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Excessive deficit procedure against Hungary to be lifted

May 31st, 2013

Right-wing commentators celebrate Hungary’s exit from the EU excessive deficit procedure, which they interpret as an acknowledgment of the government’s performance. Left-wing pundits, on the other hand, believe that the EU pressurized Orbán into submission, and fear that the Hungarian economy will not grow any time soon.

On Wednesday, the European Commission recommended that the Council finally lift the Excessive Deficit Procedure to which Hungary has been subjected ever since she joined the EU in 2004. In a separate report, however, the Commission criticized the surplus taxes levied on telecom companies, banks and large retail firms as well as the utility tariff cuts. The Commission has also warned about increasing poverty in Hungary. Fidesz welcomed the decision which it regards as a recognition of the successful economic policies of the government. The opposition parties, on the other hand, noted that in order to keep the deficit low, the government introduced painful austerity packages which increase inequality and also hinder economic growth.

The Orbán government has done its homework, and cleared up the mess left behind by the irresponsible left-wing governments of the past, Anna Szabó writes in Magyar Nemzet. The pro-government columnist underlines that the government has successfully reduced the deficit from 7 per cent in 2010 to below 3 per cent, by introducing unusual economic policies, including the imposition of surplus taxes on banks and multinational companies. As a result of its exit from the list of budget sinners, Hungary has regained most of its fiscal sovereignty and is therefore less exposed to pressure by the EU, Szabó reckons.

Although growth has been slowed down by the painful restrictions, the government has made a major achievement, Csaba Szajlai comments in Magyar Hírlap, adding that the announcement may boost the government’s popularity. As for its impact on the economy, Szajlai remarks that if the government decided to increase spending, It could slip easily back under surveillance. The decision, however is good news for Hungarian companies, since as a result no new tax hikes are likely, which increases the prospects of faster growth, Szajlai maintains.

In a front page editorial, Népszabadság writes that the Commission’s recommedation is more the result of external factors than a recognition of the Hungarian government’s achievements. The leading left liberal daily believes that the deficit has shrunk because of the monetary easing programs launched by central banks around the world, while the Hungarian economy is unlikely to grow in the near future despite the good international investment environment.

The Hungarian government has no rason to celebrate, Brussels correspondent Eszter Zalán writes in the same daily. She contends that the EU has had the upper hand, and it managed to pressure the Orbán government into complying with EU norms even at the price of introducing harsh austerity measures. As for the future, Zalán fears that now the EU has no real stick with which to stop the government from increasing public spending in the wake of the 2014 parliamentary election.

Brussels has acknowledged Hungary’s lower deficit, but its report clearly shows that the Commission is far from satisfied with the Hungarian government’s economic path, András Törő writes in Népszava. The left-wing commentator takes it for granted that the government will now start directing even more funds to its political allies and clientele.

The Orbán government is in a restrictive spiral, Péter Bod comments in the same daily. He suggests that the government’s austerity packages have slowed down the economy, and thus in the future new restrictions are to be expected if the government wants to keep the deficit beneath the 3 per cent threshold.

The Commission’s decision is a victory for both the EU and Hungary, Balázs Fekete remarks in Mos Maiorum. The report acknowledges the Hungarian government’s success in keeping budget deficits under control and also indicates that the EU can influence its member states and make them comply with the deficit ceiling requirement, Fekete concludes.

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