Proposal for a COUNCIL DECISION on the existence of an excessive deficit in Hungary
Date: 2024-07-08
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Hungary, budget deficit, economic policy, economic reform, gross domestic product, public debt, public finance, stability pact

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   EUROPEAN COMMISSION  Brussels, 8.7.2024  COM(2024) 512 final 2024/0171 (NLE)  Proposal for a COUNCIL DECISION on the existence of an excessive deficit in Hungary   
 
2024/0171 (NLE) 

Proposal for a 

COUNCIL DECISION 

on the existence of an excessive deficit in Hungary 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 126(6) thereof, 

Having regard to the proposal from the European Commission, 

Having regard to the observations made by Hungary, 

Whereas: 

(1) 

(2) 

(3) 

According  to  Article  126  of  the  TFEU,  Member  States  shall  avoid  excessive 
government deficits. 

The Stability and Growth Pact (SGP) is based on the objective of sound government 
finances as a means of strengthening the conditions for price stability and for strong, 
sustainable  and  inclusive  growth  underpinned  by  financial  stability,  thereby 
supporting  the  achievement  of  the  Union’s  objectives  for  sustainable  growth  and 
employment. 

The  excessive  deficit  procedure  (EDP)  under  Article  126  TFEU,  as  clarified  by 
Council  Regulation  (EC)  No  1467/97  on  speeding  up  and  clarifying 
the 
implementation  of the excessive deficit procedure (1) (which is  part of the  Stability 
and  Growth  Pact),  provides  for  a  decision  on  the  existence  of  an  excessive  deficit. 
Protocol No 12 on the EDP, annexed to the Treaty on the European Union and the 
TFEU,  sets  out  further  provisions  relating  to  the  implementation  of  the  excessive 
deficit procedure. Council Regulation (EC) No 479/2009 (2) lays down detailed rules 
and definitions for the application of those provisions. The EU’s reformed economic 
governance  framework,  which  came  into  force  on  30  April  2024,  includes  Council 
Regulation  (EU)  2024/1264  amending  Council  Regulation  (EC)  No  1467/97.  The 
reform kept the rules of the excessive deficit procedure due to non-compliance with 
the  deficit  criterion  broadly  unchanged,  whereas  for  Member  States  with  a 
government  debt  ratio  above  60%  of  GDP  the  excessive  deficit  procedure  due  to 
non-compliance  with  the  debt  criterion  will  focus  on  departures  from  the  net 
expenditure path that will be set by the Council under Regulation (EU) 2024/1263 on 
the basis of the medium-term fiscal structural plans to be submitted by the Member 
States.  As  the  Council  has  not  yet  set  the  net  expenditure  path  for  Hungary,  the 
Commission  is  not  able  to  assess  compliance  with  the  debt  criterion  in  accordance 

(1) 
(2) 

OJ L 209, 2.8.1997, ELI: http://data.europa.eu/eli/reg/1997/1467/2024-04-30. 
OJ L 145, 10.6.2009, p. 1. 

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with the new rules. Therefore, this Council decision only concerns the excess of the 
ratio of the government deficit to gross domestic product (GDP) with respect to the 
reference value of 3% of GDP.   

According  to  Article  126(5)  TFEU,  if  the  Commission  considers  that  an  excessive 
deficit  in  a  Member  State  exists  or  may  occur,  it  must  address  an  opinion  to  the 
Member  State  concerned  and  inform  the  Council  accordingly.  Having  taken  into 
account its report adopted pursuant to Article 126(3) TFEU and having regard to the 
opinion  of  the  Economic  and  Financial  Committee  adopted  pursuant  to  Article 
126(4) TFEU, the Commission concluded that an excessive deficit exists in Hungary. 
On  8  July  2024,  the  Commission  therefore  addressed  such  an  opinion  to  Hungary 
and informed the Council accordingly. (3) 

Article 126(6) TFEU states that the Council must consider any observations, which 
the  Member  State  concerned  may  wish  to  make,  before  deciding,  after  an  overall 
assessment, whether an excessive deficit exists. In the case of  Hungary, the overall 
assessment leads to the following conclusions. 
According  to  the  data  validated  by  Eurostat  on  22  April  2024 (4),  the  general 
government  deficit  in  Hungary  reached  6.7%  of  GDP  in  2023,  and  general 
government  debt  stood  at  73.5%  of  GDP.  The  Commission’s  report  under  Article 
126(3) TFEU considered that the excess of the deficit over the Treaty reference value 
of 3% of GDP in 2023 is not exceptional, as it neither results from an unusual event 
nor from a severe economic downturn in the sense of the Stability and Growth Pact. 
In 2023 Hungary’s real GDP contracted by 0.9% of GDP, following GDP growth of 
4.6%  in  2022.  The  excess  over  the  Treaty  reference  value  is  also  not  temporary, 
based  on  the  Commission  2024  spring  forecast,  which  projects  the  general 
government deficit to remain above 3% of GDP in 2024 and 2025. In sum, the deficit 
in  2023  was  above  and  not  close  to  the  3%  of  GDP  Treaty  reference  value.  The 
excess is not considered to be exceptional as defined by the Treaty and the Stability 
and  Growth  Pact,  and  not  temporary.  Hence,  the  deficit  criterion  as  defined  by  the 
Treaty and Regulation (EC) No 1467/97 is prima facie not fulfilled. 

