While the Hungarian government has been planning since 2003 to replace the Hungarian forint with the euro, as of 2023 [update] , there is no target date and the forint is not part of the European Exchange Rate Mechanism (ERM II). An economic study in 2008 found that the adoption of the euro would increase foreign investment in Hungary by 30%, [1] although current governor of the Hungarian National Bank and former Minister of the National Economy György Matolcsy said they did not want to give up the country's independence regarding corporate tax matters. [2]
Hungary originally planned to adopt the euro as its official currency in 2007 or 2008. [3] Later 1 January 2010 became the target date, [4] [5] but that date was abandoned because of an excessively high budget deficit, inflation, and public debt. For years, Hungary could not meet any of the Maastricht criteria. [6] After the 2006 election, Prime Minister Ferenc Gyurcsány introduced austerity measures, causing protests in late 2006 and an economic slowdown in 2007 and 2008. However, in 2007, the deficit had been reduced to less than 5% (from 9.2%) and approached the 3% threshold in 2008. In 2008 analysts claimed that Hungary could join ERM II in 2010 or 2011 and so might adopt the euro in 2013, but more feasibly in 2014, [7] or later, depending on eurozone crisis developments. On 8 July 2008, the then Finance Minister János Veres announced the first draft of a euro-adoption plan.
After the 2008 global financial crisis, the likelihood of a fast adoption seemed greater. [8] Hungary received aid from the International Monetary Fund (IMF), the European Union and the World Bank. [9] In October 2008 the head of Hungary's largest bank called for a special application to join the eurozone. [10]
Ferenc Gyurcsány ran out of political capital in March 2009 to accept necessary measures.[ clarification needed ] The exchange rate reached 317 forints to one euro on 6 March. Gyurcsány initiated a constructive motion of no confidence against himself on 21 March and nominated Minister for Development and economist Gordon Bajnai as his replacement. The socialist and liberal parties accepted him as the new prime minister, with an interim government for one year from 14 April. Bajnai's premiership brought new austerity measures in Hungary. Thus, they may[ clarification needed ] keep the deficit under 4% in 2009 and the 2010 Budget calculations assumed 3.8%. The inflation outturn was near 3% as a result of the crisis, but because of the increase in VAT, it averaged 5% in the second half of the year. Because of the IMF loan, the public debt rose to nearly 80%. The central bank interest rate fell to 6.25% from 10.5% in 2009. The Bajnai government could not lead Hungary into the ERM II, and it stated that it had no plans to do so.
The soft Eurosceptic Fidesz won enough seats in the 2010 Hungarian parliamentary election to form a government on its own. Fidesz was not specific then about its economic priorities. Shortly after the formation of the new government, they announced their intention to keep the 2010 deficit at 3.8%. [11] After more pressure, in September they also accepted a reduction to 3% in 2011. [12] In 2010, Finance Minister György Matolcsy said they would discuss euro adoption in 2012. [13] Mihály Varga, another member of the party, talked about possible euro adoption in 2014 or 2015. [14]
However, in February 2011, Prime Minister Viktor Orbán made clear that he does not expect the euro to be adopted in Hungary before 2020. [15] Later, Matolcsy also confirmed this statement. Orbán said the country was not yet ready to adopt the currency and they would not discuss the possibility until the public debt reached a 50% threshold. [16] The public debt-to-GDP ratio was 81.0% when Orbán's 50% target was set in 2011, and it is currently forecast to decline to 73.5% in 2016. [17]
In 2011, experts said that the earliest date that Hungary could adopt the euro was 2015. [18]
When the countries of the eurozone adopted the Euro-Plus Pact on 25 March 2011, Hungary decided to go along with the United Kingdom, Sweden and the Czech Republic and chose not to join the pact. Matolcsy said that they could agree with the most of its contents, but did not want to give up the country's independence regarding corporate tax matters. [2] As the Euro-Plus Pact does not feature any legal obligations - but only commitments to use various sets of voluntary tools to improve employment, competitiveness, fiscal responsibility and financial stability - joining this pact would not lead to a requirement for Hungary to abandon their current corporate tax method.
