On 24 June 2026, the Council of the European Union adopted a recommendation outlining economic, social, employment, structural and budgetary policies for Hungary, urging the country to address persistent macroeconomic imbalances and fiscal sustainability risks. The recommendation, published in a Council note dated 22 June 2026, targets Hungary's vulnerabilities in competitiveness, government financing needs, and house prices, and calls for corrective action on fiscal deviations and structural weaknesses.
The Council's recommendation builds on Hungary's medium-term fiscal-structural plan endorsed on 18 February 2025, which set maximum net expenditure growth rates of 4.3% for 2025, 4.0% for 2026, 3.9% for 2027, and 3.7% for 2028. However, on 8 July 2025, the Council allowed Hungary to deviate from these rates due to increased defence spending, activating the national escape clause for 2025-2028. Despite this, Hungary's net expenditure grew 8.1% in 2025, well above the recommended rate, and is projected to reach 9.7% in 2026. The general government deficit stood at 4.7% of GDP in 2025 and is projected to rise to 6.2% in 2026 and 5.8% in 2027. Government debt increased from 73.5% of GDP at end-2024 to 74.6% at end-2025, with projections of 75.1% at end-2026 and 76.8% at end-2027.
The Council also highlights distortive practices in Hungary's financial markets, including frozen retail mortgage loan rates at October 2021 levels, widespread subsidised loans, and price caps on food and motor fuel. The national fiscal framework is noted to have limited incentives for sustainability, with the 'state of danger' in place since 2020 lifting multiannual budget planning requirements. Pension spending is projected to increase by 4.1 percentage points of GDP between 2025 and 2070, contributing to overall high fiscal sustainability risks. Additionally, cohesion policy programme implementation remains below the EU average, and Hungary must accelerate Just Transition Fund disbursement by end-2026.
The recommendation impacts several stakeholders. For the Hungarian government, it signals the need for fiscal consolidation and structural reforms, potentially requiring spending cuts or revenue increases to meet expenditure targets. Hungarian businesses may face reduced access to subsidised credit and price controls, affecting sectors such as retail and energy. Hungarian consumers could experience higher borrowing costs if mortgage rate freezes are lifted, but may benefit from reduced inflation if price caps are phased out. EU institutions, particularly the Commission and Council, will monitor compliance through the European Semester, with possible consequences for cohesion fund disbursements if recommendations are not followed. The Council's recommendation is non-binding but carries political weight, and the Commission is expected to assess Hungary's progress in its next country report.