Brussels, 22/06/2012 (Agence Europe) - On Friday 22 June, the ECOFIN Council decided to suspend the legal proceedings against Hungary that have put on hold nearly €500 million-worth of funding from the European Cohesion Fund for Hungary in 2013. As suggested by the European Commission (see EUROPE 10623), it believes that the Hungarian government has taken measures to correct its excess deficit for 2012. The 2004 legal proceedings against Hungary remain open, however, for its excess budget deficit.
At the end of last month, the Commission said that corrective measures taken by the Hungarian government will cut its public deficit to 2.5% of GDP this year and keep it well below the 3% cut-off point in 2013 at 2.7% of GDP. Hungary's public debt is expected to fall to 78.5% of GDP in 2012, and fall slightly in 2013. In 2011, Budapest brought its deficit down to below 3% by means of creative accounting (transferring pensions from the private to the public sector, for example, to the tune of 10% of GDP). This was a one-off, of course, and the Commission says it did not make any sustainable correction in the country's deficit long-term, hence the freezing of cohesion funding.
End of proceedings against Germany and Bulgaria. The ECOFIN ministers decided to close the legal proceedings against Germany and Bulgaria because both countries have sustainably reduced their public deficits to well below 3% of GDP. Excess deficit proceedings are still ongoing against 21 other countries.
After hitting 4.3% of GDP in 2010, Germany's deficit was reduced to 1% in 2011, two years ahead of schedule and is expected to remain at 1% in 2012. This was due to good economic conditions, a robust labour market, sharp cuts in public spending and the phasing out of growth stimulus measures and aid to the financial sector. Germany's public debt stood at 83% of GDP in 2010, 81.2% in 2011, and is due to rise to 82% this year due to the cost of eurozone stabilisation measures. It is expected to fall to 80% in 2013.
After reaching 3.9% of GDP in 2009, Bulgaria's public deficit stood at 3.1% of GDP in 2010 and 2.1% in 2011. It is expected to fall to 1.9% in 2012 and 1.7% in 2013. (MB/transl.fl)