The European Parliament has adopted the new budget rules – proceedings may be initiated against Hungary

The European Parliament (EP) has adopted the update of the European Union’s budget rules, which aims to increase the economic flexibility of the member states. Under the new rules, governments’ ability to invest must be protected while maintaining fiscal discipline. The reform of the Stability and Growth Pact (SGP) makes it possible for EU-financed investments not to be included in the calculation of the national budget deficit, thus easing the situation of the member states subject to the excessive deficit procedure.

According to the reforms, countries with excessive debt must reduce their debt by at least 1% per year if it exceeds 90% of GDP, and by 0.5% if it is between 60-90%. In the case of the budget deficit, the maximum allowed will remain at 3%, but governments must reach this target level within three years.

Hungary, whose public debt to GDP ratio was 73.5% at the end of 2023 and whose budget deficit reached 6.7%, may face the initiation of the excessive deficit procedure. The Hungarian government is planning a deficit of 4.5% for this year, which shows a significant improvement compared to previous years.

The updated rules give member states more flexibility than before, allowing them to have up to seven years to rebalance their budgets instead of the usual four years. The new framework aims to support the growth and resilience of economies while maintaining fiscal discipline across the EU.