Hungarian president urged not to sign Fiscal Council Bill

Hungarian president Pal Schmitt has been urged not to sign the Fiscal Council Bill passed by parliament on December 13, 2010.

The bill foresees the dissolution of the Fiscal Council, Hungary’s main instrument for the control of public finances, which means that not only its three members but also all 40 members of staff would be dismissed. In its place, a new committee compromising the heads of the National Audit Office and the Central Bank as well a an economist appointed by the president is to be created.

The current Fiscal Council’s president, Gyorgy Kopits, now urged president Schmitt not to sign the bill but refer it to the constitutional court instead or demand parliament to reconsider the bill (as the government led by prime minister and Fidesz-chairman Victor Orban holds a 2/3-majority in the assembly, choosing to veto the bill is however not a very promising option). According to Mr Kopits, the new set-up of the Council would “significantly decrease the transparency of public finances and the credibility of economic policy.”

The Fiscal Council had only been created last year in order to be able to obtain a bailout led by the International Monetary Fund (IMF) and oversees budget planning and execution. Recently, the Council had criticised the government’s economic policy, e.g. temporary, industry-specific taxes and the diversion of private-pension contributions to the state.

The abolition of the Fiscal Council has to be seen in the context of other changes introduced by the Fidesz-government. Since its election victory in April, the government has begun to systematically change the structure of the Hungarian political system. Within the last months, the constitutional court’s ability to review budget related bills had been significantly decreased and the government has placed its own people in the newly established and powerful media council. Lastly, a new constitution is under way which is expected to further increase the power of the government.

One will have to see in how far Hungary’s new course will be affected by its holding the rotating EU Council presidency from January until mid-2011. Opposition politicians and civil rights activists, however, have already voiced their disappointment with the lack of pressure from Brussels.

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