Burdensome Legacy – Political and Economic Changes Through the Glasses of a Financial Policy Maker

Abstract

The political and economic changes 25 years ago left a burdensome legacy with an impact still felt today. This legacy includes the huge national debt and the failure to complete a price and wage reform. This study aims to dispel myths about the first government failing to request debt forgiveness and prove that making such a request was not a viable option during the first years of the changes. It shows that there were some initial ideas about implementing a wage and price reform, because wages did not include many cost items commonly integrated into them in a market economy including housing, healthcare and education. Interestingly, the study proves that it would have been possible to carry out a reform in 1990 by increasing wages and reducing contributions at the same time. As this did not happen, Hungarian wage levels remained low compared to those in Western Europe. As a result, the “reform” of large systems was confined to hard-to-implement austerity measures resulting in lower living standards.