Invoering euro in Hongarije niet voor 2008 (en)

Hungary is unlikely to meet the targets required for joining the single currency by 2008.

On Tuesday (13 January), incoming Finance Minister Tibor Draskovics confirmed in a press conference that his country will run a budget deficit of 4.6 percent of GDP in 2004, according to reports in the Swedish newspaper Dagens Nyheter. But in order to join the euro, the budget deficit must be below 3 percent of GDP.

Mr Draskovics said Hungary intends to join the ERM-2 when it joins the European Union in May 2004.

ERM-2 is an exchange rate mechanism for EU countries which are not taking part in the monetary union. At present, Denmark is the only country in ERM-2. Neither Sweden nor the UK are participating.

The currency may then fluctuate by a certain percentage relative to the central parity rate. In Denmark's case, the Danish krona is allowed to fluctuate by +/-2.25 percent against the euro.

Cutting the budget

In March, Hungary will officially reveal whether it will be ready to join the eurozone by 2008. This is, however, very unlikely to happen as eurozone countries are not allowed to run a budget deficit higher than 3 percent of GDP.

Last week Hungarian Finance Minister Csaba Laszlo was sacked when the 2003 budget deficit turned out to be 5.6 percent.

The new man in office, Tibor Draskovics, will be Hungary's eleventh Finance Minister in eleven years.

His difficult task will be to cut the budget by some 155 bn forint (600 million euro). Hungary has Central Europe's highest interest rates at 12.5 percent.