Europese Commissie start procedure tegen Hongarije vanwege buitensporig tekort op betalingsbalans (en)

Based on the assessment of its budgetary situation, the European Commission today recommended to the Council to decide that the action taken by Hungary to correct its excessive budget deficit was ineffective. While some consolidation was achieved, the deficit targets of 4.6% of GDP for 2004 and 4.1% of GDP for 2005 are likely to be missed by 0.9 percentage point.  Further measures appear necessary to ensure that the objective set by the government and recommended by the Council of bringing the deficit below 3% of GDP in 2008 is safely achieved. 

"In spite of its ambitious plans, Hungary's action to correct the excessive deficit situation in line with the adjustment path of its May 2004 convergence programme, was not effective. Further corrective action is needed in 2005 and subsequent years to maintain its chances of reducing the general government deficit below 3% of GDP by 2008," said Joaquín Almunia, European Commissioner for economic and monetary affairs.

On 5 July, based on the evidence that the government deficit in Hungary stood at some 6%, thereby clearly exceeding the 3% of GDP reference value in 2003, the Council, on recommendations from the Commission, decided that an excessive deficit existed in Hungary, and issued a recommendation according to Article 104(7) of the Treaty with a view to bringing the excessive deficit situation to an end^[1].

The Council recommended to Hungary to correct the excessive deficit in a multi-annual framework, by 2008 at the latest, in line with Hungary's May 2004 convergence programme. In conformity with the Stability and Growth Pact, the Council established a four-month deadline, i.e. until 5 November 2004, to take effective action regarding the measures envisaged to achieve the 2005 deficit target. In addition, the Hungarian authorities were recommended to stand ready to introduce additional measures, if necessary, in order to achieve the deficit target for 2004 of 4.6% of GDP.

In the Commission's view, while a certain degree of consolidation was achieved in 2004, the action of the Hungarian authorities since July (a corrective package of 0.2% of GDP and a measure to avoid further expenditure slippages) is inadequate for meeting the 2004 target, which is expected to be missed by 0.9 percentage point according to the Commission Autumn forecast.

The government also revised its 2005 target upwards to 4.7% of GDP from the 4.1% of GDP contained in the May convergence programme and the recommendation. While the 2005 budget includes newly introduced rules for expenditure restriction, these may turn out to be insufficient, and there are also risks on the revenue side. Accordingly, the Commission Autumn forecast projected a deficit of 5.2% of GDP, thereby implying a slippage of over one percentage point compared to the original target.

Therefore, in spite of a number of measures taken since July, Hungary is not in compliance with the Council recommendation. Under Article 104(8) of the Treaty, as clarified in the Stability and Growth Pact, the Commission has an obligation to recommend to the Council to establish formally that Hungary has taken no effective action in response to its 104(7) recommendation. It must be noted that since Hungary is not yet a member of the euro area the further two and last steps of the excessive deficit procedure under Article 104(9) and 104(11) do not apply, which means that no sanctions would be possible.

The text of the Commission's assessment can be found at:

http://europa.eu.int/comm/economy_finance/about/activities/sgp/procedures_en.htm

^[1] In total, seven countries received Council recommendations at that date. Concerning the assessment of compliance with the Council recommendations, see separate press releases IP/04/1527 for Greece and IP/04/1529 for the five other countries.