Economic policies that promote private sector-led growth are needed to drive up Hungaryʼs currently low level of potential growth, the ECB said in its Convergence Report 2016.
It recommended improving the quality of public institutions, reducing red tape for businesses and reconsidering the “excessive tax burden” on the private sector, specifically sectoral taxes.
The ECB noted that the European Commission had established in a recent review that Hungary is not experiencing macroeconomic imbalances.
In a section of the report focusing on the National Bank of Hungary, the ECB said Hungarian law does not comply with all of the requirements for central bank independence and the prohibition on monetary financing.
The ECB report covered Bulgaria, Czech Republic, Croatia, Poland, Romania and Sweden, in addition to Hungary. In none of the seven countries do legal frameworks fully comply with all of the requirements for the adoption of the euro, the MNB said, citing incompatibilities regarding central bank independence, in particular their institutional and financial independence. It added that in all of the countries but Croatia there are incompatibilities with regard to the prohibition of monetary financing.
Achieving sustainable economic and legal convergence is necessary to successfully adopt the euro, the ECB said.
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