Hungary slams ‘unfair’ EU funding suspension plans

1 Mar 12
uropean Commission plans to withhold €495m of Hungary’s funding for 2013 over its failure to reduce its budget deficit are ‘unfounded and unfair’, the country’s government said yesterday

By Nick Mann | 23 February 2012

European Commission plans to withhold €495m of Hungary’s funding for 2013 over its failure to reduce its budget deficit are ‘unfounded and unfair’, the country’s government said yesterday.

According to the commission, the ‘unprecedented step’ was taken following repeated warnings to the Eastern European country. It said Hungary had failed to take ‘effective action’ to bring its deficit below the target of 3% of gross domestic product by 2011.

Olli Rehn, the European Commission vice-president for economic and monetary affairs and the euro, said:‘Today's proposal should be seen as a strong incentive for Hungary to conduct sound fiscal policies and put in place the right macro-economic and fiscal conditions to ensure an efficient use of cohesion fund resources. It is now for the Hungarian government to act before the suspension takes effect.’

The money represents 29% of the support Hungary was expecting to receive in 2013 from the EU’s cohesion fund, which aims to reduce regional inequalities within EU member states. It also equates to 0.5% of the country’s GDP.

In a statement, the Hungarian government said the commission had ‘ignored the facts’. Hungary’s budget deficit was below 3% in 2011 and would remain so in 2012 and 2013 as well, it said, making it the country with the eighth lowest deficit in the EU.

It said: ‘The facts and figures demonstrate that the economic policy of the Hungarian government has taken our country in the right direction – for example, economic growth of 1.7% last year surpassed the growth rate of the EU as a whole and of the euro zone as a whole.  At the same time Hungary has been able to decrease its government debt, which was the legacy of past governments.’

It added: ‘The proposal adopted by the European Commission today is also controversial from a legal point of view: it contradicts the spirit of the Treaties since it imposes sanctions in response to a presupposed future event.’

For the funding suspension to take effect it must be endorsed by a majority of EU member states.

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