In April 2013, Viktor Orbán proclaimed euro adoption would not happen until the Hungarian purchasing power parity weighted GDP per capita had reached 90% of the eurozone average. [19] According to Eurostat, this relative percentage rose from 57.0% in 2004 to 63.4% in 2014. [20] If the same pace of "catching up" progress was to be expected in the future as in the past ten years (6.4% per decade), Hungary would only reach Orbán's 90% target and adopt the euro in 2056. Although, Hungary could potentially also reach Orbán's 90% target and adopt the euro in 2033, if being able for the upcoming period to sustain the same 1.4% of annual improvements in the figure as achieved from 2013 to 2014. Shortly after Orbán had been re-elected as Prime Minister for another four-year term in April 2014, [21] the Hungarian Central Bank announced that they planned to introduce a new series of forint banknotes in 2018. [22] In June 2015, Orbán declared that his government would no longer entertain the idea of replacing the forint with the euro in 2020, as was previously suggested, and instead expected the forint to remain "stable and strong for the next several decades", [23] although, in July 2016, National Economy Minister Mihály Varga suggested that country could adopt the euro by the "end of the decade", but only if economic trends continue to improve and the common currency becomes more stable. [24] [25] No official target date has been set for euro adoption.
The following are polls on the question of whether Hungary should abolish the forint and adopt the euro.
Date (survey taken) | Date (survey published) | Yes | No | Undecided / Don't know | Conducted by |
---|---|---|---|---|---|
April 2023 | June 2023 | 72% | 25% | 3% | Eurobarometer [26] |
April 2022 | June 2022 | 70% | 29% | 1% | Eurobarometer [27] |
May 2021 | July 2021 | 69% | 26% | 5% | Eurobarometer [28] |
June 2020 | July 2020 | 66% | 31% | 3% | Eurobarometer [29] |
April 2019 | June 2019 | 66% | 28% | 6% | Eurobarometer [30] |
April 2018 | May 2018 | 59% | 32% | 9% | Eurobarometer [31] |
April 2017 | May 2017 | 57% | 39% | 4% | Eurobarometer [32] |
April 2016 | May 2016 | 57% | 37% | 6% | Eurobarometer [33] |
April 2015 | May 2015 | 60% | 35% | 5% | Eurobarometer [34] |
April 2014 | June 2014 | 64% | 30% | 6% | Eurobarometer [35] |
April 2013 | June 2013 | 54% | 39% | 7% | Eurobarometer [36] |
April 2012 | July 2012 | 58% | 34% | 8% | Eurobarometer [37] |
November 2011 | July 2012 | 54% | 36% | 10% | Eurobarometer [38] |
May 2011 | August 2011 | 47% | 42% | 11% | Eurobarometer [39] |
September 2010 | December 2010 | 47% | 41% | 12% | Eurobarometer [40] |
May 2010 | July 2010 | 54% | 36% | 10% | Eurobarometer [41] |
September 2009 | November 2009 | 54% | 38% | 8% | Eurobarometer [42] |
May 2009 | December 2009 | 58% | 34% | 8% | Eurobarometer [43] |
May 2008 | July 2008 | 47% | 43% | 10% | Eurobarometer [44] |
September 2007 | November 2007 | 48% | 38% | 14% | Eurobarometer [45] |
March 2007 | May 2007 | 49% | 37% | 14% | Eurobarometer [46] |
September 2006 | November 2006 | 46% | 45% | 9% | Eurobarometer [47] |
April 2006 | June 2006 | 56% | 35% | 9% | Eurobarometer [48] |
September 2005 | November 2005 | 49% | 37% | 14% | Eurobarometer [49] |
September 2004 | October 2004 | 56% | 33% | 11% | Eurobarometer [50] |
Inflation slowed down to 2.2% in 2006. However, after the austerity measures it was much higher than the criteria until the crisis. The crisis slowed it down to 2.9%, but in the end it was above the Maastricht criteria in 2009. The annual inflation was 0.9% in October 2013.
The budget deficit was 9.2% in the election year of 2006. After the austerity measures, it neared the 3% threshold in 2008. The deficit was planned to be 3.9% in 2009, but was ultimately above 4%. The 2010 budget planned 3.8%, but it also went over 4%. Hungary's general government deficit, excluding the effect of one-off measures, was 2.43% of GDP in 2011, lower than the 2.94% target and under the 3% threshold for the first time since 2004. Hungary recorded a budget deficit of 1.9% in 2012, well below previous expectations. The budget deficit is expected to be under the 3% threshold in 2013 as well. [51]
Public debt accounted for 80.1% of GDP in 2010, [52] above the 60% target. However, the EU might accept a Hungarian public debt which declines for at least 2 years.
The central bank's interest rate was raised by 3% to 11.5% in October 2008, because of the crisis. However, then it was lowered consecutively 14 times until 27 April 2010 down to 5.25%. Then it was raised 5 times until 21 December 2011 up to 7%. Since then the rate has declined 35 times, as of February 2019 [update] the interest rate is 0.90% [53]
As the conservative government in 2013 did not plan to adopt the euro before 2020, there is no discussion about a possible ERM II membership.
