Saturday

30th Sep 2023

EU to freeze millions for Hungary over deficit

Hungary on Wednesday (22 February) was given less than a year to lower its public deficit or have a third of its EU subsidies slashed, amounting to €495 million. It is the first time the EU commission takes such an action.

"This unprecedented step follows the commission's repeated warnings to Hungary urging it to step up its efforts to end the country's excessive government deficit, and its subsequent failure to take appropriate action," the EU executive said in a statement. Hungary has overshot the EU deficit threshold of three-percent of gross domestic product every single year since it joined the EU, in 2004.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Hungary is tussling with Brussels on several fronts (Photo: Tracy Russo)

The freeze will affec one third of the EU funding for infrastructure projects in Hungary and will take effect on 1 January 2013 if the Hungarian government does not take "satisfactory", "structural" measures to reduce the deficit, rather than the one-off measures tabled hastily by the Viktor Orban government on the eve of the decision.

"We received very recently two letters from the minister of finance and Prime Minister Orban, but they did not present measures which could immediately change our picture about the outlook of Hungarian public finances," EU economics commissioner Olli Rehn said during a press conference on Wednesday.

The day before, the Orban government publishedl a series of measures slashing public spending by more than 0.3 percent of GDP, which would bring Hungary's deficit to below three percent.

But the measures, such as a cut in subsidies for medicines and for the Budapest public transportation system as well as the introduction of an electronic toll pay system on motorways are deemed to be 'one-off' rather than the deeper labour market and pensions reforms expected by the EU.

Rehn said that Wednesday's decision should be seen as a "strong incentive" rather than punishment and said it was a "separate process" from the other legal actions the EU commission has taken against Budapest for limiting the independence of its judges, media and the national central bank.

The latter issue is the main stumbling block in Hungary receiving a loan from the International Monetary Fund - which would also help bring its deficit down.

Informally, EU officials admit that all these issues are interlinked and it is up to the Orban government to untie the knot.

Budapest did not take the news very well, despite the reassurances from Brussels that this action is not meant to "alienate any government".

"Our government regards it as an unfounded and unfair proposal," government spokesman Peter Szijjarto said in an emailed statement.

"It is unfathomable why the European Commission has ignored the facts: Hungary’s budget deficit was, for the first time since we joined the European Union in 2004, below three percent in 2011 and will remain so this year as well, which makes it the country with the eighth lowest deficit in the European Union," he claimed.

But the EU commission argues the deficit was brought down by a "one-off measure" - the nationalisation of a private pension fund, which still left Hungary in an excessive deficit procedure.

The Hungarian government said it "remains ready for continued consultations with the institutions of the European Union."

Hungary responds to EU infringement procedure

Hungary sent around a 100-hundred page response on Friday to the European Commission concerning three infringement proceedings launched against the country in January.

MEPs voice 'serious concern' on Hungary's democracy

The EU parliament has passed a resolution tabled by left-wing and liberal deputies urging Hungary to respect EU laws. But the right of the house says it is inappropriate and bad on timing.

EU gives Hungary one month to fix laws

The EU commission on Wednesday gave Hungary a one-month deadline to change its controversial laws or face court cases in Luxembourg, just as Budapest is struggling to secure a loan from international lenders.

IEA says: Go green now, save €11 trillion later

The International Energy Agency finds that the clean energy investment needed to stay below 1.5 degrees Celsius warming saves $12 trillion [€11.3 trillion] in fuel expenditure — and creates double the amount of jobs lost in fossil fuel-related industries.

Opinion

How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. EU women promised new dawn under anti-violence pact
  2. Three steps EU can take to halt Azerbaijan's mafia-style bullying
  3. Punish Belarus too for aiding Putin's Ukraine war
  4. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  5. EU states to agree on asylum crisis bill, say EU officials
  6. Poland's culture of fear after three years of abortion 'ban'
  7. Time for a reset: EU regional funding needs overhauling
  8. Germany tightens police checks on Czech and Polish border

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Join EUobserver

Support quality EU news

Join us