European Commission Urges an Excessive Deficit Procedure against Hungary

Hungary and six other EU countries (Belgium, France, Italy, Malta, Poland, and Slovakia) could soon be subject to an excessive deficit procedure by the European Council on a proposal from the European Commission, according to a statement issued by the body on Wednesday, reports Világgazdaság.

Based on the commission’s resolution, the seven Member States concerned do not meet the EU’s deficit criteria, requiring public debt as a share of GDP to be below 60 percent, and the budget deficit to be no higher than three percent of gross domestic product. Based on recent domestic data, the Hungarian indicators do not meet any of the expectations that have been suspended over the past four years due to the war in Ukraine and the COVID pandemic.

Last year, the deficit was 6.7 percent and public debt stood at 73.5 percent.

The Commission’s communication underlines that the current findings do not imply that the panel will actually open an excessive deficit procedure for Hungary, and the recent communication is merely a factual update. The report added that the procedure could be launched in July against the seven Member States concerned, after seeking the opinion of the Economic and Financial Committee of experts, with the ultimate aim of convincing Member States to review their management – which the Committee will recommend to the Council.

Following the publication of the committee’s proposal, the forint weakened, down 0.8% in a day, after sliding to around 397 against the euro.

This would not be the first excessive deficit procedure against Hungary: a similar one was launched in 2004, and closed in June 2013, after nine years.

Fiscally, have the worst of both worlds – high deficits and debts. have high deficits but relatively low debts.

Positively, most EU countries are outside the Excessive Deficit Procedure danger zone, even if some still require to consolidate public finances. https://t.co/x32n50VNuC pic.twitter.com/jBX9HXx79h

— Daniel Kral (@DanielKral1) June 17, 2024

Hungary is not the only country subject to the procedure, as in light of the assessment contained in the report, the opening of a deficit-based excessive deficit procedure is warranted for seven Member States: Belgium, France, Italy, Hungary, Malta, Poland, and Slovakia. The European Commission has prepared a report under Article 126(3) of the Treaty on the Functioning of the EU (TFEU) for 12 Member States to assess whether they fulfill the deficit criterion of the Treaty: Belgium, the Czech Republic, Estonia, Spain, France, Italy, Hungary, Malta, Poland, Slovenia, Slovakia, Finland, and Spain. In its assessment, the Commission took into account relevant factors put forward by Member States if their government debt-to-GDP ratio is below 60 percent of GDP, or if their deficit is “close to” the three percent reference value and “temporary.” The Article 126(3) report is only the first step towards the launch of the excessive deficit procedure. In addition, as part of the Autumn European Semester Package, the Commission will propose recommendations to the Council to correct the excessive deficit in order to ensure consistency with the adjustment path set out in the medium-term plans.

Via Világgazdaság; Featured image Facebook/European Commission