Hungary’s new Tisza government inherits massive deficit after Orbán, EU funds become key

Hungary’s incoming Tisza Party government is set to inherit a heavy financial burden: the state budget deficit reached HUF 3,420 billion in the first three months of the year alone, making access to EU funds potentially decisive.

A difficult economic starting point for Tisza

Although the newly elected Tisza Party is not responsible for this year’s budget, the economic environment already signals serious challenges ahead. The state budget deficit reached HUF 3,420 billion in the first quarter alone, a figure largely accumulated under the outgoing Orbán government.

According to Zoltán Török, chief analyst at Raiffeisen Bank, the first-quarter deficit is exceptionally high. In an interview with 444.hu, he said that the current international situation – particularly conflicts in the Middle East – makes reliable economic forecasting increasingly difficult. What seems certain, however, is that Hungary’s economic performance is unlikely to improve significantly in the short term, with only modest growth expected at best.

In this context, gaining access to EU funds as soon as possible has become crucial. Without them, stabilising the economy and progressing towards euro adoption will be significantly more difficult.

Faragó Ferenc, a former professional at Concorde Asset Management, also highlighted the limited fiscal room for manoeuvre. He argued that the high deficit and costly policy commitments leave the government with few options, one of which could be adopting the euro in the longer term to reduce financing costs and provide a more predictable economic path.

Ultimately, he believes the market will decide how credible the new economic policy is.

“If handled well, it could turn into a major success story, with sustained growth from 2027 onwards, and within a decade Hungary could even reach Poland’s level of development. This would require freeing up the market, restoring competition, rolling back state involvement, removing the remnants of autocratic control, eliminating distortions (…) and rebuilding trust at every level, including among people. There will be plenty of work to do,” he wrote in a Facebook post.

EU funds as a potential lifeline

In the current situation, EU funds appear to be one of the most important possible ways out. While the necessary legislation could be adopted quickly, this alone will not be enough. The key question is whether Brussels will be convinced that anti-corruption and institutional reforms will work in practice.

In a recent post, Péter Magyar said he had held talks with Ursula von der Leyen, President of the European Commission. According to him, both sides agreed that unlocking frozen EU funds should be a top priority, and that the Commission is ready to cooperate with the new Hungarian government despite tight deadlines.

“We agreed that releasing the EU funds due to Hungarian citizens, which were frozen due to corruption under the previous government, must be the top priority,” Magyar wrote.

The fastest accessible funding could come from the EU’s Recovery and Resilience Facility, with a total Hungarian allocation of around €10.4 billion, including €6.5 billion in grants. However, accessing these funds requires meeting 27 so-called “super milestones”, including strengthening the Integrity Authority, improving public procurement transparency and fulfilling rule-of-law guarantees.

Until meaningful progress is made, payments will not begin – at best, technical solutions may buy some time.

One such option, as reported by Portfolio, would involve restructuring delayed projects and reallocating several billion euros to the Hungarian Development Bank. This could be counted as completed expenditure administratively, allowing funds to be considered “used” before the August 2026 deadline, even if the actual investments are implemented later.

However, this would not be a lasting solution. Cohesion funds – of which roughly €11.8 billion is currently accessible – come with even stricter constraints, as they can only be spent on predefined programmes and require approval from Brussels.

Péter Magyar and the Tisza Party face a delicate balancing act: they must demonstrate credible reforms for the EU while operating under tight fiscal constraints.

Recent talks suggest that the process may finally be moving forward, with political willingness on the EU side to reach an agreement. Whether this will accelerate the arrival of funds in practice remains to be seen in the coming months.

Meanwhile, tensions have also surfaced on the foreign policy front, with Serbian President Aleksandar Vučić reacting sharply to remarks made by Péter Magyar.