Economy
Bumpy road lies ahead of Hungary even if formal aid talks start with IMF/EU
Bence Rétvári, state secretary at the Ministry of Justice and Administration, told Reuters on Monday that if the proposals are accepted in Brussels Parliament could modify the legislation within two weeks. Analysts, however, warned that even if the problem of the disputed laws is sorted out Hungary can still expect the road to the bailout to be rocky.
The Hungarian government will send its formal reply to the European Commission regarding its disputed laws by the 17 February deadline, Rétvári told Reuters. (Hungary had a month to respond after the EU initiated infringement procedure against the country on three laws on 17 January.)
He said if the proposals are accepted in Brussels, which must sign off on any aid package to Hungary, Parliament could modify the legislation within two weeks.Rétvári said there were two points in the Central Bank Act over which there was still debate: the text of an oath which the bank's leaders must take and a cap on public sector salaries which also affects central bankers.
"We are ready to agree on both of these issues, on one of them (the text of oath) we see a compromise solution, while we can't see this (for salaries) but we are certain that we will find the solution during the negotiation," Rétvári said.
Rétvári said the government also saw room for compromise with Brussels on the other two laws, affecting the judiciary and the data protection authority.
He said the government was not aware of additional requests for amendments but if there were, that could help the far right opposition party.
Prior to their recent trip to Budapest, Morgan Stanley’s economists thought the main obstacle to the official start of the negotiations was the issue of the Central Bank Act - in particular, the Governor’s salary, the number of MPC members, the MPC oath and the possibility to merge the financial markets watchdog (PSZÁF) and the central bank (NBH).
"While a compromise on the NBH Act seems fairly easy to reach, in our view, our trip has revealed that the judiciary issue is as important as the NBH Act," said Pasquale Diana, CEE economist at Morgan Stanley in London, in a recent trip note.
He noted that at this point it is not clear how the judiciary issue will be addressed, and the EU has not provided clear guidelines.
"If the EU sets further conditions or opens further conflicts with Hungary, with that it could contribute to the strengthening of the opposition far right Jobbik party," Rétvári warned.
Local pollster Tárki said last week that in the fourth quarter of 2011, Fidesz had 43% of voter support, ahead of the Socialists (MSZP) that had 22%, far-right Jobbik party with 21% and small opposition LMP with 8% support, respectively.
Among young voters aged 18-37, Fidesz was in the lead with 42% of support, followed by 30% garnered by Jobbik and 14% by the Socialists. LMP’s support was the same in this age group as in the whole sample (8%).
"I don't think it will be all that smooth from now on, but we will be one step forward," said Zoltán Török, an analyst at Raiffeisen. "There will be some more punches here and there, but we will make progress gradually (towards a deal with IMF)."
He said if the proposals are accepted in Brussels, which must sign off on any aid package to Hungary, Parliament could modify the legislation within two weeks.Rétvári said there were two points in the Central Bank Act over which there was still debate: the text of an oath which the bank's leaders must take and a cap on public sector salaries which also affects central bankers.
"We are ready to agree on both of these issues, on one of them (the text of oath) we see a compromise solution, while we can't see this (for salaries) but we are certain that we will find the solution during the negotiation," Rétvári said.
Rétvári said the government also saw room for compromise with Brussels on the other two laws, affecting the judiciary and the data protection authority.
He said the government was not aware of additional requests for amendments but if there were, that could help the far right opposition party.
Prior to their recent trip to Budapest, Morgan Stanley’s economists thought the main obstacle to the official start of the negotiations was the issue of the Central Bank Act - in particular, the Governor’s salary, the number of MPC members, the MPC oath and the possibility to merge the financial markets watchdog (PSZÁF) and the central bank (NBH).
"While a compromise on the NBH Act seems fairly easy to reach, in our view, our trip has revealed that the judiciary issue is as important as the NBH Act," said Pasquale Diana, CEE economist at Morgan Stanley in London, in a recent trip note.
He noted that at this point it is not clear how the judiciary issue will be addressed, and the EU has not provided clear guidelines.
"If the EU sets further conditions or opens further conflicts with Hungary, with that it could contribute to the strengthening of the opposition far right Jobbik party," Rétvári warned.
Local pollster Tárki said last week that in the fourth quarter of 2011, Fidesz had 43% of voter support, ahead of the Socialists (MSZP) that had 22%, far-right Jobbik party with 21% and small opposition LMP with 8% support, respectively.
Among young voters aged 18-37, Fidesz was in the lead with 42% of support, followed by 30% garnered by Jobbik and 14% by the Socialists. LMP’s support was the same in this age group as in the whole sample (8%).
"I don't think it will be all that smooth from now on, but we will be one step forward," said Zoltán Török, an analyst at Raiffeisen. "There will be some more punches here and there, but we will make progress gradually (towards a deal with IMF)."
