Hungary to assume Erasmus costs if deal with EU cannot be reached - minister

Government will cover Erasmus costs if no agreement is reached

"The Commission's decision is unacceptable and intolerable" - this is how Gergely Gulyás reacted to the news that the European Commission, based on a European Council decision on 15 December, sent a letter to the institutions concerns stating that they cannot receive any EU funds until conflict of interest issues at the public interest trusts managing them are settled.

Gulyás recalled that there is a long list of active politicians sitting on the boards of trustees of Western European higher education institutions, and the government has amended the Hungarian regulation in line with expectations.

He said that the codified text had been agreed with the European Commission, approval had been obtained and the government would have been willing to adopt stricter rules, but there had been no such request.

At the same time, he indicated that if the dispute could not be settled,

the government will pay the Erasmus costs,

but as the agreement on this year's costs was concluded before 15 December, the programmes of the current academic year would not be affected by the funds freeze. The government's budget pledge would apply to next year's Erasmus scholarships.

IF THERE IS NO SOLUTION TO THE MATTER, WHICH WE WOULD FIND DIFFICULT TO ACCEPT, THE GOVERNMENT WILL COVER THE COSTS,

he said.

Moreover, he announced that if the matter cannot be settled amicably, Hungary will take the Council decision to the European Court of Justice. We would like to find an amicable solution, but the chances of this are limited, as the government acted in agreement with the Commission, yet this is the result.

He pointed out that the number of scientific publications in the model universities had increased by 18% in one year and that the number of students graduating from these institutions had also increased.

Overall, he said that there was "no basis for accusations" and that the government had adopted the legislation exactly as agreed with the Commission. The government is confident of a clearance, but is ready to launch a lawsuit.

About the members of the boards of trustees

Asked whether the government would be willing to recall government members or state secretaries from university boards of trustees if the Commission were to impose such a condition, Gergely Gulyás replied that the government would have been willing to adopt legislation on the subject earlier, but the Commission had not made such a request.

2023 budget to be submitted to Parliament next week

On Wednesday, the government reviewed the 2023 budget, which will be presented to Parliament next week, so that negotiations on amending the budget can begin in February. MPs could then adopt the budget in March, Gulyás said.

The focus of next year's amending budget is primarily on protecting the utility bills reduction scheme. The most important thing is to avoid a recession, and if we can do that, we can maintain the reduced prices for the average consumption, he said.

Gulyás added that for this year, the budget expects economic growth of 1.5%, which confirms the assumption that the economy can avoid a recession.

There are expectations and there are expectations. Analysts at UniCredit, for instance, are not as hopeful in their outlook on Hungary's economic performance this year, forecasting a 1.0% annual average GDP contraction.

Given the expected technical recession in Europe, coupled with procyclical fiscal and monetary policies, we expect Hungary’s GDP to fall by around 1% in 2023, even if the economy starts to rebound in 2H23,

Dan Bucșa, Chief CEE Economist at UniCredit Bank AG in London, said in a research note earlier this week.

Meanwhile, Goldman Sachs economists do not expect a recession in the Eurozone saying the outlook has improved significantly.

The International Monetary Fund (IMF) expects that a third of the world economy will be in recession this year, saying the world faces a tougher year in 2023 than in the previous 12 months, with the US, the EU and China all slowing down at the same time.

This year has been the most difficult year for Hungary since the fall of communism, PM Viktor Orbán said in late December, noting among the positive things that we have managed to stay out of the war in Ukraine, which has so far only had losers.

THE CHALLENGE FOR 2023 IS TO AVOID RECESSION, HE ADDED.

 The OECD also projects 1.5% GDP growth for Hungary this year.

Gulyás also said the aim this year is to further reduce the budget deficit from 4.9% to 3.9% of GDP and to further reduce public debt in line with constitutional requirements.

He added that the most important strategic goals will be maintained, the government will not reduce the resources allocated to family benefits, and the range of family benefits will be extended. For those who have children under the age of 30, the personal income tax exemption will be extended to the age of 30, he said.

Currently, individuals under age 25 can apply this allowance with respect to certain incomes, but only up to maximum the gross national average income published by the Hungarian Central Statistical Office for the July of the preceding year (HUF 500,000 for July 2022). It practically means that individuals under age 25 can apply the PIT-free allowance but only up to this maximum limit. (PwC)

On the funding of pensions, Gulyás said that this will be the single largest expenditure item in the 2023 budget, with HUF 6,150 billion going to pensions next year, including the 13th-month pension.

"Pathetic and appalling performance on this" solar tender payment

Gergely Gulyás received a question about the fact that while he promised at a press conference last autumn that most of the payments for the residential solar panel tender would be made by now, the facts show that only a small amount has been paid so far. As the table below shows, out of 43,000 applications, 35,000 have been successful so far, but only 41 applications have been paid out for a total of HUF 78 million.

In his response, Gulyás acknowledged that "it is a pathetic and terrible performance" and that "it cannot be disputed that the fault lies with the state".

He has now promised that, on top of the meagre payments made so far, the aim is for the government to pay out HUF 1.2 billion by the end of January, but even that would be a small fraction of the current HUF 7.8 billion in advance claims already submitted by 3,750 winners.

Gulyás apologised for the slow payments so far and said the aim was to "make up at least this much of the backlog month by month".

Cover photo: MTI/Lajos Soós