Will the Hungarian government give in to Brussels to save the forint?
The Hungarian government is becoming more accommodating to Brussels’ demands. What is the point of this capitulation? Has the government also realised that the forint cannot be allowed to depreciate indefinitely?
The government is more lenient
When asked by 444.hu what the Hungarian government seems to be more lenient on, a Brussels-based expert replied that it seems to be more lenient on everything. This expert has a good insight into the negotiations between the European Commission and the Hungarian government on the reconstruction fund (RRF).
As 444.hu puts it, there is a lot of money at stake, and very little time left to get it. EUR 5.8 billion of aid is pending and a further EUR 9.6 billion in soft loans. 70 percent of the aid will be lost if the European Council does not approve the Hungarian government’s plan to spend the money by the end of the year.
The Council will have four weeks to approve the Hungarian plan if the Commission approves it first. This means that in any case, the Commission must approve the plan, which Hungary has not yet even submitted, by November at the latest.
The funds would be very important
This money would be very important to the government, especially as it has already spent some of it in advance. For example, it was going to pay for this year’s pay rise for doctors, but it has also started to finance some investments and grants that can be won through tenders.
But just as importantly, Hungary is the only EU member state that would apply for the reconstruction fund, but does not yet have an approved plan – this also contributes to the weakening of the forint. This makes investors see Hungary as riskier than other European countries.
“The government wants to do everything it can to make peace with Brussels over EU funds,” György Jaksity, founder of Concorde Securities, told Forbes.hu. He said that the forint is moving towards the category of play money, but at least the government does not want to kick us out of the EU for the time being. The country would be incapable of adopting the euro and the world would be incapable of sending Russia packing.
Source: 444.hu, Forbes.hu