Finance Minister Mihaly Varga – Photo: MTI

Finance Minister calls for preserving EU member states’ economic sovereignty

Managing the increased budget deficits and debt levels within the European Union requires the introduction of a new kind of practice, but this must not lead to the European Commission taking over more elements of member states' national sovereignty, Hungary's finance minister said in Luxembourg on Tuesday.

Speaking to Hungarian reporters after a meeting of the Economic and Financial Affairs Council (ECOFIN), Mihaly Varga said Hungary, like other countries, wanted to steer its economy back onto a stable pre-pandemic growth path.

It is therefore a fundamental question, he said, who would exercise certain powers. Varga said it was also key for national budgets to be set along national interests by elected governments rather than by the EC, individual deals or other preferences.

The new system aimed at reducing budget deficits and debt would be an “excuse” for the EC to interfere even more in member states’ fiscal policies, he said, adding that it could also hurt the principle of equal treatment.

“The plans for these kind of changes are cloaked in the guise of European unity, but are actually aimed at taking over key elements of member states’ sovereignty,” the minister said.

Hungary is committed to European cooperation, but refuses to give up its national sovereignty and economic self-determination, Varga said. The push to approve the reform cannot come at the expense of the elaboration of the rules and thereby the interests of member states, he warned. He also pointed to a north-south division on the issue, saying the northern member states wanted more rigour, and the southern countries more flexibility. Hungary’s interest lies in a well-thought out system that is acceptable to everyone, the minister said.

Varga also underlined the importance of member states’ ability to enforce their interests, the pursuit of economic growth paths and appropriate and proportionate debt management.

A reform package centred on debt will be good news for Hungary, he said, adding that if the country succeeded in managing the high inflation rate caused by the high energy prices that had carried over from the previous period, there was a good chance that the government could keep to next year’s deficit target of 2.9 percent of GDP.

Meanwhile, he said countries neighbouring Ukraine should be given the chance to deduct their increased expenditures, including border protection costs, from their deficits. Hungary has spent 650 billion forints (EUR 1.7bn) on border protection since it built a fence on its southern border, for which it has received only “a very modest contribution” from the EC, the minister noted.

On another subject, Varga said talks were under way to unlock the funding Hungary “is entitled to” from the EU’s Recovery and Resilience Facility (RRF).

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