The European Commission proposes to suspend €495 million of Cohesion Fund commitments to Hungary for 2013. The threatened funding represents 0.5% of GDP and 29% of the Hungary's cohesion fund allocations for 2013. 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.

On 11 January, the European Commission concluded, as part of the Excessive Deficit Procedure that Hungary had not taken effective action to bring its deficit to below the target of 3% of GDP by 2011 in a sustainable and credible manner. The European Commission therefore proposed to step up the Procedure.

Hungary has been under the Excessive Deficit Procedure since its accession to the EU in 2004. After deciding in January and November 2005 that Hungary had not taken effective action, the deadline for correcting this situation was postponed in October 2006, from 2008 to 2009. Although Hungary is expected to report a budgetary surplus of 3.5% of GDP for 2011, the country has achieved this surplus due to one-off measures worth some 10% of GDP-Hungary transferred private pension funds of 9¾; of GDP to the budget and introduced extraordinary levies. Without these one-off measures the deficit in 2011 would have reached 6% of GDP. The structural budgetary position deteriorated by a cumulative 2½;% of GDP in 2010 and 2011 in contrast to the Commission's recommended cumulative fiscal improvement of 0.5% of GDP.

For full details see http://europa.eu/rapid/pressReleasesAction.do?reference=IP/12/161