Assessment month | Country | HICP inflation rate [54] [nb 1] | Excessive deficit procedure [55] | Exchange rate | Long-term interest rate [56] [nb 2] | Compatibility of legislation | ||
---|---|---|---|---|---|---|---|---|
Budget deficit to GDP [57] | Debt-to-GDP ratio [58] | ERM II member [59] | Change in rate [60] [61] [nb 3] | |||||
2012 ECB Report [nb 4] | Reference values | Max. 3.1% [nb 5] (as of 31 Mar 2012) | None open(as of 31 March 2012) | Min. 2 years (as of 31 Mar 2012) | Max. ±15% [nb 6] (for 2011) | Max. 5.80% [nb 7] (as of 31 Mar 2012) | Yes [62] [63] (as of 31 Mar 2012) | |
Max. 3.0% (Fiscal year 2011) [64] | Max. 60% (Fiscal year 2011) [64] | |||||||
Hungary | 4.3% | Open | No | -1.4% | 8.01% | No | ||
-4.3% (surplus) | 80.6% | |||||||
2013 ECB Report [nb 8] | Reference values | Max. 2.7% [nb 9] (as of 30 Apr 2013) | None open(as of 30 Apr 2013) | Min. 2 years (as of 30 Apr 2013) | Max. ±15% [nb 6] (for 2012) | Max. 5.5% [nb 9] (as of 30 Apr 2013) | Yes [65] [66] (as of 30 Apr 2013) | |
Max. 3.0% (Fiscal year 2012) [67] | Max. 60% (Fiscal year 2012) [67] | |||||||
Hungary | 4.6% | Open(Closed in June 2013) | No | -3.5% | 6.97% | Unknown | ||
1.9% | 79.2% | |||||||
2014 ECB Report [nb 10] | Reference values | Max. 1.7% [nb 11] (as of 30 Apr 2014) | None open(as of 30 Apr 2014) | Min. 2 years (as of 30 Apr 2014) | Max. ±15% [nb 6] (for 2013) | Max. 6.2% [nb 12] (as of 30 Apr 2014) | Yes [68] [69] (as of 30 Apr 2014) | |
Max. 3.0% (Fiscal year 2013) [70] | Max. 60% (Fiscal year 2013) [70] | |||||||
Hungary | 1.0% | None | No | -2.6% | 5.80% | No | ||
2.2% | 79.2% | |||||||
2016 ECB Report [nb 13] | Reference values | Max. 0.7% [nb 14] (as of 30 Apr 2016) | None open(as of 18 May 2016) | Min. 2 years (as of 18 May 2016) | Max. ±15% [nb 6] (for 2015) | Max. 4.0% [nb 15] (as of 30 Apr 2016) | Yes [71] [72] (as of 18 May 2016) | |
Max. 3.0% (Fiscal year 2015) [73] | Max. 60% (Fiscal year 2015) [73] | |||||||
Hungary | 0.4% | None | No | -0.4% | 3.4% | No | ||
2.0% | 75.3% | |||||||
2018 ECB Report [nb 16] | Reference values | Max. 1.9% [nb 17] (as of 31 Mar 2018) | None open(as of 3 May 2018) | Min. 2 years (as of 3 May 2018) | Max. ±15% [nb 6] (for 2017) | Max. 3.2% [nb 18] (as of 31 Mar 2018) | Yes [74] [75] (as of 20 March 2018) | |
Max. 3.0% (Fiscal year 2017) [76] | Max. 60% (Fiscal year 2017) [76] | |||||||
Hungary | 2.2% | None | No | 0.7% | 2.7% | No | ||
2.0% | 73.6% | |||||||
2020 ECB Report [nb 19] | Reference values | Max. 1.8% [nb 20] (as of 31 Mar 2020) | None open(as of 7 May 2020) | Min. 2 years (as of 7 May 2020) | Max. ±15% [nb 6] (for 2019) | Max. 2.9% [nb 21] (as of 31 Mar 2020) | Yes [77] [78] (as of 24 March 2020) | |
Max. 3.0% (Fiscal year 2019) [79] | Max. 60% (Fiscal year 2019) [79] | |||||||
Hungary | 3.7% | None | No | -2.0% | 2.3% | No | ||
2.0% | 66.3% | |||||||
2022 ECB Report [nb 22] | Reference values | Max. 4.9% [nb 23] (as of April 2022) | None open(as of 25 May 2022) | Min. 2 years (as of 25 May 2022) | Max. ±15% [nb 6] (for 2021) | Max. 2.6% [nb 23] (as of April 2022) | Yes [80] [81] (as of 25 March 2022) | |
Max. 3.0% (Fiscal year 2021) [80] | Max. 60% (Fiscal year 2021) [80] | |||||||
Hungary | 6.8% | None | No | -2.1% | 4.1% | No | ||
6.8% (exempt) | 76.8% (exempt) |
The euro is the official currency of 20 of the 27 member states of the European Union. This group of states is officially known as the euro area or, commonly, the eurozone, and includes about 344 million citizens as of 2023. The euro is divided into 100 euro cents.
