EU suspends Hungary aid over deficit requirements failure

PanARMENIAN.Net - The European Union on Wednesday, February 22 ordered the suspension of 495 million euros (656 million dollars) in aid to Hungary over its failure to bring its budget deficit in line with the bloc's requirements.

The European Commission made the announcement in Brussels.

It is first time that the bloc imposes the penalty of suspending access to the EU Cohesion Fund - money available to poorer members for infrastructure projects.

Hungary received about 2 billion euros (2.5 billion dollars) of the 37 billion euros disbursed by the fund in 2010, according to the latest available figures.

EU Economy Commissioner Olli Rehn has said that any such suspension would apply from January 2013.

Last month, he rebuked Hungary for applying deficit-cutting measures that were only temporary, saying this was 'not sufficient to correct the deficit in a sustainable and credible manner.'

Budapest had been mandated to bring its deficit below the EU-required level of 3 per cent of gross domestic product (GDP) by this year.

Hungary has always breached the rules since it joined the EU in 2004 apart from last year. But Rehn has attributed that feat to a controversial one-off transfer of private pension funds to the state.

Tougher fiscal discipline rules now allow the European Commission to force members to comply with EU requirements. But because Hungary is not a eurozone country, it does not face the threat of economic sanctions, M&C reported, citing DPA.