May 8, 2018 / 8:17 AM / 3 months ago

Hungary plans fiscal stimulus, sees no Polish-style conflict

BUDAPEST (Reuters) - Hungary’s government is planning new fiscal stimulus measures to keep economic growth above 4 percent, a senior aide told Reuters late on Monday, ruling out a Polish-style conflict with European Union authorities over the rule of law.

Parliament holds the opening session after the recent election in Budapest, Hungary May 8, 2018. REUTERS/Bernadett Szabo

Prime Minister Viktor Orban won a third successive term in power last month at an election dominated by his fierce anti-migrant campaign, which resonated with large swathes of the electorate, especially in poorer, rural areas.

The landslide gave Orban’s ruling Fidesz party the power to rewrite any laws, including the constitution. Gergely Gulyas, Orban’s new chief of staff, said no reforms were in the pipeline that would undermine judicial independence.

Poland, eastern Europe’s biggest economy and Hungary’s key ally in the EU, has been locked in a legal battle with the European Commission over reforms affecting its judiciary.

“Should there be any changes, that will not affect the constitutional requirement of judicial independence,” Gulyas said when asked whether a similar conflict could emerge in Orban’s next term in power, after a batch of sweeping reforms following his 2010 election victory.

“If there should be any intention to change this, that would pertain to the justice minister. However, as of today, I am not aware of anything to that effect,” Gulyas said in an interview in Hungary’s imposing Parliament building overlooking the Danube River.

Gulyas, who is currently the leader of the Fidesz parliamentary group, said keeping economic growth above 4 percent in the coming years would require additional measures, which were currently discussed but no decisions were made.

Hungarian Prime Minister Viktor Orban attends the opening session after the recent election in Budapest, Hungary May 8, 2018. REUTERS/Bernadett Szabo

“From the agriculture sector, to industry, the machinery sector and construction, we would like to see that this development is broad-based,” Gulyas said, declining further comment on the specific proposals being discussed.

He said the new government would press on with hikes in the minimum wage, which have filtered through to the broader economy, helping Orban’s re-election bid.

Gulyas said the wage rises and strong economic growth could help Hungary catch up to western living standards faster, adding however that in his personal opinion, joining the euro zone would not be likely during the next four years.

“For now, there is a consensus among most economists that we should enter the euro zone, when we reach 80 to 90 percent of the average EU living standards,” Gulyas said, adding that Hungary was currently at 69 percent.

“We should join the euro zone when it serves the interests of the Hungarian economy and citizens.”

Gulyas also said Hungary would not be headed into talks about the EU’s next budget with an intention to veto it.

The European Commission proposed a bigger new multi-year budget last week that will trigger battles among members over how to fill the funding gap left by Britain’s exit next year.

Poland, which the Commission has in its sights with a new mechanism to penalise authoritarian governments that impinge on independent judges, warned of “a long road ahead” to reach the unanimous compromise required to put the budget into effect.

“We belong to those, who approach the departure of the second-strongest economy from the EU rationally,” Gulyas said. “We have taken up a negotiating position that is open to sensible proposals.”

Reporting by Gergely Szakacs and Krisztina Than; Editing by Shri Navaratnam

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