Budapest appears to be dragging its feet over submitting a realistic picture of Hungary’s economic outlook, according to a European Commission letter seen by Euronews – the latest potential quarrel in a pattern of worsening relations with Brussels.
ADVERTISEMENTHungary’s fiscal plans are missing significant information and based on unreliable data, European Commissioner Valdis Dombrovskis has said in a letter to Finance Minister Mihály Varga, dated Thursday (5 December) and seen by Euronews.
Budapest appears to be dragging its feet in submitting realistic economic forecasts to Brussels – part of a growing pattern of confrontation between the two.
“At this stage, there are still important elements missing, or requiring further adjustment and specification, for the Commission to finalise its assessment” of Hungary’s medium-term fiscal plan, said Dombrovskis, who is European Commissioner for the Economy.
The Commission also highlights issues with data on economic growth, inflation and interest expenditure, saying that deviations from the Commission’s own methodology need to be “duly justified”.
The analysis is supposed to set out how Viktor Orbán’s government plans to return to fiscal balance over the coming few years, after strict EU spending rules were relaxed amid the covid pandemic and the ensuing energy crisis.
But the EU executive’s full assessment “may take some time … given the breadth of the missing information” – possibly stretching the deadline from the current 12 December into the middle of January next year, the letter said.
Fines for breaches
The EU Treaty limits the debt its member states can incur – and in principle breaches can lead to fines, even if such tough measures are rarely if ever imposed.
The bloc’s Stability and Growth Pact aims to avoid economic turmoil in the eurozone, as seen in Greece following the global financial crisis of 2007-8 – but the rules also apply, albeit less strictly, to those such as Hungary who don’t share the currency.
Under the EU’s ‘Maastricht criteria’ outstanding government debt should not exceed 60% of annual economic output, or GDP, and the budget deficit should be no more than 3%.
These budget strictures were largely suspended during the government splurges of the pandemic and the energy crisis surrounding Russia’s invasion of Ukraine, but they are back in force as of this year.
Hungary was apparently late submitting its fiscal plans, meaning it couldn’t be assessed in late November alongside most other EU member states.
In light of domestic political issues, the Commission had given five other EU members extra time to submit their deficit proposals. Among them are Germany, which has called a snap poll for February, and Belgium, which is still attempting to form a governing coalition after June federal elections.
Just one of the remaining 21 countries was given a fail grade for its fiscal plans in November. The Commission chastised the Netherlands, traditionally a fiscal hawk, for a deficit predicted to rise from 0.2% this year to 2.4% in 2026, due in part to income tax cuts and a rise in public investment.
Toxic impact
Conforming with Brussels’ demands can have a toxic impact on domestic politics. The government of French prime minister Michel Barnier fell this week after lawmakers refused to support his seven-year plan to bring down France’s deficit, which at 6.2% is the highest in the eurozone.
Hungary is also approaching the end of a complicated six months in which it has chaired discussions among member states in the EU Council.
ADVERTISEMENTBudapest has repeatedly vetoed sanctions and other measures taken against Russia in response to the Ukraine invasion, and has refused to implement EU court judgements on asylum rights, leading Brussels to suspend lucrative EU funds.
