Hungary’s fiscal strategy has drawn sharp criticism from the European Commission for lacking crucial details and relying on questionable data, as tensions grow between Budapest and Brussels over economic governance and compliance with EU rules.
Fiscal strategy under scrutiny
As Euronews reports, Hungary’s fiscal strategy has come under scrutiny for lacking crucial details and relying on questionable data, according to European Commissioner Valdis Dombrovskis’ letter sent to Finance Minister Mihály Varga. The letter, dated 5 December, highlights concerns over Hungary’s unrealistic economic forecasts submitted to Brussels, which are essential for evaluating its medium-term fiscal plans. Dombrovskis emphasised that key elements of the plan are either absent or require significant refinement, complicating the European Commission’s ability to complete its assessment.
Critique on Hungarian economic growth
The Commission also criticised discrepancies in Hungary’s data on economic growth, inflation, and interest expenditure, urging better alignment with EU methodologies. The analysis aims to detail how Prime Minister Viktor Orbán’s government intends to achieve fiscal balance after pandemic-induced spending relaxations. However, the EU’s evaluation may be delayed beyond the current 12 December deadline, potentially extending into January, due to the extensive gaps in the submitted information.
Strict debt and deficit limits
The EU imposes strict debt and deficit limits on member states under its Stability and Growth Pact, though enforcement has historically been lenient. These rules, aimed at preventing economic crises like Greece’s in 2007-8, were suspended during the pandemic and energy crisis but have been reinstated this year. Hungary’s delayed fiscal plan submission meant it missed November’s assessments, unlike most other member states. Exceptions were made for five nations, including Germany and Belgium, facing political disruptions. Of 21 assessed plans, only the Netherlands failed, criticised for its projected deficit increase driven by tax cuts and higher public investment.
Meeting Brussels’ fiscal demands often stirs domestic political tensions, as seen in France where Prime Minister Michel Barnier’s government collapsed over resistance to his deficit-reduction plan. Meanwhile, Hungary faces its own challenges after six contentious months chairing the EU Council. Budapest has blocked sanctions against Russia, defied EU court rulings on asylum rights, and faced suspended EU funds as a result of its actions.
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