Page 11 - bne_newspaper_October_19_2018

Central Europe
October 19, 2018 www.intellinews.com I Page 11
Hungarian parliament votes to phase out subsidies on home savings funds
IntelliNews Pro
Hungary's ruling party Fidesz voted to phase out the state subsidy on home saving funds in an expedited procedure on October 16, one day after the bill was submitted by one of their MPs. The bill came into force on Tuesday night after the Hungarian president signed the legislation into law. The proposal does not affect existing contracts: subsidies on these will be paid until the saving period expires.
The subsidy on the home saving funds, 30% up to HUF72,000 (€222) a year, had not effectively served its purpose of supporting home con- struction recently, while home saving funds had pocketed "extra profit", MP Erik Banki said when presenting the bill on Monday.
State subsidies totalled HUF70bn annually or 0.3% of Hungary's planned expenditure for 2018. It re- mains a question whether the home saving funds can continue to operate without state subsidies.
The government will use the savings to increase funding for other programmes, Banki said. These include the home subsidy scheme CSOK, which offers grants of up to HUF10mn for the purchase of new homes for families with at least three chil- dren. The programme may be extended, but no details were given.
The decision to terminate state subsidies came out of the blue and stunned market players and depositors. On Tuesday morning people rushed to banks to open further savings accounts on the news of the speedy procedure, as the deadline to sign new contracts ended the same day.
Customers line up to sign last-minute contracts at home savings fund Fundamenta
that Hungary paid one of the highest subsidies
on these savings in Europe, but the government could have regulated profits of home saving funds more strictly or cut back state subsidies without abolishing state support altogether, they say.
Opposition MP's said the cabinet could have fine-tuned the scheme by cutting subsidies or eliminate irregularities. Opposition parties said the decision would exacerbate the housing crisis and make the renovation of apartment blocs and housing cooperative property much more difficult.
The Hungarian Banking Association cautiously criticised the decision in a statement. “We need to strengthen the willingness and ability of households to save for a sustainable economic growth,” it said.
It called for a consultation with the government on finding a new structure for pre-savings that suits everybody's interest.
Over the last 20 years, home savings funds man- aged 3.7mn saving contracts and have laid out HUF2 trillion, allowing 1mn people to renovate their homes or helping them buy one.
They also called on the government to maintain the system of tax-deductible fringe benefits, as the cabinet prepares to eliminate all such perks from next year with the exception of the holiday vouchers used in domestic tourism. Unions have also warned that if the tax allowance is abolished employers will cancel them, thereby lowering the real income of employees.
Even the government's critics acknowledged
Analysts point out that the bill was targeted at