The European Commission plans to suspend 495m euros (£417m; $655m) of
Hungary's EU funds next year because of the country's budget deficit. The penalty is "unprecedented" for an EU nation, said a statement from the commission - the EU's executive arm. The sum represents 29% of Hungary's cohesion (development) fund allocation. Last month the commission threatened Hungary with legal
action over new laws said to restrict the independence of its central
bank and courts. Hungary has until 1 January next year to improve its budget finances - otherwise the EU funds will be frozen.
The commission proposal would also have to be backed by the
26 other EU member states to be applied. The EU cohesion funds are
designed to improve infrastructure and the environment in the EU's
poorest regions. The commission statement on Wednesday said "this
unprecedented step follows the commission's repeated warnings to
Hungary, urging it to step up its efforts to end the country's excessive
government deficit, and its subsequent failure to take appropriate
action", Reuters news agency reported. The EU's Excessive Deficit Procedure rules say EU member
states should keep their budget deficits below 3% of national output
(GDP) and government debts below, or sufficiently declining towards, 60%
of GDP. "Hungary has been in excessive deficit since it joined the EU
in 2004. And the deadline for correcting the excessive deficit has been
pushed back twice, by three years in total," said EU Economics Commissioner Olli Rehn. "This decision today is to be regarded as an incentive to
correct a deviation, not as a punishment. It is a fair and proportionate
measure of a preventive nature," he said. "Hungary has until 1 January next year to bring its deficit
back on track and avoid these consequences, and I trust it can and it
will do so."
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