BUDAPEST, Hungary (AP) — Hungary has reduced the price of gasoline at the pump. But not if you have a foreign license plate.
It also imposes what it calls “extra profits” on industries, including airlines, with carriers like Ryanair and EasyJet raising ticket prices to cope. The Nationalist government says it is trying to mitigate an economic slowdown and the highest inflation in nearly 25 years amid Russia’s war in Ukraine, but the central European country’s unusual moves are alienating businesses and threaten a new deadlock with the European Union.
With these interventionist measures, which also include price caps on certain food products, right-wing populist Prime Minister Viktor Orban is abandoning the conservative financial model of deregulation and free market capitalism.
The policies have helped lower some prices for Hungarians, but some multinational and national companies say they hurt their bottom line and competitiveness. Meanwhile the EU has raised questions about whether the policies are in line with its rules, following clashes between the 27-nation bloc and Hungary over rule of law and corruption issues .
EU challenges a requirement introduced in May that drivers with foreign number plates pay market price for fuel at Hungarian service stations, preventing them from buying petrol and diesel capped at 480 forints ($1.25) per liter since November. Representing a price hike of up to 60% for drivers of vehicles registered in other countries, the EU has asked Hungary to remove the requirement until it can determine whether it complies with the block rules or face legal action, calling it “discriminatory”. The fuel price cap has given Hungary one of the lowest fuel prices in the EU, leading to fuel tourism and increased demand leading to late supply and shortages.
“The government had to act, but instead of opting for a more market-friendly solution, it opted for something that goes directly against the values of the European Union,” said Gyorgy Suranyi, an economist and former Governor of the Central Bank of Hungary. Associated Press.
In a radio interview last week, Orban blamed the war in neighboring Ukraine and EU sanctions on Russia on Hungary’s economic woes: its currency has weakened to record lows and inflation under underlying rose to 12.2% in May. In comparison, consumer prices increased by 8.1% in the 19 countries using the euro.
“We are now in a war situation, and this must be resolved,” Orban said. “(Companies) will have to shoulder more of the burden than they normally do, because Hungarian families cannot afford the price.”