EMU: HUNGARY UNDER SPOTLIGHT AS SIX CONVERGENCE/STABILITY PROGRAMMES REVIEWED.

Major consolidation effort demanded from Hungary.

Budapest expects to correct its budget deficit by 2008 (by which date it should have been reined in from 6.1%, according to estimates for 2005, to 1.9% of GDP). The Commission feels this scenario is not plausible since "structural measures lack the necessary quantifications to judge their short- and medium-term budgetary effects" and the programme fails to provide a medium-term objective. The net result of this "cruel and lack of information", according to the Commission, is that "budgetary outcomes could be different than projected in the programme".

Moreover, since "the sustainability of the Hungarian public finances appears to be at high risk given the projected budgetary costs of ageing populations, a large consolidation of public finances over the medium term and a strengthening of the budgetary position thereafter are necessary to reduce risks to public finance sustainability". The EcoFin Council on January 24 will be asked to validate this analysis and approve the timetable proposed for Hungary to present a new, more credible convergence programme update by September 1.

Slovakia and the Czech Republic back on track.

Though the Slovaks and Czechs appear to be on track to correct their excessive deficits (in 2007 and 2008 respectively), the Commission nevertheless invites both countries to "strengthen their fiscal adjustment efforts in view of the favourable outlook". "The results are encouraging but these programmes should be even more ambitious", Mr Almunia insisted. He notably urged the Czech Republic to seize on the current situation to launch reforms forthwith in the health and pensions sectors "since forecasts for 2050 suggest the impact of ageing on public finances is not sustainable".

Finland held up as a shining example.

The country's stability programme was once again highlighted as an example by Joaquin Almunia since the majority of indicators are in the black: the general government balance is forecast to remain in comfortable surplus (1.9% in 2005 and 2006 and 1.8% in 2007). Government debt is estimated to decline by 2.5% to reach about 40% of GDP by 2009. The Commission nevertheless warns that the sustainability of public finances "may come under strain in the long term from rising old-age-related expenditure".

Denmark not at risk.

The Danish economic convergence programme update (the country is not a member of the euro-zone) is likewise positive. The Danes are...