15.02.2010 - The review in close cooperation with the IMF concluded that Hungary had maintained its course in implementing its economic programme and the economic policy conditions laid down in the 3rd Supplemental Memorandum of Understanding.
On 15 February 2010, the European Commission services, in close cooperation with the International Monetary Fund staff, completed the fourth review under the EU balance of payments assistance.
They concluded that Hungary had maintained its course in implementing its economic programme, in particular regarding the economic policy conditions laid down in the 3rd Supplemental Memorandum of Understanding. Signed on 21 January, this Memorandum is linked to the fourth instalment of the EU medium-term financial assistance.
In particular, the general government deficit target of 3.9% of GDP (ESA definition) in 2009 is expected to have been achieved. This has resulted in a substantial improvement in the structural balance of close to 3% of GDP, bringing the total structural adjustment over the last three years to 8½%.
This has also been recognised by the Commission in its communication of 27 January on effective action taken by Hungary in response to the Council recommendation of July 2009 under the excessive deficit procedure.
Third supplemental memorandum of understanding
>> Press release of 15 February 2010. IP/10/159. Commission concludes fourth review of the EU balance-of-payments assistance for Hungary
>> Commission communication to the Council of 27 January 2010 on action taken by Hungary
The adopted 2010 budget is in line with the target of 3.8% of GDP and contains a significant level of reserves. Nevertheless, the considerable budgetary risks do not only call for a rigorous implementation but may also require a rebuilding of reserves if needed. Hungary also made progress in the area of fiscal governance, financial sector supervision and structural reform.
The Commission services will continue to monitor the situation in Hungary not only in the context of the EU medium term assistance but also via its regular EU fiscal surveillance under the Stability and Growth Pact.
So far, Hungary received three instalments of the EU €6.5 billion balance of payments loan: two instalments of €2 billion each on 9 December 2008 and 26 March 2009 and a further €1.5 billion on 6 July 2009.
In view of the improved external financing situation and the regained access to financing, Hungary has not drawn on EU and IMF assistance upon the satisfactory completion of the previous review in November 2009. It has neither requested a disbursement after the current review. The outstanding amount of EU assistance (of up to EUR 1 billion) remains available and can be disbursed if needs arise, as usual subject to policy conditionality.
Two further reviews are scheduled for the second and third quarter of this year.
The Community assistance is part of an international assistance effort of around EUR 20 billion, which also includes €12.5 billion from the IMF and €1 billion from the World Bank.