Should Hungary adopt the euro?

A growing list of prominent Hungarians, including conservatives, are supporting an initiative to launch a national referendum on the adoption of the euro in Hungary. More accurately, the proposed referendum is actually about Hungary joining the EU’s Exchange Rate Mechanism, which is the first formal step in having the euro replace the forint as Hungary’s currency. (The Fundamental Law does not permit referendums on changing the country’s currency, so focusing on the ERM is one way around this.)

The proposed referendum is spearheaded by a tiny upstart party called Polgári Világ (Civic World), attached to school principal István Pukli, who made national headlines by launching mass protests among teachers in 2016. Mr. Pukli is the party’s vice president and its most prominent personality.

While Mr. Pukli’s party has much work to do if it is to contest national elections in April 2018, its plan to hold a referendum on adopting the euro is supported by some of the most prominent former ministers and thinkers in Hungary, from both “sides” of the aisle. The following have indicated that they support the initative:

  • Péter Balázs, Minister of Foreign Affairs under the Bajnai government (2009-2010);
  • Péter Ákos Bod, former Governor of the Hungarian National Bank, university professor, former MP;
  • Géza Jeszenszky, Minister of Foreign Affairs under the Antall government (1990-1994), former ambassador to Washington and Oslo under the Orbán government;
  • Tamás Kolosi, founder of the Tárki public polling firm and a sociologist by profession, former prime ministerial adviser under the interim Németh government (1989-1990) and the first Orbán government (1998-2002);
  • Kálmán Mizsei, Deputy Secretary General of the United Nations from 2000 to 2016 and an economist by training;
  • György Surányi, Governor of the Hungarian National Bank from 1990 to 1991 and from 1995 to 2001.

The Polgári Világ party believes that adopting the euro in Hungary is the last chance to bind the country to western values and to the North-Atlantic world, rather than the authoritarian oligarchies of the east. The party emphasizes: “In 2004 we joined the EU–essentially by acclamation–to make our homeland blossom within the developed and strong union that safeguarded peace in Europe for 72 years. With this, the thousand year old dream of St. Stephen was fulfilled. At the same time, we also joined a value system, which includes the Reformation, the Enlightenment and the heritage of European democracies.”

Zoltán Keresztény, the fledgling party’a president, added that adopting the euro was the guarantee that Hungary would tear itself out of Vladimir Putin’s sphere of influence.

A proposed design for Hungarian euro coins by Anev Kámen. This includes: the insignia of St. Stephen, the Hungarian national shield, Albert Szent Györgyi, Lajos Kossuth, Béla Bartók, the parliament, the Puli dog breed, the Rubik cube and Ferenc Puskás.

There are not many polls that measure the levels of support of adopting the euro among Hungarians. But a Eurobarometer study from two years ago put the percentage of Hungarians who would like to replace the forint with the euro at 60%.

Still, as Gábor Vágó points out on the anti-corruption Átlátszó website, adopting the euro is not that easy, nor will it be a panacea for all of Hungary’s problems. First, Hungary needs to bring its national debt-to-GDP ratio down to 60%. In 2016, Hungary’s ratio was 75%.

More critically: Mr. Vágó believes that it is not in Hungary’s interests to adopt the euro in its current form. For instance, uniform interest rates set in Frankfurt cannot possibly serve both countries like Germany and Portugal well at the same time, as these countries–and others in the EU–have divergent labour markets, economic structures and productivity levels. This is the traditional conflict between the centre vs. the periphery.

Mr. Vágó believes that giving up the flexibility that Hungary currently enjoys in terms of setting its own interest rates would be a mistake and whatever benefits come with adopting the euro would not make it worth it. In the case of another financial crisis or shock, Hungary would have to adhere to economic solutions that have Germany’s interests in mind, first and foremost.


  1. Why would Hungary and Hungarians want to join into that disaster? Hungary’s economy has been recovering very nicely from the disaster the previous government left behind. Why wreck it? The good news, which happens to be the best that can be said of the previous Socialist government is that between 2002-2010, they managed to increase Hungary’s debt/GDP from 56%, to 83%, and as a result, it will be at least another decade before Hungary qualifies to join the Euro. A decade is what I figure it will take for that monstrosity to collapse, meaning that Hungary will dodge that bullet.

    • Economic “disaster the previous gov left behind” – really? With
      4+% GDP avr growth,
      and 1% GDP of gov contribution to pension funds
      Extensive infrastructure building
      20+% productive investment
      Higher median real wages and standard of living than now.

      Compared to “the nice recovery” now:

      2% GDP avr growth even with 4% GDP avr EU funding
      0% pension contribution
      feeble infrastructure development, if any
      dropping productivity (excpt for big multies), competitiveness, business environment, education levels, etc.
      16% unproductive investment (stadiums, repaving squares)
      10-12% unemployment (incl. 200k fostered workers and 130k working abroad) taking the official figures, in fact more.

