Analysts say parties offer similar prescriptions for Hungary’s ills

Tax cuts and employment growth are the main prescriptions offered by Hungary’s major political parties to cure the country’s lackluster competitiveness and its social ills.

Gordon Bajnai, who is standing down as prime minister, has been a cheerleader for tax cuts and a reduction in contributions paid by small businesses as a way to boost employment and competitiveness, but it is a prescription that Viktor Orban, the opposition Fidesz leader, is likely to deliver after the April elections.

Orban has also put tax cuts and employment at the heart of his campaign, promising to create one million new jobs over the next ten years. He hopes that measures such as reducing the amount of time it takes the state to pay contracts will help to create jobs.

But it will be harder to cut taxes given Hungary’s tight budgetary situation. Under an agreement with the IMF and the EU, the country must bring its budget shortfall to 3.8 percent of gross domestic product by the end of the year. Fidesz insists that there are “skeletons in the closet” and predicts a much larger deficit.

Orban is cagey about giving details of any tax cuts, sticking to the mantra that the aim is to make substantial cuts over time and that their precise extent will depend on the size of the budget deficit and its fiscal room for maneouvre. But he categorically rules out introducing a flat tax.

The Socialists expect the economy to grow by around an annual 4 percent after 2011, generating 2,000 billion forints (EUR 7.4bn) of extra revenue. The supplementary income should be devoted to boosting the country’s competitiveness and growth through tax cuts and easing conditions for businesses, they say.

The ruling party would reduce burdens imposed by the state on businesses by 4 percent over the period of a governing cycle if it won the election – which, polls indicate, is very unlikely.

Radical nationalist party Jobbik – expected to become the third largest party in parliament after the April elections – also offers much the same medicine to workers and businesses. The emphasis, however, is squarely on creating a strong “Hungarian” economy by supporting home-grown companies.

It is unclear whether a fourth force will occupy benches in Hungary’s legislature after the elections. Polls indicate that the conservative Democratic Forum, a small party which has a partial pact with the liberal Free Democrats, will not make it back into parliament. If it does, it will be putting pressure on Fidesz to cut the size of the state, reform education and smooth conditions for enterprises. The party also rejects Hungary’s burdensome state redistribution system and recommends shrinking it.