13th Month pension falls prey to the crisis

The House approves the first crisis-budget, temporarily abolishing 13th month pensions.


The GDP growth of the year 2009 will be 3% less than anticipated, signifying a Ft60-80bn shortfall in budgetary revenue compared to the earlier estimates.
The government, therefore, needed to cut the expenses of the 2009 budget, the tax bills of which were approved by the Hungarian Parliament this Monday (Dec 1). One of the major elements of the bill was the temporary axing of the 13th month bonuses in the public sector and the 13th month pensions are also to be scrapped by the government next year.
Referring to the need of technical modifications of the bill’s text, main opposition leader Fidesz and its political ally, the Christian Democrats have attempted to enforce another parliamentary vote on the bill in question, which would have meant that the minority government would have had to gain a parliamentary majority for the second time in order to implement the planned scrapping of the 13th month pensions and bonuses of the public sector (basic elements of the budget, including these decisions were already accepted by the House last week).
Fidesz’s expert László Iván told journalists that, “the government should make savings by scaling back corruption and bureaucracy, reducing the size of parliament to 200 MPs and cutting senior executive salaries in state-owned firms, rather than taking away pensioners' bonuses.”
Lászó has not specified exactly how much income this proposal would gain the budget, yet it is considered to be of a different scale of magnitude than the savings that are to be made by the current cuts.
In compliance with Fidesz’s hopes, the liberal SZDSZ has decided not to endorse the tax laws. It actually was (former Fidesz-ally) MDF that voted for the tax bills and thus saved the minority government.
According to the all-time political protocol, this actually means that the two small parties might have changed places on the political scale from left to right and as far as their allies are concerned, possibly bringing about a highly needed change of the political status quo.
According to the economic analysis of the OTP Bank referred to by the Hungarian online newspaper, Index.hu, the scrapping of the 13th month pensions and related welfare cuts are to gain a Ft66 bn income for next year’s budget.
Pensioners, on the other hand will be compensated by the unnecessarily high increase of next year’s pensions. The pension hikes are based on a Swiss indexation and consist of the expected rate of inflation and the net increase of salaries.
The rate of inflation (which is expected to amount to 4.5 percent this year), whereas the average net rise of salaries was anticipated to be around two percent. According to these figures, pensions will grow by 3.1 percent. In reality, however, the rate of inflation is unlikely to exceed 1.2 percent and the average rise of net salaries is too expected to be slightly more moderate than the originally planned 2%. Taking these figures into consideration, only a 1,1 percent rise of pensions would be necessary, claim the experts.
Furthermore, OTP anticipates a 2.5 percent nominal GDP-decrease next year, which results in the proportionate increase of pensions, which already took 20% of the budget. All in all, say the economists, despite the economic recession, pensioners are to receive a thicker slice of cake from the 2009 central budget.
The 13th month pension, along with other social benefits introduced by the Socialist Medgyessy-government between 2002 and 2004 are, today, in many ways, held responsible for the Hungary’s hazardous financial situation.
Although the opposition party, Fidesz, now strongly opposes the scrapping of the 13th month pensions, at the Parliament voting in 2003, as the Socialists pointed out during the arguments several times, all Fidesz MPs were against the introduction of this benefit. Other social benefits that were included in PM Péter Medgyessy’s 100-day program in 2002 (and that are deemed to be the reasons of the high budget deficit and the country’s foreign currency debts) were unambiguously backed by all Parliamentary parties.

Orsolya Tokaji-Nagy

03.12.2008