BRUSSELS (MNI) – European Union finance ministers on Tuesday voted
to punish Hungary for failing to take adequate measures to control its
budget deficit, but they said Budapest could still avoid the sanctions
if it acted quickly enough with new measures.

Although Hungary succeeded in bringing its budget deficit down to
the EU ceiling of 3% last year, the European Commission and EU member
states said that the steps taken to achieve the target, which included a
number of unorthodox one-off moves such as nationalizing some private
pensions, were unsustainable.

As a result, EU finance ministers voted to withhold from Hungary in
2013 EU development aid worth 0.5% of the country’s GDP, or E495.2
million.

The decision comes after Eurozone finance ministers and the
European Commission decided last night to approve a significant easing
of Spain’s interim budget deficit target from 4.4% of GDP to 5.3%.

Under the EU’s new fiscal rules, Eurozone countries like Spain and
non-Eurozone countries like Hungary face different procedures when their
budget deficits exceed EU agreed targets.

“Comparing Spain and Hungary is a bit like comparing apples and
oranges,” EU Economics and Finance Commissioner Olli Rehn said at a
press conference.

“We cannot compare exactly these two cases because even if the goal
is the same, the sustainability of public finances, we have difference
instruments, a different legal basis, and a different logic in how they
[sanctions] are triggered,” he said.

Spain and Hungary also face different deadlines for compliance,
Rehn reminded journalists.

Suspending aid to Hungary would provide a “strong incentive” for
Budapest to reach its own target of cutting the budget deficit to 2.5%
of GDP this year, but “effective action by Hungary will lead to a
lifting of sanctions before they become effective,” Rehn said.

EU finance ministers will review Hungary’s progress and could lift
the sanctions at a meeting on June 22, he said.

Twenty-tree out of the EU’s 27 member states have budget deficits
that violate the EU’s fiscal rules, of which 13 use the euro currency.

Last November, the Commission asked five governments that appeared
to be on the way to missing their targets to take corrective actions.
Four of these, Belgium, Cyprus, Poland and Malta took new measures
deemed adequate. But Hungary, which is seeking a bailout from the EU and
International Monetary Fund, was singled out for taking inadequate
measures.

The EU is also in a dispute with Budapest over a number of new
laws, including some the Commission says undermines the independence of
the country’s central bank.

EU officials say talks on a bailout package for Hungary cannot
proceed before these concerns are resolved.

–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com

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