Women in work - the trend increases in spite of traditional family values rethoric - introducing also the Eurostat gadget

Eurostat has a gadget generator on its site. I used this to show the proportion of women in work in Hungary during the latest years:

What does the Hungarian minister of the national economy (including finance) know and understand?

According to a press article,the minister of the national economy, Mihály Varga (this superministry integrated or rather melted into itself the finance ministry, ministry of economy, labour and the different sectoral ministries - foreign trade, commerce, industry etc.) declared that the Hungarian government will not follow the recommendation of the European Council (it is prepared by the Commission but descussed in the Council and signed by the president of the Council) to cut tax benefits to poor people. Apart from the fact that low earners in Hungary have no special tax benefits (they were abolished by the FIDESZ government to cover partially the costs of the flat personal income tax), the article states that Varga confused the tax wedge with the tax benefits as the coutry-specific recommendation to Hungary proposed to decrease the tax wedge for low earners (see point 3 on page 7). Actually the document complains in an earlier paragraph (number 12 on page 5) that the" tax wedge on single low-income earners is one of the highest in the EU". Probably Mr Varga should have read the Hungarian version. There, the translator (who knows why, certainly not fearing misunderstanding by an economist and economy minister) translated the tax wedge to "tax burden" (pages 5 and 8 as the Hungarian text is somewhat lengthier).
The recommendations are denouncing the sectoral extra taxes (with the following justification: "The application of different tax rates across sectors is an obstacle to the effective allocation of resources
and thus negatively affects growth" and recommend a more equitable tax system. This is no surprise. No surprise either but very instructive are, however, some other statements about the situation of the economy and about economic policy: "Notwithstanding the Central Bank's subsidised 'Funding for Growth' scheme for small and medium-sized enterprises, normal lending to the economy has not picked up in a sustainable manner." (see also in Hungarian: Why the "funding for growth" programme did not help?)
"The regulatory burden on the financial sector has been
further increased, thus limiting the capacity for capital accumulation. Measures like
the increase of the financial transaction duty have contributed to a pick-up in the cash
usage of the economy. The household portfolio has further deteriorated and the high
proportion of non-performing loans currently represents one of the biggest
challenges for the financial sector. Portfolio cleaning is hindered by the weak
efficiency of resolution proceedings."
Also interesting: "The youth unemployment rate has decreased in 2013, while the rate of young people who are not in employment, education or training has increased." -  hints to the phenomenon often discussed in the Hungarian economic press that employment figures may hide more than reveal the real processes. "The Public Work Scheme attracts the bulk of budgetary resources available for employment measures, but in 2013 less than 10% of its participants were able to return to the open
labour market after exiting the scheme."
"The business environment in Hungary is characterised by frequent changes in the
regulatory framework and limited competition in an increasing number of sectors.
New barriers have been introduced in the services sector and existing ones have not
been removed (e.g. pharmacies, waste management, mobile payment, retail tobacco
and textbooks)."
"Overall investment has declined particularly strongly in those sectors
where sector-specific surtaxes have been imposed in recent years. Between 2010 and
2013, nominal investment declined by 44 % in energy, 28 % in finance and 18 % in
the communication sectors, while increasing by 3.4 % overall."

And so on, and so on. So if after this, the minister of national economy says that Brussels does not require adjustment any more, obviously concentrating on the budget balance (in fact this is also a little false as the recommendations state: "Reinforce the budgetary measures for 2014 in the light of the emerging gap of 0.9% of GDP relative to the Stability and Growth Pact requirements, namely the debt reduction rule, based on the Commission 2014 spring forecast. In 2015, and thereafter, significantly strengthen the budgetary strategy to ensure reaching the medium-term objective and compliance with the debt reduction requirements in order to keep the general government debt ratio on a sustained downward path."), he forgets his role beyond being the minister of finance, to be very polite. For the uninitiated: a lot of criticism and recommendations target the governments pet measures, denounced also in Hungary even by economists who supported FIDESZ before.