According  to  the  2024  Convergence  Programme,  Hungary’s  general  government 
deficit  is  planned  to  reach  4.5%  of  GDP  in  2024.  The  Commission’s  2024  spring 
forecast (5)  indicates  a  deficit  of  5.4%  of  GDP,  above  and  not  close  to  the  Treaty 
reference  value  of  3%  of  GDP.  The  difference  between  the  two  sets  of  projections 
stems  primarily  from  the  higher  projected  baseline  growth  in  expenditure  in  the 
Commission’s  forecast,  in  particular  as  regards  public  wages,  intermediate 
consumption and current transfers. The Commission’s forecast projects also slightly 
lower  revenue  from  social  contributions  and  taxes  on  production  and  imports  in 
2024. 

In line with the requirements of Article 126(3) TFEU, the Commission also analysed 
all  the  relevant  factors  in  its  report  under  Article  126(3)  TFEU.  As  laid  down  in 
Article 2(4) of Regulation (EC) No 1467/97, when assessing compliance on the basis 
of  the  deficit  criterion,  if  the  ratio  of  the  government  debt  to  GDP  exceeds  the 

documents 

EDP-related 

for  Hungary 

All 
finance.ec.europa.eu/economic-and-fiscal-governance/stability-and-growth-pact/corrective-arm-
excessive-deficit-procedure/closed-excessive-deficit-procedures/hungary_en . 
Eurostat 
April 
https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/2-22042024-AP . 
European Economic Forecast - Spring 2024, European Economy-Institutional Paper, No 286, 15 May 
2024. 

https://economy-

Indicators 

published 

found 

2024. 

Euro 

See: 

can 

22 

on 

at: 

be 

(4) 

(5) 

(6) 

(7) 

(8) 

(3) 

(4) 

(5) 

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(9) 

reference value, relevant factors shall be taken into account in the steps following the 
report under Article 126(3) TFEU and leading to the decision on the existence of an 
excessive deficit only if – before these relevant factors are taken into account – the 
general government deficit remains close to the reference value and its excess over 
the reference value is temporary. In the case of Hungary, the double condition is not 
met. Therefore, relevant factors are not taken into account in the steps leading to this 
decision. 

In  view  of  the  deadline  of  20  September  2024  for  the  submission  of  the  national 
medium-term fiscal-structural plan in accordance with Article 36 of Regulation (EU) 
2024/1263,  the  Council  takes  note  that  the  next  step  in  the  procedure,  namely  the 
Commission  recommendation  for  a  Council  recommendation  under  Article 
126(7) TFEU on the correction of the excessive deficit, will take place together with 
the  Commission  opinions  on  the  draft  budgetary  plans  of  euro  area  Member  States 
under  Article  7  of  Regulation  (EU)  No  473/2013.  This  approach  allows  to  ensure 
consistency  between  the  budgetary  requirements  under  the  excessive  deficit 
procedure and the adjustment path set out in the medium-term fiscal-structural plans. 
Enabling  such  consistency  while  avoiding  a  surveillance  gap  under  the  excessive 
deficit procedure, requires a timely submission of the Member States’ medium-term 
fiscal-structural plans. This timeline is exceptional and linked to the transition to the 
new framework, therefore not setting a precedent. The Council also takes note that, 
in  the  absence  of  a  timely  submission  of  the  medium-term  plan,  the  Commission 
recommendation  for  a  Council  recommendation  under  Article  126(7)  will  consider 
the  reference  trajectory  transmitted  by  the  Commission  to  the  Member  State 
determined according to Regulation (EU) 2024/1263. 

HAS ADOPTED THIS DECISION:  

Article 1 

From an overall assessment it follows that an excessive deficit exists in Hungary due to non-
compliance with the deficit criterion. 

This decision is addressed to Hungary.  

Done at Brussels, 

Article 2 

For the Council 
The President 

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