Hungarian finance minister: We need to think about the introduction of the euro

Last year would have been easier even if we had been part of the ERM-2 system, the precursor to the euro, Finance Minister Mihály Varga admitted in an interview with VG.

Although the vast majority of Hungarians have long been in favour of joining the eurozone, the Orbán government has made no effort to replace the forint with EU currency since it came to power in 2010. Now the situation seems to have changed due to Hungary’s economic crisis (huge inflation, no money coming in from the EU fund), and the Hungarian finance minister has at least mentioned the euro.

Minister Varga stressed in the interview that we committed to adopting the euro when we joined the EU, but that careful consideration should precede the choice of the right date for joining.

We should think about the possibility, but the government should not rush into this issue,

Mihály Varga said, citing the Czech Republic as an example.

The 2024 budget is planned for an exchange rate of 381 forints to the euro, the minister said.

The government expects economic growth of 4% next year, which several credit rating agencies consider over-optimistic. Varga said:

I will sign if it ends up being 3 percent.

He said analysts agree that growth will be strong next year, because the outlook for the Hungarian economy is good: foreign investment is coming in briskly, our investment rate is the highest in the EU, exports are at a record high this year, and the labour market is tight. The government expects growth of 1.5 percent this year.

Varga says Brussels is increasing deficits and causing economic damage by blocking the funds Hungary is due.

I find it inexplicable that three years after the launch of Covid, there are still countries, including Hungary, that have not received the support they deserve. As the programme is about to enter the repayment phase, we could have the impossible situation where Hungary is paying back the loans it has taken out and has not yet received either the grant or the loan part, he said.

The inflation outlook was also discussed. Varga expects inflation to accelerate its decline over the summer and even more so in the second half of the year, which will be helped by easing borrowing rates.

Of course, the public purse will suffer from lower consumption, as we have less tax revenue, but this also means that inflation will be able to fall faster than previously expected, the minister said, adding that there are also forecasts that the rate of price increases will slow to 6-8 percent by the end of the year.

Source: