the gyes, which can be received for an additional year. These are continuously slated for “reforms,” as they do not achieve the desired effect, and there are no more children born as a result of them.

Men Not at Work

At the other end of the scale, around two-thirds of working Hungarians take early retirement, the second-highest proportion in a survey of 26 countries by researcher GfK in a survey commissioned by insurer AXA.

As a result, the number of people employed in Hungary – just under 4 million with 312,000 unemployed – is also low by international comparison. Between October and December of last year, only 54.9% of the population between 15 and 74 years of age appeared on the employment market. The rate in the 15-64 range was 61.9%. 45.8% of those unemployed had been seeking employment for at least one year, while the average period for unemployment is 16.7 months.

Despite the bloated welfare system, any attempts to reduce benefits to ease the tax burden are met with fierce opposition. The government attempted to reduce energy subsidies to take account of income levels 18 months ago, but 1.8 million households applied to continue to receive gas price benefits, almost half of all households.