I wrote about the issue in a post published here earlier this month. If a member state of the European Union has a budget deficit that exceeds the deficit ceiling of 3 percent, it triggers an excessive deficit procedure that often brings sanctions. Hungary has been under the EDP since it joined the EU in 2004. The previous government never came close to meting the 3 percent ceiling, but since 2010, Hungary has become one of the EU’s top performers in debt reduction and cutting the deficit. Here’s why we think Hungary should be allowed to exit the EDP.

In 2011, Hungary had a budget surplus of 4.3 percent. In 2012, the deficit returned but was lower than projected, reaching only 1.9 percent. Few other countries currently under the EDP have achieved those kinds of numbers. When Olli Rehn, Commissioner for Economic and Monetary Affairs and the Euro, last spoke on the issue at the beginning of May, he recommended that only three countries — Latvia, Lithuania and Romania – be allowed to exit, countries that have not performed as well as Hungary when it comes to strictly the deficit numbers. See the chart in my previous post.

Furthermore, since Commissioner Rehn’s last statement on the matter, Hungary announced a set of corrective measures to further reduce government expenditures and ensure the deficit remains below 3 percent again this year. Commissioner Rehn responded to the new measures, calling them “promising.”

If that weren’t enough, the report earlier this month on the EU’s 2013 first quarter GDP figures showed Hungary among the EU leaders, registering a +0.7% growth when many of the other EU economies were shrinking. That growth is far from what we’d like, of course, but as an indicator it suggests we’re doing something right.

Hungary undertook an obligation when joining the European Union in 2004 to keep the deficit, and debt, under control. Unfortunately, the country’s debt burden nearly doubled between 2002 and 2010, under the previous government. That burden is one of the reasons the financial crisis found Hungary so exposed in 2008 and it severely limits our flexibility in introducing economic growth measures. Clearly one of the keys to alleviating that spiraling debt is limiting spending, keeping a strict budget.

Ending the EDP is important. It represents more than just a budget-keeping procedure of the European Union. It represents a “lost decade” of uncontrolled government finances, the opposite of what the Orbán Government is working hard to maintain. Exiting the EDP would represent a milestone, an important indicator to the rest of the world that Hungary is on the right track regarding financial stability and has become able to focus on boosting growth – with cautious, well-defined measures that do not foresake stability, but help the economy grow again.

We think we’ve made a lot of progress and hope – and expect – the Commission will take notice by recommending Hungary exit the EDP.

Source: A Blog About Hungary

News reports suggest that the European Commission will recommend tomorrow that Hungary exit the EU’s Excessive Deficit Procedure. We think it’s about time.

I wrote about the issue in a post published here earlier this month. If a member state of the European Union has a budget deficit that exceeds the deficit ceiling of 3 percent, it triggers an excessive deficit procedure that often brings sanctions. Hungary has been under the EDP since it joined the EU in 2004. The previous government never came close to meting the 3 percent ceiling, but since 2010, Hungary has become one of the EU’s top performers in debt reduction and cutting the deficit. Here’s why we think Hungary should be allowed to exit the EDP.

In 2011, Hungary had a budget surplus of 4.3 percent. In 2012, the deficit returned but was lower than projected, reaching only 1.9 percent. Few other countries currently under the EDP have achieved those kinds of numbers. When Olli Rehn, Commissioner for Economic and Monetary Affairs and the Euro, last spoke on the issue at the beginning of May, he recommended that only three countries — Latvia, Lithuania and Romania – be allowed to exit, countries that have not performed as well as Hungary when it comes to strictly the deficit numbers. See the chart in my previous post.

Furthermore, since Commissioner Rehn’s last statement on the matter, Hungary announced a set of corrective measures to further reduce government expenditures and ensure the deficit remains below 3 percent again this year. Commissioner Rehn responded to the new measures, calling them “promising.”

If that weren’t enough, the report earlier this month on the EU’s 2013 first quarter GDP figures showed Hungary among the EU leaders, registering a +0.7% growth when many of the other EU economies were shrinking. That growth is far from what we’d like, of course, but as an indicator it suggests we’re doing something right.

Hungary undertook an obligation when joining the European Union in 2004 to keep the deficit, and debt, under control. Unfortunately, the country’s debt burden nearly doubled between 2002 and 2010, under the previous government. That burden is one of the reasons the financial crisis found Hungary so exposed in 2008 and it severely limits our flexibility in introducing economic growth measures. Clearly one of the keys to alleviating that spiraling debt is limiting spending, keeping a strict budget.

Ending the EDP is important. It represents more than just a budget-keeping procedure of the European Union. It represents a “lost decade” of uncontrolled government finances, the opposite of what the Orbán Government is working hard to maintain. Exiting the EDP would represent a milestone, an important indicator to the rest of the world that Hungary is on the right track regarding financial stability and has become able to focus on boosting growth – with cautious, well-defined measures that do not foresake stability, but help the economy grow again.

We think we’ve made a lot of progress and hope – and expect – the Commission will take notice by recommending Hungary exit the EDP.

Source: A Blog About Hungary

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