A triumph of failed ideas European models of capitalism in ... - Journal

András Tóth, László Neumann and Hortenzia Hosszú.................................................................................................................................................................sudden U-turn was a bolt from the blue for most Hungarians. Thingswere made worse by the leaking of a speech given by the Prime Ministerin autumn 2006, in which he admitted to a closed meeting of theMSZP’s parliamentary faction that the government had lied during theelection campaign, did not govern properly and had forged statisticaldata to mislead the electorate in order to win re-election. The leaking ofthe speech led to an eruption of protests throughout the country.FIDESZ accused the government of winning the election under falsepretences and demanded a new election. The Gyurcsány-led government,however, refused to accede to the demands of the opposition. It hopedthat a sharp correction and rebalancing of the budget would cut therecession short and lead to growth from 2008 onwards, thereby hopefullyrestoring the government’s fortunes.In early 2008, the Hungarian economy seemed to return to growth afteran anaemic 2007. However, in autumn 2008 the credit crunch hit. Theensuing financial crisis forced Hungary to turn to the IMF and to begina new round of drastic economic austerity measures to reduce thebudget deficit. At the same time, the export-led engine of the Hungarianeconomy came to halt: 2009 saw a 6.7 per cent fall in GDP, mainly dueto the worldwide recession. The collapse of the Hungarian economy wasespecially deep as the state, after years of pro-cyclical spending drift,had to continue to cut budget spending instead of initiating Keynesianstyleanti-cyclical measures to lessen the impact of the recession in thereal economy.The crisis also shed light on the unsustainable employment and demographictrends of Hungarian society. Hungary, after the collapse of thestate-owned industrial sector, emerged as a country with a substantialinactive population, partly due to the relatively generous early pension anddisability schemes, which allowed older people to opt to be welfarerecipients instead of being unemployed. A huge segment of the Hungarianactive population is unable to find work due to health problems related toage, but also poor education and living in remote rural areas. The rapidaging of the society made things worse. The Hungarian population, andthat of the working age population, is both shrinking and greying. Thisparallel process is increasingly imposing an unsustainable burden on thewelfare budget, especially as far as pension payments and health costs areconcerned (Hugh 2007; Fazekas, Cseres-Gergely and Scharle 2008).144 A triumph of failed ideas – European models of capitalism in the crisis