Tuesday, February 11, 2025

Hungary wins EU Commission approval for long-delayed budget plan

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The European Commission endorsed Hungary’s plan to comply with the Union’s budget rules on Thursday, marking a slight easing of tensions in Budapest and Brussels’ fractious relationship – at least for now. 

The EU executive’s assessment of Hungary’s ‘medium-term’ (i.e. four-year) fiscal plan had initially stalled after Hungary missed a deadline for submitting its proposal for assessment to Brussels.

Further delays ensued amid disagreements over growth projections. Hungary argued that a stellar economic performance this year would boost its tax intake and cause its budget deficit to shrink.

However, new economic data released late last year, coupled with multiple “technical discussions” between Hungarian and EU officials, led both sides to agree on a plan, which would see Budapest cut its deficit from 4.9% of annual GDP last year to 2.5% in 2026 – below the Union’s 3% threshold.

“Obviously, as time passes during the year, we get updated information on where we stand,” said a senior EU official. They added that much of the conversation between EU and Hungarian officials focused on growth estimates, assumptions, and other technical matters.

Brussels’ approval means that 21 out of the 22 submitted medium-term fiscal plans have been endorsed by the Commission. Only the plan of the Netherlands, a traditional fiscal hawk, was negatively assessed.

Five of the EU’s 27 member states have been granted extra time to submit proposals – including Germany, the Union’s largest economy, which will submit its budget plans following federal elections this February.

Despite the Commission’s approval, deep disagreements remain between Budapest and Brussels.

Roughly €19 billion – or 10% of Hungary’s annual GDP – in post-pandemic recovery and regular EU budget funds earmarked for Budapest are currently blocked by the Commission over concerns about corruption, judicial independence, and the mistreatment of migrants.

Moreover, Hungary’s high budget deficit this year means that it remains one of eight member states subject to an “excessive deficit procedure” (EDP), or formal reprimand, by the Commission.

On Friday, the EU executive will determine whether Austria, whose prospective far-right-led government submitted a new deficit-cutting budget to the Commission earlier this week, will also be subject to an EDP.

Initial talks between Austria’s Finance Minister, Gunter Mayr, and the EU Commissioner for the Economy, Valdis Dombrovskis, have been positive, EU and Austrian officials say.

[Edited by Martina Monti]





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