EU finance ministers decide to lift funding suspension for Hungary

History

European Union finance ministers on Friday decided to lift a partial suspension of Hungary's Cohesion Fund allocation introduced as part of an excessive deficit procedure.

The ministers approved the suspension in March after Hungary failed to take sufficient measures to plug its budget gap.

In May, the European Commission recommended lifting the unprecedented suspension because it said Hungary had taken the necessary action to correct its excessive deficit.

The suspension affected €495m, or 29%, of Hungary's funding for 2013.

In a statement published after their meeting on Friday, Ecofin acknowledged that "Hungary has taken measures to correct its excessive government deficit by 2012", in line with its recommendation from March 13, but noted that the country's excessive deficit procedure nevertheless remains open.

Ecofin noted in particular that official deficit targets and planned fiscal efforts outlined in Hungary's annual update of its convergence program, submitted on April 23, complied with the recommendation.

In the March recommendation, Ecofin set 2012 as the target year for achieving a credible and sustainable correction of Hungary's deficit, with a deadline of September 13 for taking effective action. The ministers called for an additional fiscal effort to meet Hungary's deficit target of 2.5% of GDP in 2012, and for additional structural measures to ensure that the deficit in 2013 remains well below the 3% of GDP threshold, even after the phasing-out of one-off measures.

In its recommendation in May to lift the suspension, the EC found that Hungary's budget deficit is expected to reach 2.5% of GDP in 2012 and to remain well below 3% of GDP, the EU's reference value for government deficits, in 2013. The Commission expects Hungary's 2013 deficit to reach 2.7% of GDP.

On the basis of the Commission's spring 2012 economic forecast, Hungary's general government debt is expected to decrease to 78.5% of GDP in 2012 and slightly further in 2013.

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