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EU lifts Hungarian cohesion fund suspension

June 25th, 2012

The leading pro-government daily welcomes the decision by the ECOFIN to lift the suspension of 500 million Euros in aid to Hungary, and explains it as an open acknowledgement of the validity of the government’s economic policies. Left-wing commentators, on the other hand, believe that the Hungarian government has wasted two years and was forced by the EU to back-pedal on the counter-productive economic strategy it initially pursued.

ECOFIN, the Council of Finance Ministers of the European Union on Friday decided to abolish the suspension of 500 million Euros worth of cohesion funds (see BudaPost March 14) which would have come into force in January 2013. The decision follows the recommendations made by  the European Commission (see BudaPost June 1), according to which the Hungarian government has proposed measures which will keep the deficit under the 3 percent EU threshold for the first time since 2004.

“The EU has retreated,” Magyar Nemzet reports on the ECOFIN decision. According to the pro-government daily, the abolition of the suspension of aid will increase investors’ confidence in Hungary, and thus the Forint will probably gain in value against the Euro. The daily quotes Finance Minister György Matolcsy’s claim that the ECOFIN decision should be seen as an acknowledgement of the Hungarian government’s achievements in successfully consolidating the budget. The Hungarian government is also optimistic that in 2013 the EU will also end the excessive deficit procedure against Hungary which began in 2004 (see BudaPost March 15).

Brussels has lifted restrictions, but it is not yet satisfied. We have not moved a step forward,” Népszabadság reports. Although Hungary will not be punished, the threat to suspend cohesion funds weakened the Hungarian government’s standing in the EU, and thus it will have less opportunity to influence the EU’s aid decisions, which could harm the country’s interests, Brigitta Szabó speculates on the long-term consequences of the case, in a commentary in the same daily. In a front page editorial, Népszabadság adds that despite the decision of the ECOFIN, there is no guarantee that the deficit in 2013 will indeed be under the required 3 percent. Among others, the State Audit Office has warned that in its opinion of the 2013 draft budget, the government significantly overestimates the revenue expectations for 2013.

In Népszava, Zsolt Zsebesi contends that there is no reason to celebrate the EU decision to abolish the suspension of aid. The left-wing columnist believes that the EU has successfully forced its will on the Hungarian government. “We are exactly where we would have been before the government announced its national freedom fight. … We have wasted two years,” Zsebesi suggests.

The verdict of the ECOFIN clearly shows that finance ministers of the EU appreciate the fiscal policies of the Orbán government, most importantly its efforts to reduce the deficit,” Csaba Szajlai writes in Magyar Hírlap. The conservative columnist who has  been highly critical of the Orbán government’s economic policies in the past, notes that the restrictions the Hungarian government proposed in order to balance the budget could not be pushed through in most of the EU member states.

Szajlai, however, warns that it would be complacent to deny that the Hungarian growth outlook remains grim. Even if an agreement is brokered with the IMF on a precautionary credit line, one should not realistically expect the IMF loan to help the government to boost production with increased public spending, Szajlai remarks.

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