Much of the international coverage of the EU’s economic forecast focused on the dim outlook for growth on the continent as well as France getting a two-year extension of its deadline to meet the deficit target. But in Hungary, where the Orbán Government has been working hard to reduce debt and slash the deficit, the spring forecast and news about the EDP was much anticipated. Since joining the EU in 2004, Hungary had never come close to meeting the three percent target until 2011 when it produced a 4.3 percent budget surplus (due, in part, to one-off measures) and 2012 which saw the lowest deficit in more than a decade, well below the EU forecast.

Let’s have a quick look at how these countries compare, based on official Eurostat data.

In 2012, Italy had a budget deficit of 3.0 percent, Latvia’s was 1.2 percent, Lithuania at 3.2 percent and Romania came in at 2.9 percent. Hungary’s, as mentioned, was 1.9 percent. Out of those five countries, Hungary had the second-best result after Latvia.

In 2011, Hungary had a surplus of 4.3 percent, Italy had a deficit of 3.8 percent, Latvia registered a deficit of 3.6 percent, Lithuania’s gap was 5.2 percent and Romania’s 5.6 percent.

If you look at just these numbers and consider the EU Commission’s pronouncement, you may be scratching your head in wonder. Hungary, after being one of the top two performers in both 2011 and 2012, and the only country to get below the three percent criteria twice in a row is only good enough for Mr. Rehn’s “maybe list.” Meanwhile, countries that have clearly not performed as well get on the “for sure list.”

Minister of Economy Mihály Varga was reserved in his statement but said it seems like an indication of the EU applying double standards. He added that the Commission is wrong in its forecast for the 2013 and 2014 budget deficit (-3.0 percent and -3.3 percent). Minister Varga has good reason to be skeptical. The 2012 budget balance, which came in at -1.9 percent was predicted by Brussels to be worse than the -3.0 percent threshold until their own Eurostat numbers proved them wrong. Currently, the Commission expects the 2013 budget deficit to reach -3.0 percent, which is better than what they had forecast for the 2012 budget this time last year.

You may also be wondering about the decision on Lithuania, given its budget deficit numbers. Why has Lithuania been given the green light out of the EDP when its 2012 budget deficit was -3.2 percent? Well, it seems there’s some flexibility in the rules that even if a member state’s balance is a little bit over the threshold, the Commission can still suspend the EDP. But why doesn’t Hungary enjoy the same treatment? And remember, even if the Brussels forecast for 2013 proves correct – for the first time, I might add – it would still be just at the threshold of -3.0 percent, not exceeding it and certainly not higher than Lithuania’s current level.

Clearly, Hungary is expected to do more here than others. One argument for that ‘special’ treatment says that Hungary failed to meet the budget deficit goals between 2004 and 2010, under the previous government. So, the country is expected to prove itself by continuing to beat the 3.0 percent target.

But that’s weak. The rules simply say that the country has to meet a deficit target, and Hungary has done that – two years in a row. What’s more, Brussels should understand that forcing unnecessary austerity measures onto a country puts downward pressure on growth and that affects other member states as well.

So, we feel like we have good reason to question the Commission on this one and ask, once again, that Hungary be treated like any other member state, according to the same criteria and measures. We look forward to our exit from the EDP.

Source: A Blog About Hungary by Ferenc Kumin

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