News of the week
Márton Nagy, Minister of Economic Development, wrote an article in the government’s newspaper about the need for a new basis for European energy policy and new types of government intervention. Economic policy must distribute the costs and burdens in wartime. “The state restricts and, if necessary, intervenes roughly to ensure that social and defence needs are met.” The examples of “Germany, that has become voluntarily a hostage to Russian energy“, the Czech Republic, Switzerland and the UK demonstrate that in the West corporate survival prevails over individual goals.
He does not agree with the European price cap, but instead prefers to consider pricing on a cost basis. He proposes that “if electricity prices were regulated on a cost-plus basis, the current level could be reduced to a fifth of what it is today, although this would remove the extra profit of many producers. In this case, therefore, it would not be the price that would be constrained, but the margin.” In contrast, a voluntary cap on gas prices would lead to an indirect Russian gas embargo and Russia could turn off the gas taps. (The article was published in the morning of the G7 summit day. Following the G7 agreement, Russia shut off North Stream 1 in the evening)
New ideas are needed. “Today, the economic effects of energy prices are much more pwerful than the effects of fiscal or monetary policy. Governments and central banks need to exert more and more control over energy prices.” The supervision of energy exchanges needs to be strengthened. Energy markets should be regulated stricter than at present. Central banks should be empowered to influence the energy market (even temporarily). The European Central Bank or a financial fund financed or national central banks could enter the energy market to improve liquidity and intervene. As Brussels is moving away from this solution, local solutions need to be considered. We have to help the viable SMEs because they are unable to compensate for the increase in energy prices by raising consumer prices and of course “we must not deviate from the Hungarian path“. (Magyar Nemzet)
The price freezes have played their role, they are meant to deal with temporary difficulties, but now they are becoming increasingly expensive to maintain, the Economic Development Minister, Márton Nagy said. He said that the sustainability of the measures should be considered from the point of view of inflation and sustainability, and that the right amount of imports should also be brought into the country. (telex)
On Hungarian owned companies
Minister Márton Nagy outlined the sectors in which they want to increase state involvement (telex):
- Hungarian ownership in the banking sector could still be increased,
- The insurance sector has not yet been consolidated,
- In the food retail sector, the targets are very far away,
- Hungarian ownership is nowhere to be found in the production of raw materials for construction.
Assessment: Learning from the government’s actions under COVID the combination of EU funds and the economic crisis will accelerate that virtually all of Hungary’s largest entrepreneurs will be loyal to the current governing party. This would give the Government a solid, undisputed political position for a long term.
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(picture: Bacsó Péter: A Tanú – Hungarian orange scene)