The government’s decision to award compensation to public-sector employees for the scrapped 13th month wage, and using budget reserves to pay for the deal was the right one, Prime Minister Ferenc Gyurcsany told public radio in an interview broadcast on Friday, denying that the move had raised eyebrows at the International Monetary Fund.
According to press reports, head of the IMF Dominique Strauss-Kahn raised concerns about Hungary’s ability to stick to its target of reducing the budget deficit to 2.6 percent as defined in the government’s 2009 budget.
Hungary decided on the target when it asked the IMF, the European Union and World Bank for a 20 billion euro loan last October to help the country weather the financial crisis.
The wage deal to compensate public-sector employees for scrapped 13th month pay has put an extra burden on the budget, strained on the revenue side by expectations of a worse recession this year than first feared — the government expects a contraction of around 3 percent — and a faster rate of falling inflation.
Gyurcsany told MR1-Kossuth radio, in reply to a question about whether he had caved in to union pressure over pay, that it would have been “bloody minded” had he not struck a compromise with the unions.
I’m wondering how the gov’t can be so sure, despite the 20% fall in the value of the currency since 6 weeks ago, that such won’t been seen in the prices we pay?
While the inflation computation usually gives more weight to employee demands (I guess it figures that the people themselves will moan if they cannot make ends meet), the simple fact is that most of the products in HU come from outside.
In a way, it sounds as if the gov’t expects employees to take it on the chin and just dig into savings to compensate for the higher prices, for fear that going on strike and/or demanding wage increases would get them sacked.
Anybody got any thoughts?
Fletó is a weak-kneed, unprincipled weather-cock. That explains about everything he says and does.