Magyar says Hungary will join the euro by 2030, but at what cost?

Incoming Hungarian Prime Minister Péter Magyar plans to join the eurozone in 2030, but the country may have to undergo some painful austerity measures in the meantime. At the same time, Magyar is touting extensive spending on various programs.

How much austerity may Hungarian citizens face? At least 3-4 trillion forints, equal to 8-11 billion euros, according to Világgazdaság.

During Tisza’s campaign, future Finance Minister András Kármán also spoke about Hungary joining the eurozone, calling the move economically rational since it would provide stability and predictability for companies and people, sparing them unpredictable swings in the forint.

What neither Kármán nor Magyar ever mentioned were the austerity measures required for switching to the euro. Conditions for joining the eurozone include: a 60 percent debt-to-GDP ratio, an inflation rate only 1.5 percentage points higher than the average of the three countries with the lowest inflation, long-term interest rates that are a maximum of 2 percentage points above the average of the three best-performing member states, and a stable exchange rate.

Hungary’s budget deficit is another major factor. Last year, the Hungarian budget deficit was 4.7 percent of GDP, better than previous years, but still far above the 3 percent Maastricht criterion. This means that without cutting budget expenditures or revenue-raising measures, Hungary is unlikely to enter the Exchange Rate Mechanism II (ERM II), a necessary move before officially entering the eurozone.

In the midst of a stagnant economy, an energy crisis, and wars, improving the needed criteria seems unlikely. The government already raised the 3.7 percent deficit target planned for this year to 5 percent last December, but according to one analyst who spoke to Világgazdaság, a deficit of some 7 percent cannot be ruled out given the current conditions.

The Hungarian economy has seen little to no growth over the past three years. Following a drop of 0.8 percent in 2023, GDP grew just 0.6 percent in 2024, with estimates calling for an increase of 0.4 percent to 0.5 percent for 2025. While a lack of EU funds has certainly contributed to this, the eurozone area has itself been stagnant, with growth of 1.5 percent, 0.9 percent, and 1.5 percent for the same three years.

Concerns abound that to stick to any plan to join the eurozone by the given timetable, cuts will have to be made. And that means chopping Orbán’s multiple family benefits, the Home Start program, the 14th month pension, and possibly other measures such as food and utility price caps.

There is some room for optimism. Another analyst notes that interest expenses are expected to decrease – if not overnight – so savings can be made here. If there is economic growth and the deficit is low, then reducing the public debt-to-GDP ratio should no longer be a problem. Achieving the inflation target is not an easy task, but it is not impossible either. The past months have shown that Hungarian inflation can be low with appropriate monetary policy.

It may also be difficult to lower long-term yields – reducing the government debt-to-GDP ratio can certainly help here, but the commitment to the euro may in itself bring yields down. Greater fiscal transparency and credibility will play a big role.

It’s interesting to note that the biggest supporter of the Hungarian euro in the Orbán government was Mihály Varga, the president of the Hungarian National Bank, who is expected to remain in his post under the Tisza government.

Notably, certain countries such as Italy and Greece entered the eurozone without meeting the necessary Maastricht criteria, especially Italy, which had a debt-to-GDP ratio of 120 percent, far exceeding the 60 percent normally required. Questionable accounting also arose in numerous countries. Whether Hungary will go down the same path remains to be seen.

While many citizens have been skeptical of euro adoption, such as Bulgarians, where a majority rejected the currency in polling. Hungarians, on the whole, have been more positive towards the idea. Opposition to the euro has much to do with maintaining sovereignty, economic independence, and keeping exports strong. A weak currency, after all, can help industry, an important factor for Hungary’s automobile sector, for instance.

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