Brussels, 20/10/2005 (Agence Europe) - As Commissioner Joaquin Almunia announced a month ago (EUROPE 9029), Hungary has still not taken the measures necessary to reduce its state deficit, which is set to rise to 6.1% of GDP in 2005. On Thursday, the Commission adopted a recommendation calling upon the Ecofin Council to note that "for the second time this year, the Hungarian authorities have failed to take effective action to correct their deficit". The objectives set by hungry for 2005 and 2006 "will be very greatly exceeded, calling back into question the 2008 deadline set to bring its deficit below the reference value of 3% of GDP", the Commission notes. It adds that the budgetary situation in Hungary has deteriorated considerably since last June (when the Commission's last assessment was carried out) and that the deficit for 2005 would be far higher than the initial objective of 3.6% of GDP. The Hungarian authorities are now estimating a deficit of 6.1% of GDP in 2005 and of 5.2% in 2006 (compared to an objective of 2.9% initially forecast for 2006). The Commission therefore recommends that the Council should note, in line with article 104, paragraph 8, of the treaty, that Hungary is still not "taking effective action to correct its excessive deficit". According to the Commission, the new objectives set in the draft budget 2006 for Hungary- a public deficit of 5.2%- "is likely to be far exceeded, due to reductions in tax" which have been announced, and will not be offset by a reduction in expenditure. As Hungary is not yet a member of the euro zone, article 104, paragraph 9, and the subsequent stages of the procedure are not applicable to it. If the Council approved the Commission's recommendation, it will only be able to send Hungary a further recommendation under article 104, paragraph 7.
Last March, the Ecofin Council asked Hungary to take further measures to reduce its deficit to 1.6% in 2008 (EUROPE 8905). In July, the Commission said that the Hungarian authorities "have taken adequate and effective measures" to correct the deficit in 2005, although the situation remains "fragile" (EUROPE 8990). However, in September, Mr Almunia acknowledged that Budapest would not manage to achieve its objectives.