Reforming fiscal rules and institutions in Hungary – aspects and proposals

Abstract

The statement that Hungary's central budget is struggling with dire problems has now become a cliché. In spite of considerable austerity measures, the country's deficit in 2007 is expected to be in the range between 6 and 7 per cent in terms of GDP, which would be a substantial improvement from 9 to 10 per cent recorded in 2006, but cannot be considered acceptable by any other standards, not even in the short term. Adjustment plans do not stop here of course, targeting a gap of less than 3 per cent in terms of GDP1. But, aside from statements uttered by politicians emphasising their personal commitment, taxpayers have relatively few guarantees to be assured that failures of past attempts at cutting back budget deficits will not recur this time. Hungary has a track record of producing deficits of around 8 or 10 per cent, but since all previous records-of a rather questionable nature-were broken in 2006, the time has come to ask the question: What guarantees are there to prevent it from happening again in four or eight years' time?