Brussels, 25/01/2012 (Agence Europe) - On Tuesday 24 January, EU27 finance ministers endorsed the European Commission's finding that Hungary has failed to take the measures required to put its public finances on a sustainable track for the medium-term (see EUROPE 10536). The Danish economics minister, Margrethe Vestager, said the ministers had seen that Hungary had not done what it needed to do. She added that one of the Danish Presidency's priorities is to ensure that the updated Stability and Growth Pact decisions are properly applied and that there had been a change in the atmosphere of the Council. If it fails to change tack, Hungary risks suspension of the EU cohesion funds earmarked for the country from 1 January 2013 onwards.
Hungary's 3.5% budget surplus for 2011 is solely due to one-off creative accounting methods, without which it would be in deficit, to the tune of 6% of GDP (for 2011). The Commission predicts that Hungary will have a budget deficit of 2.8% this year thanks to jiggling with the accounts. The Ecofin Council says that although Hungary respects the reference value for 2011 on paper, it has not achieved this by means of a structural, sustainable budget correction. For non-euro countries like Hungary, failure to comply with the Council's recommendations can only be punished by withdrawing EU cohesion funds allocations, explained the Council.
The EU commissioner for the euro, Olli Rehn, said that Hungary will have to take measures in the immediate future if it is to meet its targets. He warned that if no corrections are made in 2012, then the cohesion funds may be suspended, and added that this left the government plenty of time. On Tuesday, the Hungarian finance minster, György Matolcsy, commented: “I am quite optimistic that Hungary will avoid the freezing of cohesion funds.”
The Ecofin Council decided not to move on to the next stage in the excess deficit infringement procedures against Belgium, Cyprus, Malta and Poland, which are all aiming to reduce their deficits to below 3% of GDP this year.
Spain. Rehn described as regrettable the news that Spain's public deficit for this year was likely to be close to 8% rather than the 6% target, saying that the Spanish government had reacted rapidly, but there was still a gap in the budget. He urged the government to introduce a budget for 2012 as soon as possible with measures to sustainably reduce the debt and tackle young unemployment. On Tuesday the Spanish prime minister, Mariano Rajoy, said Spain would meet the target of reducing its deficit to 4.4% of GDP this year, contradicting the Spanish budget minister, Cristobal Montoro, who called for the target to be altered because it is based on out-of-date growth forecasts. According to the IMF's updated forecasts, Spanish GDP will fall by 1.7% this year. (MB/transl.fl)