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Greg Dorey


Part of UK in Hungary

12th November 2010

New route to jobs, growth and competitiveness?

When the current Hungarian government came to power, they made clear that creating more jobs and growth would be their key priority. That fits neatly with the EU’s own priorities – when Hungary takes over the Presidency in January, it can be in the driving seat on this vital issue. National and EU goals will merge neatly together.

The financial and economic crisis of the past few years led to a sharp fall in economic growth rates and a steep increase in unemployment rates worldwide. This twin problem has made the countries affected less competitive. And EU member states – along with other developed countries – are still struggling with the negative impact of the crisis. The Lisbon Strategy has been of limited success as a tool for enhancing jobs and growth in the EU. So people are hoping for rather better from its successor strategy – the so-called “EU2020”.

Hungary is a relatively small, open, export-oriented and therefore vulnerable economy. So there is no surprise that the global slowdown has had a major negative impact on its economic growth. Hungary is now trying to find ways to recover from the crisis; shares the discontent over progress under the Lisbon Strategy; and supports EU2020 and its main objectives – establishing more jobs and maintaining a competitive EU presence in the international market. And more generally it wants the EU to focus on the freedom, well-being and security of its citizens and to find solutions for their real problems, within the European framework. EU2020 has therefore been identified as one of the main priorities of the Hungarian Presidency, together with another linked topic of major current relevance – economic governance.

Stimulating economic growth is important for all countries right now. In Hungary, so far, the government has had limited room for manoeuvre because of structural budgetary problems. In practice EU Structural and Cohesion Funds flowing into the country have served as the main source of stimulus. But re-launching economic growth also depends on expanding and revitalizing exports markets; attracting more foreign direct investment; increasing employment levels; and achieving more competitiveness through innovation and research and development.

Learning the right lessons from the crisis and taking appropriate policy measures will enable us to create a global economy that is sustainable, resilient and able to face the climate change challenge. That means free and flexible markets; promoting enhanced trade and investment opportunities; reform of international architecture to reflect current economic realities; and moving towards a low carbon, high growth economy. Decreasing the tax burden when this is possible, on employment and on businesses, could also stimulate economic growth in Hungary – that is the government’s intention. Coupled with tougher enforcement, this approach could slice into the black economy and benefit multinational companies and SMEs. The latter will have a key role in increasing employment and are already a critical part of the supply chain for bigger companies here.

Our Embassy has been trying to help stimulate the debate on these issues in collaboration with the Central European University and other partners – by organising well-received series of seminars on the Economic Crisis and Global Europe in the past 18 months. These dealt with e.g. the roots and consequences of the crisis; international institutional reform and global governance; trade and development; the concept of a high growth low carbon economy; and the future of the EU, including EU2020. The aim was to generate thinking and discussion and to exchange best practices and identify policy solutions. Given the involvement of many decision makers and opinion formers in these seminars, we hope some of the ideas identified will be taken forward during the Hungarian Presidency.

A Presidency that sees success on policies that really matter to our citizens, such as creating jobs and growth through EU2020, would rightly be celebrated.