Brussels scolds Hungary for important mistakes in its fiscal plans!
Hungary's fiscal plans lack important information and are based on unreliable data, European Commissioner Valdis Dombrovskis said in a letter to Finance Minister Mihály Varga on Thursday (December 5th). Budapest appears to be dragging its feet on presenting realistic economic forecasts to Brussels, part of a growing pattern of confrontation between the two.
The Commission also highlights issues with data on economic growth, inflation and interest costs, saying deviations from the Commission's own methodology must be "properly justified".
The analysis is supposed to determine how Viktor Orban's government plans to return to fiscal balance over the coming years, after strict EU spending rules were eased amid the Covid pandemic and the ensuing energy crisis. But the EU executive's full assessment "may take some time ... given the breadth of missing information" which could extend the deadline from the current December 12 to mid-January next year, the letter said .
The EU treaty limits the debt its member states can incur and in principle breaches can lead to fines, although 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 after the 2007-8 global financial crisis, but the rules also apply, albeit less strictly, to those such as Hungary that do not share the currency. .
Under the EU's 'Maastricht criteria', outstanding government debt must not exceed 60% of annual economic output, or GDP, and the budget deficit must be no more than 3%. Those budget restrictions were largely suspended during the government's crackdown on the pandemic and the energy crisis surrounding Russia's invasion of Ukraine, but they have been back in place since this year.
Hungary was apparently late in submitting its fiscal plans, meaning it could not be assessed at the end of November along with most other EU member states. In light of domestic political issues, the Commission had given five other EU members extra time to present their deficit proposals. Among them are Germany, which has called an early vote for February, and Belgium, which is still trying to form a governing coalition after June's federal election.
Only one of the remaining 21 countries was given a failing grade for its fiscal plans in November. The commission chastised the Netherlands, traditionally a fiscal hawk, for a deficit projected to rise from 0.2% this year to 2.4% in 2026, partly due to income tax cuts and increased public investment.
Complying with Brussels' demands can have a toxic impact on domestic politics. French Prime Minister Michel Barnier's government fell this week after lawmakers refused to back his seven-year plan to reduce France's deficit, which at 6.2% is the highest in the eurozone.
Hungary is also nearing the end of a complicated six-month period in which it has chaired discussions among member states in the EU Council. Budapest has repeatedly vetoed sanctions and other measures taken against Russia in response to its invasion of Ukraine and has refused to implement EU court rulings on asylum rights, prompting Brussels to freeze lucrative funding. of the EU.
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