The EP voted on the rules on the basis of which proceedings can also be initiated against the Hungarian government

On Tuesday, the European Parliament (EP) voted on the new rules by which the EU supervises the budgets of the member states. The regulations try to prevent national governments from spending too much unfunded, which causes them to go into debt and have to be bailed out by others.

The rules were suspended due to the coronavirus epidemic, but will be reinstated this year, modified. For countries that have it

1. whose debt is higher than 90 percent of their gross national product (GDP), they must pay an average of one percent per year,
2. and half between 60 and 90 percent.
3. In addition, the public budget deficit of more than three percent of GDP should be reduced to one and a half in times of growth, as well as a reserve with which to prepare for the more difficult economic situation.

Based on the rules, a significant part of the member states, including Hungary, can expect a procedure. According to data released by Eurostat on Monday, the state debt was 73.5 percent last year, which would tick the second condition, but it fell by one and a half percent, well more than the required half percent. The third condition may be a bigger problem: the deficit rose to 6.7 percent, exceeding the government’s expectations. Based on Monday’s data, only the Italian government compiled a higher deficit than this, and it has been stubbornly high since 2020, at least double the three percent limit every year, although this is also worsened by one-off effects (epidemic, spending before the 2022 election).

On the other hand, there is no question that the EP has decided to initiate any budgetary procedure, which can be initiated by the European Commission. In addition, the EP’s announcement highlights that it is more difficult for the body to initiate an excessive deficit procedure if essential investments are underway, and in addition, member state co-financing of EU programs has been excluded from the calculation of the deficit. The rules must be officially adopted by the EU’s Council of Ministers, although this is only expected to be a formality after the body already reached an agreement with the EP in February.

In September, member states must present a four-year national plan on their spending targets, as well as investments and reforms. If they can justify it in the Council, they can get another three years.

In the EP, all three relevant legislation or amendments achieved a comfortable majority. According to the statistics of the EP, every Hungarian representative who voted for the decree on budgetary supervision and the coordination of economic policy supported it. On the other hand, the Fidesz representatives voted no (with the exception of Ádám Kósa on one occasion), while the others voted yes for the amendment of the legislation on the excessive deficit management procedure and the budget framework.

Cover image: Alexis Haulot / European Parliament / European Union