March 5th, 2013

Varga says government may add new tools to economic policy mix, downplays inflation fears

The government’s economic policy will not change in direction only in the tools it uses, Mihaly Varga, the economy minister nominee, said on Monday.

He said inflation was “not a danger that would merit serious consideration” at the moment.

Parliament’s budget committee has endorsed Varga’s nomination to replace Gyorgy Matolcsy at the head of the ministry.

Varga said this year’s key budget figures would not be affected by the changes. He said growth could be propped up by agricultural output and exports this year, while “cautious expectations” are justified in connection with household consumption, as borrowers are still paying off forex mortgages.

He said it was positive that the central bank base rate hit a historic low in the past months and he said hopefully this should bring a drop in real interest rates and boost corporate lending.

Varga said temporary sectoral crisis taxes must be retained for the time being, as long as the excessive deficit procedure against Hungary is in place.

He said the expansion of lending was not only dependent on the banking tax. There are talks under way regarding measures which would not impact on budget revenues but give banks discounts for lending growth. There should be an agreement on this within weeks, he said.

Varga said earlier there was no need to amend the 2013 budget, but first-quarter data were needed for a clearer assessment of growth. He said as minister he would set the economy on a firm growth path and see that the excessive deficit procedure against Hungary is dropped.

Imre Szekeres, lawmaker for the Socialist opposition, said the government should change economic policy as investment rates are low. He said the government had not done anything over the past two years to ensure Hungary moves towards joining the euro zone.

Laszlo Nyikos, a lawmaker for the radical nationalist Jobbik party, called for stricter governmental financial control and said the auditing of annual reports of central budget and local government institutions was not being completed.

Varga’s nomination was also endorsed by the committee for consumer protection on Monday. In this committee, Varga said the government envisages consumer protection based on three pillars: the consumer protection authorities, mediating bodies and civil consumer protection organs. Varga confirmed that the government wishes to continue efforts to ease the burdens of borrowers with foreign currency loans. The government is looking for ways to manage the situation related to the moratorium on evictions, in which he regards municipalities as partners. He noted, however, that if the moratorium is maintained indefinitely, that would greatly risk the future disbursement of mortgage loans.


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