The European Parliament (EP) has approved the updating of EU budget rules. The focus of the new rules is to protect governments’ ability to invest, to ensure credibility through deficit and debt reduction mechanisms, to provide greater room for maneuver, and to improve dialogue and responsibility, reports portfolio.hu.
Due to the reform of the Stability and Growth Pact, the excessive deficit procedure can start already this year. Pursuant to the revised rules of the pact, it will be more difficult for the European Commission to subject a member state to the procedure to be followed in the event of an excessive deficit, if essential investments that increase the resilience of the economy are underway. All national expenses related to the co-financing of programs financed by the EU will have to be excluded from the calculation of the government’s expenses, the portal reads.
Over-indebted countries will have to reduce debt by an average of 1 percent per year if their debt exceeds 90 percent of GDP, and by 0.5 percent per year if the debt is between 60 percent and 90 percent.
Hungary’s public debt as a percentage of GDP stood at 73.5 percent at the end of 2023.
The Stability and Growth Pact also stipulates that the budget deficit cannot exceed 3 percent, and those member states that are above this level must reduce it annually, reaching the target level within three years. There are certain exemptions from this for defense investments, as well as if certain developments that improve economic resilience are carried out in the given member state.
In the case of the Hungarian budget, the deficit was 6.7 percent, so it was well above the target level at the end of 2023, and the government is planning a level of 4.5 percent for this year.
And all of this makes it almost certain that the excessive deficit procedure will be launched against Hungary as well.
Based on the latest EU data, Brussels called on roughly 10 other member states to report due to the high level of public debt and deficits.
However, this will not necessarily lead to the rough fighting between the European Commission and the Hungarian government seen in the first half of the 2010s: the new rules also allow greater flexibility: instead of the usual four years, three extra years are provided to achieve the objectives of the national plan , so that the respective countries return to a sustainable budget path – reports portfolio.hu.
