Professor, University of Szeged,
Chairman of the Fiscal Council and President of the Hungarian Economic
Published in: Public Finance Quarterly 2016/3 (p. 312-330.)
SUMMARY: In the first decade of the 2000s it became evident that in order to prevent the overspending of Hungarian budget management – which was quite detached from actual performance – executing the current budgets in a more disciplined manner was not enough. Regaining and maintaining financial stability became a strategic issue that required constitutional rules and high level legal norms relying on these rules to consistently regulate public finances. The initiatives directed at changing the situation became more and more valuable as indebtedness continued to intensify, and consolidation programmes failed. The consequences of the financial crisis that erupted in 2008 – leading to a situation bordering on sovereign default – also contributed to the making of a law on the rules of fiscal responsibility and its institutional guardian. Eventually public finances were given a worthy place in 2011 in the Fundamental Law, then the regulation was supported by the Stability Act enacted later at the year-end. The consistent enforcement of the Fundamental Law – enacted five years ago – has become a key guarantee of Hungarian financial stability. This study briefly summarises the antecedents of the regulation of public finances in the Fundamental Law, and describes the major considerations of Hungarian constitutional regulation and the related Stability Act, and the main characteristics of the work of the Fiscal Council. It briefly compares the conditions prevailing in Hungary with the similar regulations of other EU countries and the ways that tasks and institutions are interpreted by their independent fiscal institutions.
KEYWORDS: fiscal policy, crisis management, debt management, budgetary stability
JEL CODES: B15, E62, H15, H61, H63, L38, P48