There are problems also in the social area (another superministry is the Ministry of Humnan Resources): "The proportion of early school leavers is on the rise and the adoption of an early
school leaving prevention strategy has been repeatedly delayed." - and this in the context when compulsory upper schooling age has been decreased.

A final quote: "Review the impact of energy price regulation on incentives to invest and on competition in the electricity and gas markets. Take further steps to ensure the autonomy of the national regulator in establishing network tariffs and conditions. Take measures to increase energy efficiency in particular in the residential sector." - Another pet project, the "decreasing utility charges" is under attack. If we look what was written above about the investment scenario, we see why. The criticism of the public procurement system is very diplomatic, but sstill, recommends improvement. THis would, however, stop the government from distributing public work contracts to its cronies. No surprise but very sad that the minister shows himself deaf.

Let's carry on - on the EU budget

Everybody likes to get money. But not too many like to give. The masters of the EU (who are, contrary to common belief, still the member states) gave the Union a moderate financial framework (this is how the long term budget is called in EUspeak) and 2014 budget. The negotiations were relatively successful for Hungary - it remains the second-third most supported country in terms of net balance per capita or by share of GDP. So now the Hungarians should be happy, shouldn't they? Well, the EU funds are well "earmarked", at least the area where they could be spent, is defined.You cannot spend European Social Fund money for economic development or infrastructure, only if there is a social benefit, and cohesion funds also have certain goals to be adhered to and also limitations. Rules of spending, documentation and accounting are not so simple. Partly this is due to the conditionality, adherence to which has to be checked. There is, however space for simplification. Increasing the flexibility in using the funds both concerning eligibility criteria and administrative requirements in beneficial but this should be done in a way that the possibility of fraud should be avoided. On the other hand, in spite of the short-term temptations, the real interest of the country is to prevent that EU funds should be used to distort competition as on the long term this means loss to Hungarian competitiveness to richer countries. Hungary is interested in simplification and also in decoupling the EU budget from conjunctural changes and spirit fluctuations between member states, thus also in giving the EU genuine own sources, for example from a future financial transaction tax or energy tax. This has nothing to do with the extraordinary taxes introduced in Hungary and probably would require their abolition which would actually help the Hungarian economy. Work is in progress and finally sme member state control and also mechanisms to equalise temporary fluctuations can be expected. The condition of agreement of the European Parliament to a decreased budget was more flexibility in reassigning funds and also a review to see if increases are necessary. Hungary should carefully follow this review and support an increase in the budget - improvement of economic conditions can be expected and thus more could be made available - benefiting the recipient countries, Hungary among them. Inevitably there will be a question, what the additional funds should be used for. Part of the funds was made available already to the youth employment programme - if more Hungarian regions could benefit from increasing its amount and lowering the threshold where it can be used, it would address a burning problem.

Youth guarantees

There are two European countries, Austria and Finland which guarantee, that if a young person is unemployed for four months, he/she should get a job, traineeship or re-training offer. This is basically different from the public work which is now the favourite job-creating tool of the Hungarian government. On proposal of László Andor , the commissioner for employment, social affairs and inclusion, the new Multiannual Financial Framework will contain a new youth employment initiative (this was the only addition to the proposal of the Commission on the European Council meeting which approved the Council position on the MFF the 8th February (see criticism about the deal and its enthusiastic reception in a Hungarian article ). And these 6 bn euros can also be used to establish this guarantee as the Council agreed the 28th February (see here . It will be used in the regions where youth unemployment is the highest. The youth guarantee initiative also has a Twitter stream. According to estimates by Andor, the programme would cost 20 billion Euros in Europe. This would mean proportionally 50 billion HUF in Hungary. Thus roughly the amount which has been just taken from the universities or less than half of the interest difference between market financing and an IMF loan (by the most conservative estimates). Further information about the Council negotiations on the MFF is available here while the European Parliaments position can be followed here . A third-party report about the presentation of Mr Van Rompuy and the responses to it shows the main controversies.