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Hungary welcomes EU deficit procedure exit as 'recognition'

29 May 2013, 17:54 CET
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(BUDAPEST) - Hungary praised the European Commission's recommendation Wednesday that the country be removed from a fiscal monitoring procedure as "recognition" for its efforts to reduce overspending.

In a move which should unlock vital EU development funds, the Commission said Hungary had done enough to bring its budget deficit in line and should be dropped from the excessive deficit procedure (EDP) list.

"The country has produced a very serious (budget-cutting) performance, which has now been recognised in Brussels," Economy Minister Mihaly Varga told a press conference.

"We have defended our access to support funding from Brussels," he added.

The finance ministers of the 27 EU members are now expected to approve Hungary's exit from the EDP at a meeting on June 21.

Hungary has been subject to the monitoring procedure ever since it joined the EU in 2004 due to deficit and debt levels exceeding the 3.0 percent and 60 percent of gross domestic product (GDP) respectively stipulated by Brussels.

In its spring report earlier this month, the Commission forecast that Hungary would run a deficit of 3.0 percent of GDP this year, and 3.3 percent of GDP in 2014.

On Wednesday however it acknowledged that Hungary had recently taken a number of fiscal steps -- including a freeze of budget expenditures worth about 0.3 percent of GDP both for 2013 and 2014 -- and lowered its projections to 2.7 percent in 2013 and 2.9 percent in 2014.

Opposition parties welcomed on Wednesday the Commission's recommendation but said it came at the cost of painful austerity policies, with the Socialists saying the government had made "the poor pay for it".

Opposition parties have also warned that leaving the EDP will increase the risk of the government hiking spending ahead of the next elections scheduled for 2014, a charge denied by Varga.

"Spending will be disciplined in both 2013 and 2014, we aren't leaving the EDP to immediately move in the other direction," he said Wednesday.

Economists said the exit could lead to an improvement in the country's appeal to investors and an upgrading by sovereign bond ratings agencies.

"The Commission's verdict that Hungary's budget will be stable for the next two years is a positive and stabilising message," Zoltan Torok of Raiffeisen Bank told state newswire MTI.

Country-specific recommendations 2013 
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Excessive Deficit Procedure 
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