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Does Hungary need the Euro?

July 10th, 2017

A conservative economist ponders the potential benefits and disadvantages of introducing the Euro in Hungary, and calls for a calm pragmatic approach.

It is time to start to ask whether Hungary needs the Euro in the near future, Csaba Szajlai writes in Figyelő. The conservative economist suspects that EU cohesion funds may well be made dependent on the introduction of the common European currency, so Hungary needs to seriously investigate how the Euro would impact the Hungarian economy. Szajlai points out that Hungary meets most of the fiscal requirements to introduce the Euro, so if public debt does decrease below 60 per cent of the GDP, the Euro could replace the Forint. As for the benefits of the currency change, Szajlai mentions the strong backing of the ECB, the absence of currency exchange losses and the easier availability of currency needed to finance the state. But the introduction of the common European currency would make it impossible for the Hungarian National Bank to actively intervene and stimulate the Hungarian economy, Szajlai remarks. Szajlai fears that the Euro would hamper Hungarian growth – as Hungary would have no leverage over currency rates, and the Euro, reflecting the economic output of Western European powerhouses, could slow down exports. All in all, Szajlai is uncertain whether it would be worth introducing the common currency, but he cautions against ideological disputes, and recommends a sober and pragmatic approach to the dilemma.

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