The European Union will warn Hungary to cut budget spending further and overhaul its health-care, pension and education systems to avoid budget slip-ups in the future after missing deficit targets every year since 2001, according to a draft document.
Prime Minister Ferenc Gyurcsány has raised taxes and cut subsidies to reduce the shortfall after running up the EU's widest deficit. The premier on February 12 said the country was on course for its goal of cutting the budget gap to 6.8% of GDP from about 9.6% last year.
EU Monetary Affairs Commissioner Joaquin Almunia has said Hungary will remain under pressure to implement its budget plans. „Much more remains to be done,” the EU will tell the Hungarian government, according to the draft report obtained by Bloomberg News, which will be discussed by finance ministers on February 27. The report is expected to be endorsed by heads of state at March 8-9 summit in Brussels.
Hungary must „implement necessary measures to ensure a credible reduction of the government deficit,” doing so „with increased reliance on the expenditure side,” according to the draft. The EU will recommend implementing more budget rules to prevent slippages. Hungary should also improve its economic efficiency by limiting early retirement, tightening disability pension rules and overhauling health care spending, according to the draft ruling.
The document says Hungary has made „limited progress” in executing Gyurcsány’s budget plan through last year's measures. It praises new rules for unemployment benefits and for allowing the sale of certain medicines outside pharmacies.
The EU will warn the Czech Republic that the country must tackle spending cuts, especially as the country's 2007 budget anticipates a breach of the „expenditure ceilings and an increased deficit,” according to the draft report. The government will breach its own spending ceiling, set in 2003, by 57 billion koruna (€2 billion), or 6% of total expenditure, this year.
„There are certain risks in the macro-economic area, particularly for medium-term budgetary consolidation and,” long-term spending in the „context of an ageing population,” the draft said. The Czech Republic is expected to breach the budget limits this year at 3.7% of GDP and next year at 3.2% of GDP, according to commission forecasts.
The EU will warn Poland that it is making „limited progress” in opening up its markets, according to the draft report. Still, „there are signs that Poland is beginning to move ahead strongly in the micro-economic area.” The commission raised its 2007 growth forecast for Poland, citing „strong” investments particularly in the construction sector.
Several reforms in the public finance sectors are delayed and that the EU will urge Poland to pursue „a more vigorous implementation of employment reforms,” and continue the liberalization of its energy markets, the draft said. The EU will tell Latvia to pursue a more „restrictive” spending policy and will warn Slovakia that the „need for further measures remain, particularly in the microeconomic and employment fields,” (Bloomberg)