Budapest – Hungarian Prime Minister Viktor Orban stated on Monday that Hungary should not adopt the euro, citing the European Union’s ‘disintegration’ and the need to avoid aligning its future more closely with the bloc, reports 24brussels.
In an interview with the economic news site EconomX, Orban expressed, “Hungary should not tie its fate closer to the European Union than now, and adopting the euro would be the closest possible link.” Since assuming office in 2010, Orban has increasingly criticized the EU, which has withheld billions in funds from Hungary due to reforms concerning the rule of law led by the nationalist government.
Despite Hungary’s significant trade relations with the 27-member bloc and benefiting from billions in EU funds since its accession two decades ago, the country still uses the Hungarian forint (HUF) as its official currency. While Hungary has aimed to adopt the euro since 2003, it has not established any target dates for this transition and is not currently a member of the European Exchange Rate Mechanism (ERM II), a necessary step for euro adoption.
Unlike Denmark, which has a legal opt-out from the euro, Hungary does not possess such an exemption. Furthermore, other Eastern European nations, including Poland, the Czech Republic, and Romania, also remain outside the eurozone.
What are the main reasons Hungary delays Euro adoption?
Hungary’s reluctance to adopt the euro reflects a complex interplay of economic and political factors, including a cautious approach in light of past tensions with EU governance structures.
How has the EU funding freeze strained Hungary’s economy?
Orban’s stance sharply contrasts with that of his opposition rival, Peter Magyar, who is actively campaigning to unblock frozen EU funds and facilitate Hungary’s progress towards euro adoption. Although Orban has refrained from making direct comments on central bank policy since the appointment of his former finance minister, Mihaly Varga, he mentioned that the central bank’s main interest rate of 6.5%—among the highest in the EU—was “higher than it could be.”
The central bank recently announced a year-long pause in rate cuts, contributing to the forint reaching a 15-month high against the euro. This move aims to curb the outflow of domestic savings into foreign currencies, particularly the euro.
As debates on the euro adoption continue, the economic landscape remains uncertain for Hungary, hinging on both domestic policy decisions and evolving dynamics within the EU.