The Council adopted a decision suspending €495.2 million in scheduled commitments for Hungary under the EU's cohesion fund, taking effect as of 1 January, 2013.
The Council also issued a recommendation under the EU's excessive deficit procedure, setting 2012 as the target year for correction of Hungary's deficit.
Adoption of these measures follows a decision taken in January deeming action taken to correct its excessive deficit to be insufficient. This is the first time that a clause enabling the suspension of commitments has been invoked since the cohesion fund was established in 1994. Beneficiary countries can face such a measure if the conditions of sound government finances are not maintained. Commitments suspended for Hungary amount to €495.2 million and the maximum level of 0.5 per cent of nominal GDP. This corresponds to 29 per cent of scheduled commitments for 2013.
However, the Council agreed to return to the matter at its meeting on 22 June, with a view to lifting the suspension if Hungary applies the necessary corrective measures. Hungary has been subject to an excessive deficit procedure since July 2004, when the Council also issued a recommendation on action to be taken in order to bring its government deficit below the EU's reference value of 3 per cent of GDP. The Council issued further recommendations in March 2005 and October 2006, having found in January 2005 and November 2005 that effective action had not yet been taken.
The recommendation adopted by the Council sets 2012 as the target year for putting an end to the current excessive deficit situation. It calls on Hungary to bring its deficit below the 3 per cent of GDP reference value in a credible and sustainable manner.
More specifically, the recommendation calls for an additional fiscal effort to meet a deficit target of 2.5 per cent of GDP in 2012, and for additional structural measures to ensure that the deficit in 2013 remains well below 3 per cent of GDP, even after the phasing-out of one-off measures. It sets a deadline of 13 September for the government to take effective action to this effect, and to specify the measures that will be necessary to progress towards a durable correction of its deficit.
Press release
© European Council
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