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Commission cuts Hungary 2013 deficit forecast

The European Commission has on Wednesday adopted a proposal for a Council decision to lift the suspension of commitments from the Cohesion Fund for Hungary, after concluding that the country has taken the necessary action to correct its excessive deficit, in line with the Council Recommendation of 13 March 2012.

The European Commission cut its 2013 budget deficit projection for Hungary to 2.7 percent of economic output on Wednesday, a hopeful sign for Budapest's efforts to restore the flow of EU cohesion funds to aid economic recovery.
Brussels' decision in March to suspend some of the funds from 2013 - due to failures to put public finances on a sustainable footing - was a blow to the government's efforts to get the economy growing faster.
As importantly for financial markets, the decision was a sign of the tension that has blocked talks on a more pressing deal on EU and IMF emergency financial aid for Budapest.
The EU statement made no specific mention of whether the improved forecasts would allow it to restore access to some 495 million euros in funds but finance ministers are expected to revisit the issue on June 22.
Wednesday's forecast was the second time since the suspension that Brussels has cut its prediction for the deficit, now seen well below the bloc's 3-percent of GDP ceiling.
The Commission also said Hungary had done enough to meet its budget target of 2.5 percent of gross domestic product (GDP) this year.
"...The fiscal adjustment is assessed to be sufficient to attain the official 2012 deficit target thanks to a structural improvement of over 2 percent of GDP," the Commission said.
"Fiscal consolidation is a pressing challenge for Hungary, but wider reforms also remain necessary to promote the conditions for sustainable, investment-led growth," it said.
Viktor Orbán's conservative government has announced a series of fiscal measures since March, including a new financial transaction tax and a tax on phone calls, to keep the deficit below the EU's ceiling of 3 percent.
The 2013 deficit projection of 2.7 percent is still above the government's official target of 2.2 percent of GDP as the Commission said some of the government's fiscal measures were "not yet sufficiently substantiated."
Hungary's economy is seen contracting by 0.3 percent this year and growing only one percent next year.
The European Commission has on Wednesday adopted a package of recommendations for budgetary measures and economic reforms to enhance financial stability, boost growth and create employment across the EU. The recommendations are country-specific, taking account of the individual situation of each Member State.

The Commission has also issued recommendations for the euro area as a whole, and set out its vision for the EU-level policy action needed to complement the national measures to deliver an ambitious, two-tiered EU growth initiative. It has also presented the conclusions of twelve in-depth reviews in the context of the Macroeconomic Imbalance Procedure and made recommendations to the Council relating to the Excessive Deficit Procedure.
The package of recommendations has three distinct but interlinked components. First, there are 27 sets of country-specific recommendations, plus one for the euro area as a whole, on budgetary and economic policies. The analysis underpinning the recommendations is set out in 28 staff working documents, while the overarching policy messages are drawn together in a Communication on Action for Stability, Growth and Jobs.
Second, the Commission is publishing the results of the in-depth reviews launched earlier this year for 12 Member States deemed at risk of macro-economic imbalances. The Commission’s conclusion is that all twelve are suffering from imbalances, though none are currently excessive. Guidance for preventive action is included in the country-specific recommendations.
Third, the Commission is recommending to the Council that the Excessive Deficit Procedure be abrogated for Bulgaria and Germany. It is also proposing a Council decision concluding that Hungary has taken effective action to correct its excessive deficit and that the suspension of its 2013 Cohesion Fund commitments be lifted.
"Today the Commission has taken important decisions that set out the further action that needs to be taken both at national level by each of our Member States and at the EU level to enhance our competitiveness, boost growth and jobs, and to strengthen decisively our economic and monetary union," commented EC President José Manuel Barroso.
"Our recommendations are tailored for each Member State, but form part of a coherent approach to rebalancing the European economy. We have made good progress: public finances are starting to improve and imbalances are beginning to be unwound. The direction is clear. We now need to redouble our efforts, at both the national and European levels, to move faster and further," he added.
Source: Reuters,

Last Updated on Friday, 30 August 2013 09:11



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