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Hefty Hikes Hit Consumers, Unions Warn Of Trouble Without Wage Reform

January 9, 1989

BUDAPEST, Hungary (AP) _ The government announced a series of sweeping price increases Sunday that the official trade union leadership has warned may spawn strikes unless swift wage and social reforms are enacted.

The increases in the next five months, the first beginning Monday, reflect cuts in subsidies and will cost every consumer an average $25 per month, or about 10 percent of the average national per capita earnings per month.

The government announcement gave no reason for the price rises on food, drugs, autos, public transit and other items. But it was clear from previous official statements that the changes were in part aimed at qualifying for more help from the International Monetary Fund in financing the country’s $17 billion foreign debt.

As of Monday food prices will rise an average 17 percent, State Secretary Bela Szikszay, president of the national price office, was reported as saying. Dairy products will go up 40 percent.

Pharmaceuticals will increase 82 percent, although drugs for treating serious diseases will be decreased or become free, he told the Vasarnapi Hirek Sunday newspaper. Car prices are to increase as much as 38 percent.

Szikszay said food production subsidies will be cut by an equivalent $200 million this year, which accounts for 40 percent of the food price hikes, and that the other 60 percent is due to increased farming costs.

Szikszay vaguely referred to plans for making the wage system ″more flexible″ so as to reward better performance by higher wages.

The presidium of the Central Council of Hungarian Trade Unions warned Friday that the price rises in the first half of this year could touch off strikes unless wage hikes and other social measures are introduced.

According to the trade union daily Nepszava, the union leadership demanded that funds set free by cutting state subsidies should not only be used to reduce the budget deficit but to support those hardest hit.

The International Monetary Fund and the World Bank require that debtor governments slash price subsidies as a condition for obtaining credits or rescheduling debt payments.

Last year the Warsaw Pact country spent over $3 billion on servicing its foreign debt, including $1 billion on interest repayment.

Altogether, Szikszay said, this year’s consumer price index rise is to be kept to about 15 percent, slightly lower than in 1988.

The government is making compensations for the lowest income bracket, including a $7 extra payment to pensioners as of Jan. 1 this year.

On an average, real wages in 1988 were 15 percent lower than ten years ago and in fact dropped to the level of 1973 last year, the Central Statistical Office said in a survey.

The average monthly net wage equals about $130, while the government has set the minimum pension at $70.

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