The state fixes the price of money at 3% — and calls it business support

Rationale

This is the single largest line in the chapter and the one where the discretionary-allocation question is sharpest. The Széchenyi Kártya Program is a state interest-rate subsidy scheme: KAVOSZ Zrt. operates it, commercial banks lend through it, and the central budget pays the difference between the market interest rate and a fixed, politically set rate offered to small and medium enterprises — currently a uniform 3% net annual rate.[^4] The 2026 interest-subsidy envelope was raised from the prior year's level, and the scheme's appeal to borrowers is, by the operator's own account, driven primarily by that favourable subsidised rate.[^4] Follow the mechanism. The state borrows — or forgoes other spending — to pay down the interest cost on private commercial credit. The visible beneficiary is the SME that takes a loan at 3% rather than the market rate. The cost-bearer is the general taxpayer who funds the subsidy, and a second cost-bearer is structurally hidden: the credit market itself. An administratively fixed 3% rate is a price control on the cost of capital. It does not reveal which borrowers and which projects can bear the true cost of credit; it conceals that information. Capital flows toward the firms and projects that clear at the subsidised rate rather than toward the firms and projects that would clear at a price reflecting genuine scarcity and genuine risk. The producer cannot signal the real cost of lending to a given borrower, and the borrower cannot signal that a project is worth undertaking at the unsubsidised rate. The result is capital misallocated toward the margin the subsidy serves — and an SME sector that becomes structurally dependent on the continuation of the subsidy, because firms that built their plans around 3% credit cannot easily absorb its withdrawal. The operator's own framing — that the scheme runs at the scale it does because of the subsidised rate — is the admission that the demand is for the subsidy, not for credit the market would otherwise price and supply. There is a public-choice layer as well. A subsidy administered through a designated operator, drawn down through a national office network, with the rate set by political decision, concentrates a visible benefit on an organised and identifiable constituency — borrowing SMEs and the operator — while spreading the cost diffusely across every taxpayer. That structure produces a standing lobby for the line's preservation independent of whether subsidised credit is the most productive use of the money. None of this means small-firm access to capital does not matter. It means the state interest-rate subsidy is the wrong instrument. The classical-liberal alternative is a deeper, less distorted capital market: the binding constraint on Hungarian SME investment is the cost and availability of capital generally, and that is a function of the savings rate, the security of property, and the absence of inflation and rate volatility — not of a state subsidy that papers over a high underlying rate. The reform direction is to address the underlying cost of capital, not to subsidise it selectively.