Possible Benefits if Hungary Joins the Eurozone

Analyzing the prospects of adopting the euro, along with its potential advantages and disadvantages, a new research study examines the impact that Hungary’s joining the monetary union would have on domestic interest rates.

In line with global and European trends, interest rates in Hungary remained low during the second half of the 2010s. The 10-year government bond yields declined year over year, reaching the 2–2.5% level by the end of the decade, a study by the GKI Economic Research Institute finds. Although the external financing of the budget was secured at favorable rates, these borrowing costs still exceeded the near 0% interest rates seen in Eurozone countries.

Rising risk premiums
As researchers point out, surging interest rates became a global issue in the 2020s. Higher inflation and an uncertain, risk-heavy geopolitical environment drove up bond yields (rising risk premiums). Investors demanded higher interest rates to lend their money, while governments increasingly relied on external financing to cover their surging budget deficits. This rise in interest rates also affected Central and Eastern European countries, particularly Hungary and Romania. By April 2026, these two nations had the highest 10-year government bond yields in the region (6.5%-7.5%).

While in the Eurozone…
Conditions are more favorable for the region’s Eurozone members. Their monetary policy is guided by a central bank backed by a larger and deeper financial market, which generally translates to lower interest rates. This is well illustrated by the fact that the 10-year government bond yield in Bulgaria is 0.8 percentage points lower than in the more economically advanced Czech Republic. There are several reasons for this, the study says, but primarily, when a country operates with its own smaller and more vulnerable currency, investors demand a yield premium due to the more uncertain environment.

With an eye to euro adoption
Compared to the previous decade, today’s elevated interest rates pose a major challenge for Hungary. The government spent approximately HUF 4,000 billion on interest payments last year. Consequently, between 2023 and 2025, Hungary’s interest expenses relative to GDP were among the three highest in the European Union (3,8-4,9%).
Following the April 12 election, however, the market began pricing in the promises of fiscal stabilization and euro adoption. By mid-May, Hungarian 10-year government bond yields fell below levels of those issued in Poland (5.7–6%). If Hungary joins the monetary union, interest rates – and consequently the government’s financing costs – are expected to decrease further. In 2025, the weighted average interest rate paid on Hungary’s public debt was 4.6%. If the average interest burden on the total debt stock were to drop to 3.9% in the long term (the current Bulgarian 10-year bond yield), it would reduce the budget’s interest expenses by at least HUF 600 billion annually.

Further benefits
Low interest rates would support the state budget from another aspect as well. The funding costs for subsidized state loan programs – such as Otthon Start and the Demján Sándor Program – would drop substantially if market rates converged toward the 3-4% level of the Eurozone.
Furthermore, a better interest rate environment would not only lower borrowing costs for the government, but also for corporations and households. The former could boost the Hungarian economy by stimulating investment, while the latter could drive growth through increased consumption, researchers highlight.