Europese Commissie tevreden met Hongaarse inspanningen om begroting op orde te brengen (en)

The European Commission concluded today that the Hungarian authorities had taken effective action regarding the 2005 budget deficit, in line with the new Council recommendations of March this year. But achieving the deficit target of 3.6% of GDP in 2005 may require further action and important and decisive adjustments will be needed to cut it further to 2.9% in 2006.

"I am encouraged by the corrective measures undertaken by the Hungarian authorities to try and reach the budget deficit target in 2005. Sound finances are key for the Hungarian economy and citizens and should be pursued not only this year but also beyond 2005" said Joaquín Almunia i, European Commissioner for Economic and Monetary Affairs.

On 5 July 2004, on the basis of a Commission recommendation, the Council concluded that, at 5.9% of GDP^[1], Hungary had an excessive deficit in 2003 and issued recommendations for its correction, by 2008, below the 3% ceiling set in the EU Treaty.^[2] Since the deficit was significantly above the reference value when Hungary joined the European Union in May 2004 and because of the ongoing structural shift to a modern service-oriented market economy, Hungary was given longer than is usual under Regulation 1467/97, on the excessive deficit procedure (EDP), to correct its deficit.

Having assessed the budgetary measures proposed by Hungary, the Council in January 2005, on the basis of a Commission recommendation, concluded that the planned action was not sufficient to reach the government's deficit target for 2005. It issued new recommendations under Article 104.7 on 8 March, setting a deadline of 8 July to take further measures, according to the EDP procedure.

The Commission adopted today a communication stating that on the basis of the current information the Hungarian authorities appear to have taken effective action in view of achieving the deficit target of 3.6% of GDP this year. In particular, the authorities permanently froze a set of expenditures and limited the use of carried-over spending appropriations.

However, the budgetary situation in Hungary remains vulnerable. The correction of the excessive deficit in 2005 demands effective implementation of all the measures envisaged and of additional action, to which the Government has committed itself, should further expenditure overruns appear later in the year. Due to the expiry of the one-off revenues of 2005 and the recently announced tax cuts, revenue will decrease in 2006 while investment expenditure is expected to increase. Therefore, important adjustments and decisive action, including the adoption of a prudent budget for 2006, will be needed to achieve the deficit target of 2.9% of GDP for that year.

The targets of 3.6% of GDP in 2005 and 2.9% in 2006 were set by the Hungarian government itself in its convergence programme update of December 2004 endorsed by the Commission and the Council. ^[3]

The Commission also underlines its readiness to recommend to the Council to enhance the budgetary surveillance and to take the necessary action within the provisions of the Treaty and the Stability and Growth Pact should this appear necessary at a later stage

The full document of the present Commission communication and the previous documents relating to Hungary can be found under the following link:

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

^[1] The figure was later revised to 6.2%

^[2] In total, seven countries received Council recommendations at that date, including also the Czech Republic, Cyprus, Malta, Poland, Slovakia, as well as Greece.

^[3] The new targets incorporate, as decided by the Hungarian authorities in December 2004, 1.1% and 1.2% of GDP worth of contributions to private pension funds which according to Eurostat can be reported inside the Government sector until the Spring 2007 notification. Considering this adjustment, the new target in 2005 is somewhat lower than the original target for 2005 contained in the authorities' convergence programme of May 2004.