The Commission projects Hungarian budget deficits of 2.5% of GDP this year and 2.7% in 2013.

However, Hungary will still remain subject to the EU’s excess budget deficit procedure for repeatedly failing to bring its budget deficit below 3% of GDP.

Finance Commissioner Olli Rehn argued that a great deal of uncertainty surrounds the cabinet’s fiscal adjustments and the target numbers are too close to the 3% ceiling.

He noted that it would be impossible to remove Hungary from the excess deficit procedure before the final 2012 budget figures are made public sometime next year.

In its latest report on Hungary’s economy, the EC said Hungary faces serious but not excessive imbalances, in terms of state debt and the net negative balance of capital transfers.

The report recommends that Hungary reduce its dependence on one-off measures to reduce its budget deficit as part of a medium-term fiscal plan and incorporate the targets of the EU fiscal pact into Hungarian law.

The EU also advises that the role of the Budget Council be expanded, that bureaucracy be reduced and that the government transform financing for public transport.

The report further recommends that the government ease the effects of the flat tax, which had a negative effect on lower-income employees, and tax wealth instead.

The EC criticised the cabinet for lowering the compulsory school attendance age to 15 years, saying this contradicts EU principles and enhances segregation.

Source: Hungary Around the Clock

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