Hungarian government: new austerity package

Hungarian economics minister György Matolcsy announced a new set of measures to keep the budget deficit on track as the European Union has signalled to them that the first package is not sufficient to fill the hole in the 2013 budget.

The package of measures aimed at cutting next year’s budget deficit is worth HUF 367 billion (1.2% of GDP). Minister Matolcsy said that these measures were necessary because the EU considers only part of the previous consolidation package feasible (HUF 265 billion out of the original HUF 397 billion), and has a lower GDP projection than the government’s 1.0%.

As a result, the EU forecasts the 2013 deficit at 3.7-3.9% of GDP, a percentage point higher than the government target of 2.7%. This would leave Hungary under the Excessive Deficit Procedure (EDP) and put next year’s cohesion funds at risk.

No comment by the European Commission - as of now

"The Commission fully expects Hungary, just like all the other member states, to maintain their commitments in the context of the Excessive Deficit Procedure," Commission spokesman Simon O’Connor is quoted by the financial website portfolio.hu from the usual daily press briefing in Brussels on Wednesday.

He declined to make any comment beyond that, when asked in relation to Hungarian Economy Minister György Matolcsy’s comment that the HUF 367 austerity measures announced today were forced upon Hungary by the EU.

O’Connor said no comment on the specific measures will be made by the EC because all draft budgets and fiscal measures will be assessed and discussed in the Autumn Forecast to be released on 7 November.

For the details of the new austerity package, please, see enclosed picture.