Prime Minister Viktor Orbán has declared that his government will no longer entertain the idea of replacing the forint with the euro in 2020, as was previously suggested, and instead expects Hungary’s national currency to remain “stable and strong for the next several decades.” Mr. Orbán made these comments in an interview with the pro-government daily Napi Gazdaság, which is slated to replace Magyar Nemzet as the preferred right-wing publication in Fidesz circles. Based on Hungary’s public budget deficit of -2,5% in 2013 and -2.6% in 2006, the country has already fulfilled one of the critical requirements of adopting the euro, namely: keeping the deficit under 3%.
“It was once an attractive and logical idea in Central Europe that by giving up our own national currency, we could join a region that brought with it security and advantages created by countries more developed than ours. This dream fell apart after the 2008 financial crisis, and following attempts to manage it. It was in these years that the whole world came to realize that the Eurozone was the most clumsy in addressing these problems. Hungary, just like the rest of Central Europe, will wait it out. Those smaller countries, mainly the Baltic nations, that joined the euro faced doubts about whether having their own currencies gave them more security. In the case of Hungary, the Czech Republic and Poland, standing on their own two feet is now a more competitive alternative [to the euro],” explained Mr. Orbán. He added that Polish voters, by electing the populist and nationalist Andrzej Duda as president, effectively turned their backs on the euro as well. (Reuters had written earlier about why the Polish election could “shake up” the European Union.)
The forint is here to stay…
Realistically, Hungary may be obliged on paper to join the Eurozone, but like Sweden, it is highly unlikely that anyone would ever try to enforce the adoption of the common currency. Hungary doesn’t have an opt-out, but neither does Sweden which is required to abandon the krona for the euro, according to the 1994 Treaty of Accession. Sweden maintains that it will eventually ask its voters, in the form of a referendum, whether to even join the European Exchange Rate Mechanism (ERM II), which is the first step in moving to adopting the common currency. There are no concrete plans to hold this referendum anytime in the near future.
I would expect that if necessary, Mr. Orbán would point to the Swedish example and may argue that pegging one’s currency to the euro is voluntary, even though this is a prerequisite of later joining the euro which, for Hungary, is not technically optional.
But we all know that the European Union is not famous for its teeth, nor is it likely that amidst the various concerns about corruption and authoritarianism in Hungary, forcing Mr. Orbán to adopt the euro is the hill that Brussels plans to die on.
