Public Sector Shock
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Public Sector Shock

The Impact of Policy Retrenchment in Europe

Edited by Daniel Vaughan-Whitehead

The goal of this volume is to study this ‘public sector shock’. While budgetary reforms seek to ensure a more balanced and sound economic policy, they may generate new work inequalities among public sector employees, most particularly among women, who account for a considerable proportion of public sector employment. Cuts in education and training may also have an impact on the quality of human capital in both the public and private sectors, despite the fact that the recent crisis has shown the value of education as employees with better skills and training are more likely to maintain their jobs and incomes.
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Chapter 8: Hungary: Public sector labour market from crisis to crisis

Szilvia Altwicker-Hámori and János Köllő


As a combined result of falling tax revenues, the implementation of automatic stabilizers and fiscal expansion, several EU member states had accumulated huge budget deficits by the end of 2009. Increased current deficits and growing public debts require major cuts in public expenditure and public sector downsizing throughout Europe. Despite a number of similarities, however, Hungary’s road to fiscal turmoil differs from the majority in several ways. Since the mid-1980s, the Hungarian economy has had an inclination to rush into severe external and internal imbalances, which has brought the country to the verge of financial collapse at least five times in the past 22 years (1989, 1995, 2006, 2008 and 2011). The stabilization packages addressing these crises were regularly followed by episodes of fiscal expansion, which drove the economy to the next crisis and renewed austerity measures. The latest wave of restrictive measures started in 2006, preventing the budget deficit from growing substantially during the crisis. Fiscal stability was achieved with the help of an IMF–EU stand-by loan and major cuts in social expenditure, public investment and public sector wages, among other things.

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