EU weighs in on budget debate
With Parliament currently discussing the 2006 budget, talk is about the main areas of contention in the Socialist-led coalition’s spending plan, and how analysts and government ministers see the aims, and potential failures, of the latest attempt to spread public finances around in a manner that both addresses voters’ concerns and keeps a rein on the growing deficit.
Hungary’s State Audit Office, the European Commission, and the council of European economy and finance ministers (Ecofin), have all been vocal in their criticism of the government’s fiscal planning – and doubtful about what the future holds for a government that truly believes it can reduce an expenditure overshoot while simultaneously cutting taxes and increasing social spending. Looking further forward, doubts are growing ever stronger about the chances of Hungary attaining its stated goal of ERM2 entry by 2008, and thus euro adoption by 2010 – a feat that, on present evidence, would necessitate the budget deficit being halved in just under two years.
As the parliamentary debate on the draft budget for 2006 rumbled on last week, the EU again criticized Hungary’s fiscal laxity, stating that the country needs to take “urgent and determined action” to remedy continuing economic imbalances. There was also the threat of EU subsidies being cut if the European Commission’s recommendations are not taken on board. Contrary to Prime Minister Ferenc Gyurcsány’s assertions, many analysts are saying that this budget is nothing more than an election gambit, and fails to address any of the problems contributing to the burgeoning twin budget deficit – thus making euro adoption by the planned date of 2010 an increasingly unlikely scenario.
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