The economy of Hungary is a high-income mixed economy, ranked as the 9th most complex economy according to the Economic Complexity Index. Hungary is a member of the Organisation for Economic Co-operation and Development (OECD) with a very high human development index and a skilled labour force, with the 22nd lowest income inequality by Gini index in the world. The Hungarian economy is the 53rd-largest economy in the world with $265.037 billion annual output, and ranks 41st in the world in terms of GDP per capita measured by purchasing power parity. Hungary has an export-oriented market economy with a heavy emphasis on foreign trade; thus the country is the 35th largest export economy in the world. The country had more than $100 billion of exports in 2015, with a high trade surplus of $9.003 billion, of which 79% went to the European Union (EU) and 21% was extra-EU trade. Hungary's productive capacity is more than 80% privately owned, with 39.1% overall taxation, which funds the country's welfare economy. On the expenditure side, household consumption is the main component of GDP and accounts for 50% of its total, followed by gross fixed capital formation with 22% and government expenditure with 20%.
The economy of Romania is a complex high-income economy with a skilled labour force, ranked 12th in the European Union by total nominal GDP and 7th largest when adjusted by purchasing power parity. The World Bank notes that Romania's efforts are focused on accelerating structural reforms and strengthening institutions in order to further converge with the European Union. The country's economic growth has been one of the highest in the EU since 2010, with 2022 seeing a better-than-expected 4.8% increase.
The euro area, commonly called the eurozone (EZ), is a currency union of 20 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies.
The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe.
The economy of the European Union is the joint economy of the member states of the European Union (EU). It is the second largest economy in the world in nominal terms, after the United States and the third one in purchasing power parity (PPP) terms, after China and the United States. The European Union's GDP estimated to be around $19.35 trillion (nominal) in 2024 representing around one sixth of the global economy. Germany has the biggest national GDP of all EU countries, followed by France and Italy.
The euro convergence criteria are the criteria European Union member states are required to meet to enter the third stage of the Economic and Monetary Union (EMU) and adopt the euro as their currency. The four main criteria, which actually comprise five criteria as the "fiscal criterion" consists of both a "debt criterion" and a "deficit criterion", are based on Article 140 of the Treaty on the Functioning of the European Union.
Lithuania, as an EU member state, joined the eurozone by adopting the euro on 1 January 2015. This made it the last of the three Baltic states to adopt the euro, after Estonia (2011) and Latvia (2014). Before then, its currency, the litas, was pegged to the euro at 3.4528 litas to 1 euro.
The Harmonised Index of Consumer Prices (HICP) is an indicator of inflation and price stability for the European Central Bank (ECB). It is a consumer price index which is compiled according to a methodology that has been harmonised across EU countries. The euro area HICP is a weighted average of price indices of member states who have adopted the euro. The primary goal of the ECB is to maintain price stability, defined as keeping the year on year increase HICP target on 2% over the medium term. In order to do that, the ECB can control the short-term interest rate through Eonia, the European overnight index average, which affects market expectations. The HICP is also used to assess the convergence criteria on inflation which countries must fulfill in order to adopt the euro. In the United Kingdom, the HICP is called the CPI and is used to set the inflation target of the Bank of England.
The Czech Republic is bound to adopt the euro in the future and to join the eurozone once it has satisfied the euro convergence criteria by the Treaty of Accession since it joined the European Union (EU) in 2004. The Czech Republic is therefore a candidate for the enlargement of the eurozone and it uses the Czech koruna as its currency, regulated by the Czech National Bank, a member of the European System of Central Banks, and does not participate in European Exchange Rate Mechanism II.
