On Monday Parliament approved Hungary’s membership of the new EU Fiscal Compact, by adopting a proposal from Minister of Foreign Affairs János Martonyi. The content of the Compact was agreed by EU heads of state and government, and the treaty related to it will be signed by leaders of participating Member States at a session of the European Council on 1-2 March. The Compact will come into force on 1 January 2013.

A week ago in Parliament, Prime Minister Viktor Orbán said that all the elements of the Compact are acceptable for Hungary. He stressed that last December the Hungarian government did not automatically agree to the ‘crude, vaguely defined draft,’ but in the meantime the country’s aims had been achieved: common budgetary rules are to be made compulsory for eurozone countries, but for other states only after they have joined the eurozone. Another important achievement he mentioned was that the Compact makes no reference to tax harmonization, which he said would not be in the country’s interests.

The Government submitted the full text of the final treaty with the parliamentary proposal. According to this the signatories (the seventeen eurozone countries and other Member States agreeing to the Compact), must not allow their annual structural deficits to exceed 0.5% of nominal GDP. There will be an automatic correction mechanism, triggered if a country deviates significantly from its medium-term objective or its adjustment path (the treaty only allows this in extraordinary circumstances).

A rule related to the above will also be introduced into the legal systems of Member States, at constitutional level or equivalent. All signatories shall recognise the jurisdiction of the European Court of Justice in ensuring that the rule is applied, and its power to impose financial penalties for infringements.

The Compact obliges Member States subject to excessive deficit procedure to submit an economic partnership programme to the Commission and the Council for approval. Such a programme will detail the structural reforms necessary to ensure an effective and long-lasting correction of such an excessive deficit. The implementation of the programme, and the related annual budgetary plans will be monitored by the Commission and the Council.

For better coordination in issuing government securities, signatories will announce in advance to the Council and the Commission their plans to issue them. The Government will ask the Constitutional Court to rule on whether ratification of the new EU Compact requires a two-thirds or a simple majority in Parliament.

(MTI)