Hungary calls for activation of escape clause at ECOFIN meeting

MTI-ECONEWS – Hungary’s government will keep fiscal stability a “priority” in 2025 and 2026, even as it undertakes the biggest tax cut programme in Europe, National Economy Minister Márton Nagy told MTI in Brussels, where he participated at an ECOFIN meeting.

Nagy highlighted the rollout of personal income tax exemptions for mothers of two and three children, the doubling of tax allowances for families raising children and VAT rebates for pensioners. He said that the government had already decided on those measures and wouldn’t makes any compromises. “We will channel those resources to Hungarian families and pensioners, not to Ukraine,” he added. He pointed to the challenge posed to all countries in Europe by the decline in competitiveness of the European Union and Germany, the need to boost defence spending and the global trade war.

He noted that 16 member states, including Hungary, had requested the activation of an escape clause at the ECOFIN meeting to allow for greater fiscal manoeuvrability in defence spending.

Nagy acknowledged that the general government deficit had reached 71pc of the full-year target in January-April, as in earlier years. He said expenditures had climbed on interest payments for retail government securities and an annual pensioners’ bonus. Budget revenue rose in line with expectations, supported by increasing consumption, even as GDP underperformed expectations, he added. Nagy noted that the government had earlier modified the full-year general government deficit target to 4.1pc of GDP. Related article from yesterday: Hungary’s budget deficit reaches 70% of annual target by April

He said that after ECOFIN, the government will actively analyse budget trends and make corrections on the expenditure side, if necessary. The “basic rule,” he added, was for the general government to break even, excluding debt maintenance costs. The government will reduce interest expenditures, reducing the deficit and state debt levels in the coming years.

As we wrote last week, Hungary’s 2026 ‘anti-war budget’ submitted, Orbán cabinet detailed key spending plans

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