Conference on tripartism

EU Presidency Conference on Tripartism in an enlarged European Union

Co-organised by the Danish Ministry of Employment and the European Foundation for the Improvement of Living and Working Conditions

Hotel Comwell, Elsinore, Denmark

29-30 October 2002

• Introduction

• Background

• Programme

• Venue & contact details

See also conference information from the Danish Ministry of Employment.

Speech abstract - Erzsébet Hanti

Executive, MSZOSZ, Trade Union, Hungary

Outlines of the Hungarian National Development Plan of the social partners for preparation for the EMU

First let's cast a glance at the present economic and social situation in Hungary. The Hungarian accession process has become the last stage towards European Union this year. Our economy has been prepared for the accession. As a result of the Parliamental election that was held in April this year in Hungary, a new, left wing and liberal government came to power, replacing the previous conservative one. This change in the political life of Hungary has a great effect on the situation of the economy and social dialogue also.

In the near future we will have to face the following problems:

• the over-stretched budget;

• increased requirements for financing the so far neglected health and pension reforms;

• the relatively high inflation that is now very slowly decreasing;

• we have to make steps to catch up on the EU wages, which is harmful for the decreasing inflation rate and for financial stability.

Budget

The over-stretched budget has derived from the large commitments made by the previous government (partly in the last moments of its period in office) on one side. On the other side the over-expenditure has also been caused by the fact that during the election campaign the largest two parties (former and present governing parties) were competing in their promises.

Health and pension reforms

The new government accepted a "First hundred-day programme", including increases in social benefits and public sector wages, and at the same time planning serious tax reduction. Within 2 or 3 years reforms in health and pension systems are still to be implemented, requiring further budgetary resources.

Inflation

Inflation is still relatively high in Hungary, and the price structure is different from that in the EU members. It is inevitable that this will change in the near future as the accession process goes ahead. Food and household energy prices especially will increase in the coming years.

Increases in wages

The minimum wage has been increased by a large extent for the last 2 years; as a result, its share in the gross average wage became 52%. The new government increased some social benefits and the public sector salaries with 50% according to their promises during the election campaign, and made tax cuts as well.

Low employment rate

Another weakness is the low employment rate. Our labour market is showing signs of improvement: unemployment has falled to below 6% to this year. But the employment rate is still nearly 6% lower than the EU average. The level of inactive people is very high and there are almost 1 million people whose status is unclear. They are not inactive but they are missing from the figures of employed. The employment activity rate was 59.9% in 2000; the lowest rate even among the East-European countries.

Prospects for growth

But we can be optimistic. During the last five years the Hungarian economy has been growing at twice the EU average. Although there is a slowdown in the process of GDP growth, according to the economic forecasts, we are looking forward to maintaining a relatively high and stable growth in the coming years. This could serve as a basis for achieving real economic convergence with the European Union. But it is an open question whether the real and the monetary convergence could be implemented simultaneously, especially with regard to the ambitious lowering of inflation target.

Converging towards EMU

After the accession to the EU we also want to join the European Monetary Union within a short period. It is expected that the accession will be in 2004 and we hope that 2 years after this we can join the EMU after fulfilling the Maastricht criteria.

• Of these criteria, the inflation target seems to be the most challenging task for Hungary to fulfil. Experts forecast inflation below 6% for this year, which is a big drop compared with 9.2% inflation in last year. It is doubtful, however, whether the trend of deflation could be sustainable, and to what extent. At the moment the potential inflationary pressure from the wage side does not seem high but we have to take it into account. As regards the forecasts, the deflation trend continues and the inflation rate is supposed to exceed 1.5% after accession.

• We are ready to fulfil the interest rate criteria.

• Deficit figures seem to be realistic to exceed the necessary level after the health reform and if the deflation trend and GDP growth continues.

After the April election there were serious changes in the social dialogue system in Hungary. A new institution was set up which has similar functions as the former Interest Reconciliation Council. It covers not only labour and employment issues, but economic questions, including the tax system, the central budget, draft legislation, etc. The new government seems to pursue substantive dialogue with the social partners.

The Hungarian National Development Plan for preparation for EMU is founded on two main pillars: economic and also social convergence.

• So, what we want is to maintain the relatively high economic growth, to increase employment levels, to cut back inflation, and on the other side to harmonize the real value of Hungarian wages to the EU level.

• When? Our plan should be implemented in three phases: pre-accession period; preparations for the European Monetary Union; fully-fledged participation in the EMU.

• Why? To keep the country's competitiveness is extremely important for this period. If this is achieved, sustainable development and social peace could be maintained, although we think that stable economic growth is a necessary but not sufficient prerequisite for human development.

• Who? The social partners should implement the National Development Plan, and we think that civil society (citizens themselves and the NGOs) should also take an active part in it.

• Where? We think that the NDP should be implemented at central, regional and local level, and in this respect we consider important that between them (in the division of labour) a proper balance should be established.

• Which? In order to achieve the main goals of the NDP, the following priorities/tasks should be given special attention:

  • Elaborating various employment and training programmes;

  • Developing an inclusive society, by applying equal opportunity measures;

  • Continuing the wage catching up process;

  • Sharing responsibilities among the various actors of the Plan;

  • Gaining public support (dialogue and training programmes are needed to raise awareness);

  • Introducing capacity building measures, especially in terms of education and training;

  • Monitoring progress in implementation;

  • Gaining feedback and corrections.

For the NDP in the first phase (i.e. up to 2004), we should rely on national resources and pre-accession funds, and later (from 2004 on) on national resources and EU-funds.

Most of the prerequisites and tasks of our Plan rely on the government's competency and responsibility. Under these conditions, social dialogue has extremely high importance. The social partners (trade unions and employers) highly appreciate the readiness of the new government to pursue meaningful dialogue.

We want to utilise this positive and open attitude in order to achieve common objectives, among which facilitating the accession process to European Monetary Union is of special importance.