The Finance Ministers’ warning reaffirmed the European Committee’s (EC) country report of Dec. 22, 2004, which predicted that Hungary’s central budget deficit in 2004 will be 0.9 percentage points higher than the government’s target at 4.6% of GDP. The EC said Hungary needs to introduce further measures to bring budget deficit under 3% of GDP by 2008, a condition of entering the euro zone in 2010. On the proposal of the EC, the Committee of EU Finance Ministers last July gave Hungary until Nov. 5, 2004 to make the necessary corrections for plans in 2004 and 2005. Meanwhile, the Hungarian government has announced that the budget deficit will be 4.7%, while the EU forecasts 5.2%.

According to the EU Finance Ministers’ decision last Tuesday, the EU will make further proposals for Hungary after the Hungarian government submits its modified convergence program. The warning of the EU Finance Ministers does not involve fines for countries outside the euro zone. However, if a country does not follow the Committee’s proposals for a considerable time, its support from the EU’s Cohesion Funds can be suspended.

Besides Hungary, the EU warned the Czech Republic, Cyprus, Malta, Poland and Slovakia last summer, but these countries brought their programs up to EU expectations.