Latvia replaced its previous currency, the lats, with the euro on 1 January 2014, after a European Union (EU) assessment in June 2013 asserted that the country had met all convergence criteria necessary for euro adoption. The adoption process began 1 May 2004, when Latvia joined the European Union, entering the EU's Economic and Monetary Union. At the start of 2005, the lats was pegged to the euro at Ls 0.702804 = €1, and Latvia joined the European Exchange Rate Mechanism, four months later on 2 May 2005.
Poland does not use the euro as its currency. However, under the terms of their Treaty of Accession with the European Union, all new Member States "shall participate in the Economic and Monetary Union from the date of accession as a Member State with a derogation", which means that Poland is obliged to eventually replace its currency, the złoty, with the euro.
Bulgaria plans to adopt the euro and become the 21st member state of the eurozone. The Bulgarian lev has been on the currency board since 1997 through a fixed exchange rate of the lev against the Deutsche Mark and the euro. Bulgaria's target date for introduction of the euro is 1 January 2025, which would make the euro only the second national currency of the country since the lev was introduced over 140 years ago. The official exchange rate is 1.95583 lev for 1 euro.
Romania's national currency is the leu. After Romania joined the European Union (EU) in 2007, the country became required to replace the leu with the euro once it meets all four euro convergence criteria, as stated in article 140 of the Treaty on the Functioning of the European Union. As of 2023, the only currency on the market is the leu and the euro is not yet used in shops. The Romanian leu is not part of the European Exchange Rate Mechanism, although Romanian authorities are working to prepare the changeover to the euro. To achieve the currency changeover, Romania must undergo at least two years of stability within the limits of the convergence criteria. The current Romanian government established a self-imposed criterion to reach a certain level of real convergence as a steering anchor to decide the appropriate target year for ERM II membership and Euro adoption. In March 2018, the National Plan for the Adoption of the Euro scheduled the date for euro adoption in Romania as 2024. Nevertheless, in early 2021, this date was postponed to 2027 or 2028, and once again to 2029 in late 2021 and then moved up to 2026.
Sweden does not currently use the euro as its currency and has no plans to replace the existing Swedish krona in the near future. Sweden's Treaty of Accession of 1994 made it subject to the Treaty of Maastricht, which obliges states to join the eurozone once they meet the necessary conditions. Sweden maintains that joining the European Exchange Rate Mechanism II, participation in which for at least two years is a requirement for euro adoption, is voluntary, and has chosen to remain outside pending public approval by a referendum, thereby intentionally avoiding the fulfilment of the adoption requirements.
The United Kingdom did not seek to adopt the euro as its official currency for the duration of its membership of the European Union (EU), and secured an opt-out at the euro's creation via the Maastricht Treaty in 1992, wherein the Bank of England would only be a member of the European System of Central Banks.
Denmark uses the krone as its currency and does not use the euro, having negotiated the right to opt out from participation under the Maastricht Treaty of 1992. In 2000, the government held a referendum on introducing the euro, which was defeated with 53.2% voting no and 46.8% voting yes. The Danish krone is part of the ERM II mechanism, so its exchange rate is tied to within 2.25% of the euro.
The enlargement of the eurozone is an ongoing process within the European Union (EU). All member states of the European Union, except Denmark which negotiated an opt-out from the provisions, are obliged to adopt the euro as their sole currency once they meet the criteria, which include: complying with the debt and deficit criteria outlined by the Stability and Growth Pact, keeping inflation and long-term governmental interest rates below certain reference values, stabilising their currency's exchange rate versus the euro by participating in the European Exchange Rate Mechanism, and ensuring that their national laws comply with the ECB statute, ESCB statute and articles 130+131 of the Treaty on the Functioning of the European Union. The obligation for EU member states to adopt the euro was first outlined by article 109.1j of the Maastricht Treaty of 1992, which became binding on all new member states by the terms of their treaties of accession.
Within the framework of EU economic governance, Sixpack describes a set of European legislative measures to reform the Stability and Growth Pact and introduces greater macroeconomic surveillance, in response to the European debt crisis of 2009. These measures were bundled into a "six pack" of regulations, introduced in September 2010 in two versions respectively by the European Commission and a European Council task force. In March 2011, the ECOFIN council reached a preliminary agreement for the content of the Sixpack with the commission, and negotiations for endorsement by the European Parliament then started. Ultimately it entered into force 13 December 2011, after one year of preceding negotiations. The six regulations aim at strengthening the procedures to reduce public deficits and address macroeconomic imbalances.
Croatia adopted the euro as its currency on 1 January 2023, becoming the 20th member state of the eurozone. A fixed conversion rate was set at 1 € = 7.5345 kn.
{{cite journal}}
: Cite journal requires |journal=
(help)