Hungary’s government on Friday announced a new round of fiscal adjustments to ensure the European Commission’s excessive deficit procedure (EDP) against the country is lifted.
The government said it will order a freeze of budget expenditures worth about 0.3% of GDP – the difference between the European Commission’s projection for the country’s deficit in 2013 and the government’s. If the EC deems the freeze insufficient, government expenditures worth about 0.2% of GDP will continue only if they are covered with one of revenue from the sale of state assets.
If the EC still believes these measures are not enough to keep the deficit under the 3% of GDP European Union threshold, “the government is prepared to achieve the threshold by raising the extraordinary tax on financial institutions, the tax on energy suppliers’ profit and the financial transactions duty,” the government sad.
If necessary to achieve the deficit target for 2014, the government will also halt spending on big, one-off state investments unless they are funded with revenue from the sale of state assets.
When projecting Hungary’s fiscal deficit above the government’s projection, the European Commission has not taken into account the fact that the government will keep all spending items nominally unchanged both in 2013 and in 2014, where there is no legislative obligation to do otherwise, National Economy Minister Mihály Varga said. This applies to public sector wages too, he added. The EC experts didn’t consider the various measures taken to improve the efficiency of tax collection, he said.
Varga also noted that the EC fails to fully consider the savings resulting from a transfer of tasks from the local councils to the central government, the partial takeover of municipal debt by the government and new legislation making the management of local governments more disciplined.
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