Surprise, surprise: the draft budget for 2020 aims at a fiscal deficit of 1% of GDP only

HUNGARY - In Brief 05 Jun 2019 by Istvan Racz

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Finance minister Varga delivered the draft budget for 2020 to the president of the National Assembly (the parliament) yesterday. Surprisingly, the draft aims at a general government deficit of 1% of GDP only. This is despite the fact that in the government's annual convergence report, out in late April, the target was to cut the deficit to 1.5% of GDP from 1.8% in 2019 and 2.2% last year.So what happened in the meantime and why is there this significant change? In our view, the explanation lies in the outcome of the European election. As reported earlier, Mr. Orbán's Fidesz won that domestically with an impressive lead, but the all-European result was pretty much like a defeat for them, as the strongly hoped-for breakthrough of Eurosceptic - and within that, radical right-wing - parties failed to happen. The way Mr. Orbán appears to read this outcome, judged by his disappointed face and more importantly his actions since the vote, is that Hungary is now likely to lose lots of European money, as at some point in the campaign, he withdrew his support from Mr. Weber, the EPP's candidate for the president of the EU Commission, who very importantly happens to be German. So the German leaders have turned away from Mr. Orbán and Fidesz was suspended as an EPP member, various German politicians repeatedly saying that Fidesz could leave if they want and they would be welcome to do so.But that is a problem, as the EPP remains still the strongest party in Europe, and German politics is still regarded to be the most influential when EU financial transfers are distributed. Please, bear in mind that this is not only about the EU budget for 2021-2027, which would start to have an act...