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Fidesz the anti-money changer: euro may never fill nation’s wallets

“Hungary’s legal tender is the forint.” This single, short sentence that the government intends to enshrine in the new Constitution is clear evidence that introduction of the euro is not part of Fidesz’s plans on any timescale. It raises, however, numerous questions as to what the government has up its sleeve in terms of economic policy.

Euro introduction to require two-thirds majority

Naming the forint in the Constitution will make potential introduction of the euro far more difficult: the text of the document would have to be amended, requiring the consent of two-thirds of all MPs. The move to refer to the forint in the text could also raise legal concerns. In 2004 Hungarian voters decided by referendum that the country should join the European Union, and the accession treaty backed up by the result of the referendum stated that the nation is duty-bound to introduce the euro, even if no deadline was given. While the proposed constitutional text does not specifically contradict this, it is possible to envisage a situation in which a future government would not be able to fulfil the will of voters as expressed in the referendum because of the current move.

Question marks over economic policy

Stating in the Constitution that the forint is the legal tender could cause serious headaches for those in charge of economic policy in the future and create an unpredictable business environment. There is a significant likelihood that when the opportunity for euro introduction arrives, the government of the time – whatever its composition – will not have a supermajority in parliament. That future government would be reliant on the support of the opposition parties to pass the necessary constitutional amendment.

The opposition could wield considerable blackmailing power over the government of the day for the duration of its term. Introduction of the common European currency does not happen from one day to the next: fulfilment of the Maastricht Criteria requires persistent work over a long period, after which it is necessary to spend two more years in the ERM-II exchange-rate system before finally entering the eurozone.

A future government might decide that its economic policy priority is euro introduction, but there will be a lingering question mark for both politicians and business leaders throughout the years-long preparation process as to whether the opposition of the time will veto the decision – possibly because of a conflict arising at the time – meaning that the whole process, doubtless requiring many economic sacrifices, would have been in vain.

read more The Budapest Times – Hungary‘s leading English Language source for daily news.