      There is of course a skyrocketing, world record improvement in the standards of living… of the Orban mafia.

    • The GGov Debt according to the KSZH (Gov Stats Office) is 75%, but only on Dec 30 of the year. For the rest 355 days we don’t know with “the most transparent government”.

      If we only add the nominal value of 2500 billion of pension fund money gobbled up (500 bil of MOL shares are still here) in 2012 the GGD is 85%.
      If we add the yields of a Hun gov bond on the same amount the real terms GGD stands at above 90%.

      Let’s not forget also the 10 000 billion drop in the foreign reserves of the MNB, equal to 29% of GDP.

      There is no other such economic disaster in the EU, although Croatia seems to be close behind.

    • Correction (no fidesznik cheating here):

      Let’s not forget also the 10 000 million Euro drop in the foreign reserves of the MNB, equal to 9% of GDP.

  2. The article, or the author od the article did not point to the possible advantage or the disadvantage of the adoption of the Euro.
    The great diferances bitseen the westrn industrialized nations and the not so advanced nations is undeniable.
    As for the interest rates , like everything in a free is best when not controlled by government.
    All need to be left to the market factors to function naturally. The government’s role is to guarantee the opportunity for all to free competition. Anything else does only upsets the system and prevent the natural laws to function as it should.
    That is why the country went deep into debt before.
    Just read on Hungary Today that unemployment fell to a record low of 4.2%.
    In Spain it is around 20%.

    • The interest rates are a legitimate, if often abused instrument of a gov economic policy.
      Wild capitalism is not a good thing, but in short term exceptional circumstances; mind you the first anti monopoly action was takes in the US in 1889 (?) by tranching the Standard Oil of California.
      Unemployment in Hun is more than 10%, see above.

  3. Some of us are actually Hungarians and proud of it and do not look up to externality, that undermines ours. Anybody that understands what is going on and believes in the iterest of the people understands the importance of sovereignity.
    Ironic how this article talks about ‘democracy’ and ‘(The Fundamental Law does not permit referendums on changing the country’s currency, so focusing on the ERM is one way around this.)’

    So we are praising backdoor policies???

    • Proud of being whatever sounds pretty hollow, i.e. I’m proud of living under the sun…
      This clamoring for sovereignty reminds me of the Japanese claiming “Asia for the Asian” and Churchill’s “Nationalism is the last refuge of a scoundrel”.
      When such disgusting characters like Orban and co wrap themselves in the flag they soil it.

    • And Don,

      Work on your English.

  4. Dear observer! With all due respect, you are trying to blow smoke up our skirts.

    Let me give you just one example: 4+% GDP avr growth,.

    According to World Bank data, for the 2002-2010 period, Hungary experienced average yearly growth of 2.1%, not “4+%”. Deficits on the other hand averaged in the 6%/year range, not to mention the consumer FX bubble. So the picture of that period is a lot of debt, with very little growth to show for it.

    If you have to lie this much to try to make a point, then you have no point to make.

    • The figures are up to 2007 excluding the 2008 financial crisis when the Hu GDP fell by 6.5% (?) , similar to the German one.

      Even starting from the very low after crisis base the H GDP grew 1.6% avr 2010-13 incl and around 2.5% avr 2014-16 with record EU subsidies of 6.5% GDP for 2014-15.

      The level of investment is still a bit below 2008 level.

      No smoke here, unfortunately Hun is a quiet economic disaster, mostly of Orban’s doing.

  5. Your only point is the FX debt problem, exacerbated by Z.Jarai/MNB who drove the HUF base rates to above 12%, while FX were 3-4%. However these credits built 30 – 34 000 residential units/year. Compare to 5-10 000 in 2012-2016.

    The 2002-2008 saw the largest public infrastructure development since 1960s- mainly freeways, several big bridges, schools renovation, etc.
    What do we see now?

    Budget deficit was high, BUT
    the gov continued to contribute to the private retirement funds to the tune of 350 bil.Ft. even in 2008, i.e. 2.8% of the budget, so here’s your deficit.
    Orban stopped contributing and, voila, deficit<3%.
    I already noted above that he also cleared this 3 000 billion chest and another 2800 billion from the MNBank.

    Doesn't take much unorthodoxy to break the piggy bank.
    If it wasn't for the EU subsidies Hun would be in terrible recession with EUR/HUF 350, incomes under Romanian level, etc.

  6. Ah!!! So Observer wants to cut out the bad, and only focus on the years before the Socialists drove Hungary’s economy into the ditch? Hungary’s GDP growth slowed to 0% by 2007, a full year before the global crisis erupted, while Slovakia and Romania experienced growth in the 8% range that year. How much dishonesty does it take to justify your views?

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