The key messages of the theses on the regulation of public finances

Abstract

The Republic of Hungary inherited serious external and internal public debts at the time of the regime change. In the early 1990s, financial instability was intensified by a drastic drop in the production and employment levels. The system of public duties built in full employment was not possible to be maintained. As a result of the reforms and constringent measures carried out, the country's financial standing was consolidated by the mid-90s, and kept improving until 2001. Subsequently, however, the financial balance was lost again. Public overspending, which was particularly seen in election years, only improved the conditions of economic growth temporarily. By the middle of the decade, unsettled public finance became a drag on economic competitiveness, and weakened the foundations of sustainable development. The operation of the local government system represents serious risks from the perspective of both financial equilib rium and the absorption of EU funds. All these necessitate comprehensive re-regulation of public finance.