Hungary moves closer to eurozone opt-out

european_central_bank_02.jpg

By awarding the forint the status of the only legal tender in Hungary, the country's ruling supermajority appears to be opting out from the euro zone. EURACTIV Hungary reports.

As soon as German Chancellor Angela Merkel and French President Nicolas Sarkozy tabled their first draft of an EU 'Pact for Competitiveness' at a February EU summit, Hungarian Prime Minister Viktor Orbán kept his distance from the project.

Orbán told the Hungarian press that it was "written in the stars" that Hungary would not join the euro zone before 2020, because the Pact was "not acceptable" for his country.

Observers noted that this was the first time since 2003, when ten new countries signed EU accession treaties, that the adoption of the euro had been questioned.

Between 2004 and 2010, all Hungarian parliamentary parties supported the euro in words, despite the country conducting an economic policy that lead to a permanent excess deficit procedure and denial of entry into the first step of monetary union, the Exchange Rate Mechanism.

When a new version of the Pact for Competitiveness, dubbed the 'Euro Plus Pact', was adopted on 24 March (see 'Background'), Hungary abstained from the new economic policy rulebook.

The country's motivation became clearer the following day (25 March) when Mihály Varga, a state secretary in charge of the Prime Minister's Office, announced that the draft Hungarian constitution would be amended to state that Hungary's legal tender is the forint.

He said that this is as self-evident as the fact that the seat of the government is in Budapest. The opposition Socialists immediately labelled the move as a constitutional trick to de facto opt out from the euro zone and protested.

The new Hungarian constitution is expected to be adopted by mid-April, the week before Easter.

Only the Socialists support the euro

EURACTIV Hungary surveyed the four parliamentary parties first on the Euro Plus Pact and then on the forint amendment, and discovered that Hungary's politics had dramatically shifted.

In the previous legislation all parties supported the euro and Hungary deliberately ratified the Lisbon Treaty first to show its commitment to institutional progress. However, in the current legislature, only the Socialist Party fully supports monetary union.

Jobbik, Hungary's far-right party, fully supports the Fidesz-lead government in abstaining from both the Pact and the euro, and has submitted further amendments to the draft Constitution to strengthen Hungary's independence from the EU, reporters were told.

"Jobbik considers it important to maintain an independent and strong national currency and we agree with the reference to it in the forthcoming constitution as well," said Márton Gyöngyösi, an MP from the Jobbik party.

"But what is even more important for us it is that the constitution ensures a monetary policy with regard to national interests only," he added.

The Greens ('Politics can be different'; LMP) also have reservations about the Euro Plus Pact and hope that it will be improved by their sister parties in the European Parliament, where they are not represented. The Hungarian Greens also claim that it would be better if the countries that joined the EU in 2004 and 2007 were not obliged to enter the euro zone.

They advocated an opt-out similar to the one negotiated by Denmark after its citizens rejected the Maastricht Treaty in 1992, or the situation of Sweden, with its de facto opt-out following a 2003 referendum on the euro.

László Kovács, a former foreign minister who signed the Accession Treaty and who has served as EU tax commissioner, told EURACTIV.hu that it was hard to imagine when Hungary would be able to fulfill the Maastricht eurozone criteria, as the public deficit in the first two months of 2011 was already over 80% of the planned annual deficit.

Kovács also considers attempts to fix the national currency in the constitution to be a "bad signal".

"This is not just contrary to our Accession Treaty, and our engagements regarding the introduction of the euro, but this would also bind the change to the euro to a parliamentary decision requiring a two-thirds majority," which is very hard to achieve, he explained.

No euro accession during this legislature

Fidesz was not available for comment this week, promising to explain its positions at a later stage. However, Prime Minister Orbán and Economy Minister György Matolcsy made it clear that they do not wish to see the country enter the euro zone during their terms.

From the drafting process of the constitution, it also became evident that pinning the forint to the new constitution is seen as a top priority by the ruling super-majority.

Hungary's contentious draft new constitution has an "unclear relationship" with European law, said the Council of Europe's Venice Commission, a specialised independent body set up to provide urgent constitutional assistance to Central and Eastern Europe.

Giving the forint constitutional status could herald a legal conflict in which paradoxically the EU Treaties and the Accession Treaty would not be enforceable in Hungary, critics warned.

If you would like to react to this article, please click here.

At a 25 March EU summit, Bulgaria, Romania, Poland, Latvia, Lithuania and Denmark decided to join a Berlin-inspired project called the 'Euro Plus Pact' (see pages 13-20 of the summit conclusions) that will prompt countries to further coordinate their economic policies and in return give them access to the EU's permanent bailout facility after 2013. 

Among the EU newcomers, the Czech Republic and Hungary refrained from joining the Euro Plus Pact. Sweden and the UK also opted out. However, unlike those two countries, the accession treaties of the countries of the 2004 and 2007 EU enlargements make euro accession mandatory.

Subscribe to our newsletters

Subscribe
Contribute