The world was able to breathe a sigh of relief after last week’s elections in Greece, as it looks as if Athens will try to keep the country’s membership in the eurozone. But it won’t be easy. Once the internal politics are settled and the new government is formed, leaders of the coalition government will inherit an economy in severe recession and the largest debt burden of any country in Europe.
Despite all the attention focused on Greece over the past few months, it isn’t nearly the root of Europe’s problems. Greece is a small economy in the eurozone, and there are a number of other troubled economies creating much more financial uncertainty and risk. A lot is at stake right now, and action is still lagging.
At the European Central Bank’s conference on the eve of the Greek elections, ECB President Mario Draghi mentioned that the central bank, together with other European counterparts, has been working on a “longer-term vision” of the economic and monetary union “where credibility is substantiated by action in the short run.”
However, the key element to any master plan will be an insistence that individual governments reduce their deficit and cut their debt. Mr. Draghi issued a stern warning that political leaders in the EU must balance their own budgets or they will put at risk the assurances the ECB could provide.
“I do not think it would be right for monetary policy to compensate for other institutions’ lack of action,” he said.
Hungary’s leaders agree. The current Hungarian administration took office in 2010, when our national economy was in a very difficult situation, with high deficit and debt. Thanks to dramatic measures enacted by the new government, Hungary is in an economically stronger position than it was two years ago. With the implemented structural reforms, it will be even stronger in the future.
Of the Hungarian government’s swift action, Prime Minister Viktor Orban recently said, “I am proud of the new and modern Constitution. It was the first in Europe to prescribe decreasing public debt and keeping balance in the budget.” Over the past two years, budget deficits have decreased and government debt is on a declining path.
In May, the European Commission commended Hungary for taking the necessary action to correct its previously “excessive deficit.” This year, the government targets a 2.5 percent deficit, which is in line with the European Commission’s May forecast. European Economic and Monetary Affairs Commissioner Olli Rehn said, “For Hungary, we consider that effective action has been taken,” as government deficit will remain significantly below the 3 percent threshold in 2013 as well.
Gyorgy Szapary is Hungary’s ambassador to the United States and former economic adviser to Prime Minister Viktor Orban.