Central bank governor talks about euro introduction in Hungary

Whether Hungary will introduce the euro in the future has been a burning question ever since the country joined the European Union in 2004. However, up until now, there has not been an official statement on the probabilities of introducing the common European currency to replace the Hungarian forint. György Matolcsy, Governor of the National Bank of Hungary (Magyar Nemzeti Bank, MNB), has just answered a question from a member of parliament on the introduction of the euro.

Right level of euro maturity not reached

Péter Balassa, Member of Parliament asked György Matolcsy what conditions are necessary for the introduction of the euro that Hungary cannot meet. In his reply, Matolcsy wrote that the MNB is “committed to the successful and safe introduction of the euro in Hungary”. However, the country’s economy is “not yet at the right level of euro maturity”, he wrote, according to mfor.hu. He added that at the moment, the Maastricht criteria would not be met either. However, the central bank has developed a set of conditions for joining the euro area, consisting of several variables.

Matolcsy wrote in his response that the Hungarian central bank developed and published in 2020 a set of criteria called Maastricht 2.0. It “takes into account new real criteria in addition to the fine-tuning of the original nominal criteria”. The central bank governor believes that, considering this set of criteria, “Hungary is not yet at the right level of euro maturity”.

Nominal Maastricht criteria not met – Maastricht 2.0

He adds that in the high inflationary environment of recent years, even the nominal Maastricht criteria are not being met. This is because both Hungary’s inflation and long-term interest rate ratios are above the upper bound. The Maastricht 2.0 convergence criteria cited by György Matolcsy were published by the MNB in its publication Fenntartható felzárkózás euróval (Sustainable Catching-up with the Euro). It would also adjust the current convergence criteria.

According to Index, in the longer term, it makes sense to introduce the common EU currency. However, it should also be noted that the scope for economic policy is much narrower after the introduction, especially in response to external shocks, a senior analyst at the Oeconomus Economic Research Foundation told Index.

Finance minitry and the government’s takes on euro introduction

Naturally, several political actors also commented on the issue. Finance Minister Mihály Varga said at the end of August that it was premature to talk about Hungary joining the euro area. At the moment, “the fastest way to achieve a balanced position” is on the agenda. He also stressed that if we had the euro now, the economy would have to take far fewer risks.

Minister of Economic Development Márton Nagy also made his position clear. In May, at his ministerial hearing in Parliament, he said that the euro was not an issue in the short to medium term. He added that the government had no ambition to adopt the euro. “In the longer term, who knows,” he said. Most often, Márton Nagy pointed out that in a recession, the euro is disadvantageous for a country with such endowments as Hungary.

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