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    Choice and Competition Reform: Central European University Budapest, Hungary

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    Hummels1000
    This document discusses Hungary's economic challenges and proposes reforms in three key areas: 1. Health care reform involving three pillars of financing including mandatory private health insurance. 2. Pension reform replacing the first pillar with a notional defined contribution scheme and taxing existing pensions. 3. Employment and education reforms such as rationalizing public education, financing tertiary education through tuition fees, and making the public sector subject to normal hiring and firing practices. The proposed reforms aim to reduce fiscal deficits, increase competitiveness, and set Hungary on a path towards long-term economic convergence.

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    Choice and Competition Reform: Central European University Budapest, Hungary

    Uploaded by

    Hummels1000
    13 views12 pages
    This document discusses Hungary's economic challenges and proposes reforms in three key areas: 1. Health care reform involving three pillars of financing including mandatory private health insurance. 2. Pension reform replacing the first pillar with a notional defined contribution scheme and taxing existing pensions. 3. Employment and education reforms such as rationalizing public education, financing tertiary education through tuition fees, and making the public sector subject to normal hiring and firing practices. The proposed reforms aim to reduce fiscal deficits, increase competitiveness, and set Hungary on a path towards long-term economic convergence.

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    Choice and Competition

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    Choice and Competition

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    This document discusses Hungary's economic challenges and proposes reforms in three key areas: 1. Health care reform involving three pillars of financing including mandatory private health insurance. 2. Pension reform replacing the first pillar with a notional defined contribution scheme and taxing existing pensions. 3. Employment and education reforms such as rationalizing public education, financing tertiary education through tuition fees, and making the public sector subject to normal hiring and firing practices. The proposed reforms aim to reduce fiscal deficits, increase competitiveness, and set Hungary on a path towards long-term economic convergence.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    13 views12 pages

    Choice and Competition Reform: Central European University Budapest, Hungary

    Uploaded by

    Hummels1000
    This document discusses Hungary's economic challenges and proposes reforms in three key areas: 1. Health care reform involving three pillars of financing including mandatory private health insurance. 2. Pension reform replacing the first pillar with a notional defined contribution scheme and taxing existing pensions. 3. Employment and education reforms such as rationalizing public education, financing tertiary education through tuition fees, and making the public sector subject to normal hiring and firing practices. The proposed reforms aim to reduce fiscal deficits, increase competitiveness, and set Hungary on a path towards long-term economic convergence.

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    © All Rights Reserved
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    Download as ppt, pdf, or txt
    of 12

    Choice and Competition Reform

    LAJOS BOKROS
    professor of economics and public policy
    chief operating officer

    Central European University


    Budapest, Hungary 1
    First years in the EU with mixed
    performance (2004-2006)
    Higher growth to slow Fiscal deficit increase
    once again next years ( 10% after austerity !)
    Return to export-led Deficit target missed
    growth in the last 2 yrs for 5 years in a row
    Better trade balance CA deficit almost 9%
    (less than 4 % of GDP) dangerously high
    Higher net FDI (over 5 years of increasing
    EUR 3 bn in all years) unemployment (7.4%)
    Low inflation recently no improvement in
    but to grow again competitiveness 2
    Performance average in V4 but
    worse than Baltic3, Rom & Bul
    Slovenia: small CA & fiscal deficit, little net
    FDI, low inflation, relatively slow growth
    Baltic3 + Rom & Bul: no fiscal but large CA
    deficit, growing FDI, growth well above 5 %
    Slovenia + Baltic3 are already in ERM II.
    Poland: no CA but large fiscal deficit, little
    inflation, FDI & restructuring, high growth
    Czech R & Slovakia: large fiscal, smaller CA
    3
    deficit, large FDI and accelerating growth
    Macroeconomic problems in
    Hungary
    Large twin deficit clearly limiting growth
    Large fiscal redistribution reduces savings
    & investment performance & potential
    growing structural unemployment with
    large public sector overemployment
    interest rates kept relatively high and keep
    rising to support HUF & fiscal borrowing
    suboptimal macropolicy mix: restrictive
    4
    monetary & expansionary fiscal policy
    Fiscal issues behind macro
    picture in Hungary
    Excessive public sector wage growth in
    20O1-2OO5 has inflated wage bill in budget
    Tax loopholes widened and multiplied,
    widespread tax avoidance and evasion
    Pension and Health Care Funds sharply in
    the red and in need of growing transfers
    Current expenditure crowds out public
    investments and matching funds for EU
    5
    credibility of fiscal policy is extremely low
    Microeconomic problems
    arising from macro and fiscal
    Wage spillover reduces competitiveness
    in low tech & low value added sectors
    Inadequate spending on R&D in SMEs,
    little innovation and low investment
    Sectoral split between multinationals in
    high tech manufacturing and the rest
    Inadequate (re)training and education,
    slowly but surely growing unemployment
    6
    Economic and social structure dualisation
    Fiscal framework for substantive
    structural reforms
    Comprehensive, consistent and credible
    reform program to reduce deficit & size
    Focus on the expenditure side: reduce
    public funding - increase private funding
    Priority areas: health care and education
    Rationalize and reduce fiscal transfers to
    churches, NGOs, other special programs
    broaden tax base; eliminate exemptions
    7
    separate social support from tax system
    Structural reforms I.
    Health care
    3 pillars for financing:
    (1) public HC fund,
    private (2) mandatory and (3) voluntary
    health insurance provided by accredited
    insurance companies in competition
    Split financing for most services for all
    secondary and tertiary providers: public
    funds, private insurance and co-payment
    universal HC (solidarity) tax to first pillar
    regulated mandatory fee for second pillar
    8
    Structural reforms II.
    Pension system
    First pillar to be replaced by a notional
    defined contribution (NDC) scheme
    automatic balancing mechanism (systems
    liability is indexed to the growth of average
    income with fixed contribution rates)
    Even existing pensions are to be taxed by
    the universal HC (solidarity) tax
    Minimum social assistance to those who
    never paid any contribution (0. pillar)
    9
    Structural reforms III.
    Employment and education
    Public education (primary and secondary)
    to be rationalized (less schools & teachers)
    Tertiary education operating costs to be
    financed by tuition fee ( X%exemptions)
    No tenure and privileged public employee
    status in higher education and health care
    Flexible contracts, hiring and firing even in
    public administration at all levels
    10
    No labor income without PIT and HC tax
    Long term challenges in Hungary

    Comprehensive tax reform with consistent


    changes promoting growth and investment
    Streamline & reduce public administration
    Rationalize the structure of subsovereign
    government, its tasks and financing
    Modernize fiscal support for agriculture
    and rural development (EU-coordination)
    Create a new and transparent system for
    11
    financing political parties and campaigns
    New convergence program
    Euro ???

    Will Hungary become once again a


    regional leader in structural reforms
    and convergence ?
    12

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