Are Romania and Bulgaria ahead of Hungary in adopting the euro?
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As Hungary grapples with its long-delayed euro adoption, many wonder if Romania and Bulgaria are already ahead of Hungary. Bulgaria appears to be making significant strides towards joining the eurozone, with plans to potentially adopt the euro as early as January 2026. In contrast, Romania faces a more challenging path.
Hungary’s new efforts
As Economx writes, Mihály Varga, Hungary’s incoming central bank governor, is poised to introduce a new monetary policy alongside the country’s euro adoption efforts, believing that such preparations will bolster the Hungarian economy. During a parliamentary hearing, Varga emphasised three key points: Hungary’s commitment to adopting the euro hinges on economic readiness, which can foster sustainable development and mitigate risks; economic policy must meaningfully align with these conditions while preserving policy autonomy; and decisions regarding euro area membership will require consensus between the central bank and the government.
Procrastination
Hungary‘s path to euro adoption has seen numerous delays and shifting timelines since the first Orbán government aimed for a 2007 target. While initial convergence criteria were nearly met, subsequent governments, including those led by Péter Medgyessy and Gordon Bajnai, pushed adoption dates to 2013-2014, only to see prospects diminish following the 2008 financial crisis, significantly weakening the forint.
By 2011, Prime Minister Viktor Orbán deemed a 2020 introduction unrealistic due to economic instability. Despite these setbacks, officials like Mihály Varga reaffirm Hungary’s commitment to the euro. However, György Matolcsy suggested that adoption may not be feasible until after 2030 when Hungary reaches about 90% of the EU’s average development level.
After 2030? That clearly is no vote of confidence by Matolcsy on the future prospects of the Hungarian economy.
To join the euro area, a Member must meet the four economic convergence criteria.
1. Price stability
The inflation rate cannot be higher than 1.5 percentage points above the rate of the three best-performing Member States.
2. Sound and sustainable public finances
The country should not be under the excessive deficit procedure.
3. Exchange-rate stability
The country has to participate in the exchange rate mechanism (ERM II) for at least two years, without strong deviations from the ERM II central rate and without devaluing its currency’s bilateral central rate against the euro in the same period.
4. Long-term interest rates
The long-term interest rate should not be higher than two percentage points above the rate of the three best-performing Member States in terms of price stability.
So yes – one can see how we would struggle to meet these four criteria. Should other Member manage – well. And it would say a lot about Hungary. As much as Politicians love spin – it´s facts and data that dictates a pass or fail, when it comes to the criteria.
https://www.consilium.europa.eu/en/policies/joining-the-euro-area/convergence-criteria/