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Once again, the Hungarian economy will be put on the European Union's bench, and the consequences could be dire.

Once again, the Hungarian economy will be put on the European Union's bench, and the consequences could be dire.

According to the European Commission, Hungary's deficit will reach 5.4 percent this year, well above the planned 3 percent, so measures will be needed.

As expected, the European Commission has proposed to initiate an excessive deficit procedure against Hungary, along with several other member states. The distinctive feature of the case is that the Finance Ministers Council, meeting under the Hungarian presidency, will decide on this on Tuesday next week.

In mid-June, the European Commission announced that the budgets of Belgium, France, Poland, Malta, Italy, Slovakia and Hungary showed excessive deficits, and that it would therefore recommend starting the procedure. This happened on Tuesday, and the Brussels Committee referred the matter to the member states.

According to the justification:

“From the overall assessment, it follows that there is an excessive deficit in Hungary due to non-compliance with the deficit criterion.” According to the European Commission, Hungary’s deficit will amount to 5.4 percent this year, well above the 3 percent standard.

The objective of the excessive deficit procedure is for EU countries to correct excessively high levels of deficit and/or public debt. This procedure can be triggered if a Member State breaches the deficit limit of 3% of GDP, or there is a risk of doing so; or if it breaches the debt rule, i.e. the level of public debt exceeds 60% of GDP and is not falling at a satisfactory rate.

During the procedure, the affected country must submit a plan containing corrective measures and policies. If a Member State continues to violate these regulations, it may be required to make a budget adjustment of at least 0.5% of GDP per year until the deficit falls below 3% of GDP.

See also  Index - Economy - Almost half of Hungarians do not have the money for a vacation

The European Commission suspended the excessive deficit procedure during the four years of the coronavirus pandemic and the subsequent economic recovery, but it has now been resumed.

The Hungarian government rejects the EU's interference in Hungary's budget policy to this extent.

The case also highlights the extent to which the Hungarian economy lacks a recovery fund of around €10 billion, which the country still cannot access due to non-compliance with anti-corruption regulations.

During the Hungarian presidency, Mihály Varga (in the opening photo) will be tasked with leading this agenda item at the EU finance ministers’ meeting on July 16. At that time, the European Commission’s country-specific recommendations will be discussed, detailing the measures Hungary needs to take to reduce its deficit.

Hungary has already participated in the so-called “EU benches of shame” procedure once, right after joining in 2004, and it took 9 years to complete. In 2013, the Fidesz government celebrated the country’s removal from the procedure as a great success.

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