Hungarian euro within a few years?

July 19, 2016

If the economic processes remain constant and productivity improves further Hungary’s accession to the euro area by the end of this decade "should not be groundless", Economy Minister Mihály Varga is quoted by the financial website as saying in an interview with daily newspaper Magyar Hírlap published on Tuesday.

In the interview, Mihály Varga talked about the conditions to adopting the euro and the possible dates Hungary could join the Eurozone.
The first and foremost question, in his view, is whether Hungary needs the single European currency or not. He noted that adopting the euro benefited some countries and caused serious damage to others.
Joining with flimsy competitiveness and at an inappropriate exchange rate does more harm than good.
Asked if he thinks Hungary does not need to adopt the euro at all, Varga replied that the project is not completed yet, the "house is semi-finished" therefore the forint ensures Hungary a safer roof. He acknowledged that a lot of foreign currency-denominated mortgage holders could have avoided their current distress if Hungary had been member of the euro area during the 2008 crisis, but in that case emerging from the crisis would have been a lot more painful, as we can see in some of the periphery economies.
According to the latest Convergence Report by the European Central Bank (ECB), Hungary fails to meet a single one of the key euro adoption criteria, the one about the exchange rate, Varga reminded.
There is no problem with price stability; Hungary’s inflation was 0.4% in the reporting period against the reference value of 0.7%.
The Hungarian 12-month moving average long-term interest rate was 3.4%, whereas the reference value is 4.0%.
The budget deficit has been stably well under 3% of GDP.
Varga believes that if economic processes remain lasting and Hungary gets closer to the EU’s average development level and if the country can also improve its productivity "accession at the end of the decade is not unfounded". In order to do so, however, the euro needs to be more stable too, coupled with common fiscal policy.


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