Briefing notes

Hungarian National Bank committed to the successful and secure introduction of the euro in Hungary

Hungary should introduce the euro in a way that will allow the economy to continue to catch up.

Barnabás Virág, Vice-President of the Hungarian National Bank (MNB) responsible for monetary policy, told a local newspaper that it is important to start a factual, professional discourse on when and how it is worthwhile for the country to join the eurozone.

Virág noted that in recent years, the support for the introduction of the euro has ranged from 60 to 70 percent in surveys. 

If we were to ask the question as to whether people would like the development of the Hungarian economy to reach the average of the European Union in 10 to 15 years, then the proportion of supporters would probably be close to 100 percent, he said. The task of economic policy is to find the right strategy between the two goals, the vice-president pointed out.

The euro itself is not the end of a journey, but an important milestone. The road itself is about running a successful catching-up path for the Hungarian economy, he declared.

Two things now need to be done. On the one hand, we should see if we are able to properly assess the euro-maturity of the Hungarian economy, while on the other hand, we should develop a strategic plan that includes improving competitiveness, productivity and creating room for budgetary maneuvers to catch up even after entering, he explained.

The rapid decline in real interest rates will cause the financial cycle to overflow, leading to an abnormal current account imbalance in the growth of private and/or public debt. It is a risk factor that should be avoided, he said.

Referring to the geopolitical aspects of the introduction of the euro, he noted that the cost of giving up an independent monetary policy for Croatia and Bulgaria was significantly lower, which may have made it easier for them to decide to join the euro lobby. The Czech Republic and Poland are two of Hungary’s most important partners. If they decide to adopt the euro, the Hungarian strategy has to be re-evaluated, he stressed. 

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