EU Commission warns Hungary, Romania over expansionary fiscal policies

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The European Commission on Wednesday warned Hungary and Romania over their expansionary fiscal policies leading to deviations from the countries’ budgetary goals.

“The two countries’ expansionary fiscal policies at a time of already very strong economic growth are for us a source of concern,’’ European Economy Commissioner Pierre Moscovici said.

Report says expansionary fiscal policies seek to spur economic growth, usually taking the form of tax cuts and increased government spending.

Moscovici said there was a “significant deviation” both in Hungary and Romania in 2017 from the planned adjustment path to reach medium-term budgetary objectives.

For Hungary, the commission has called on EU member states, which need to approve making a formal recommendation on the issue, to urge measures to be taken in 2018 “to correct this significant deviation”.

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For Romania, which is already subject to a “significant deviation procedure” due to budget issues in 2016, the commission wants EU member states to issue a warning over “non-effective action” and recommend taking measures in 2018 and 2019.

The commission’s warnings are not binding and no do not have the power to draw sanctions because neither Hungary nor Romania are part of the euro zone.

“Our recommendations do not have the same strength as for countries inside the eurozone.

“Nevertheless, I’m convinced that the Hungarian and Romanian governments will take strong notice of our very strong advice, and that they will be convinced that credibility is a part of what belonging to EU represents,’’ Moscovici said.

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