Minister of National Economy Mihály Varga pointed out that the European Commission’s forecasts have proven to be wrong on several occasions. In 2011, it calculated with a 3.6% surplus in the Hungarian budget, while in the end the Government’s initial forecast of 4.3% was verified. In 2012, the European forecast showed a 2.6% deficit for Hungary, which proved to be significantly wrong when Eurostat published a 1.9% deficit at the end of the year. The price of these mistakes for Hungary was high, approximately 200 billion forints each year.

When examining the 2013 budget, the Commission failed to take into account several measures, such as keeping expenditure nominally unchanged both in 2013 and in 2014 in cases where there is no legislative obligation to do otherwise (for example the salaries of public sector employees or Members of Parliament), new tax measures that increase the efficiency of revenue collection or the better organised and more disciplined financial management of local governments.

However, in order to ensure that the European Commission’s excessive deficit procedure (EDP) against the country is lifted, the Hungarian Government will freeze 92.9 billion forints in the 2013 budget, Minister Mihály Varga stated.

This measure is equal to about 0.3% of GDP, which is the exact difference between the European Commission's projections for the country's deficit in 2013 and those of the Government, he pointed out. The Minister added that if the Commission deems the freeze insufficient, the on-going financing of major one-off government investments may also be suspended, providing additional savings of around 0.2% of GDP. However, these projects could be continued if covered with revenue from the sale of state assets.

If the two measures, together worth 150 billion forints still prove insufficient, the Government is ready to raise special taxes on banks, the income tax of energy suppliers and the financial transaction tax if needed. However, the Minister stated that the Government hopes that the freezing of 92.2 billion forints within the budget, together with converging domestic and European forecasts, will convince the European Commission to initiate the lifting of the excessive deficit procedure against Hungary this summer.

Source: Ministry for National Economy