The Feasibility of the Hungarian Convergence Programme

The paper provides on overview of the Hungarian Convergence Programme (CP) that envisages the path to restore macroeconomic equilibrium during the next three years. The spiralling budget deficit in 2006 made an update of the previous CP inevitable. In the September 2006 version the government shows strong commitment to face up to the fiscal imbalances and structural problems, yet several aspects question the feasibility of the Programme. The paper focuses on the evaluation of the major objectives and elements of the CP as well as on significant technical assumptions and external factors that may constitute a downside risk for the implementation. Besides introducing a corrective fiscal package the Convergence Program draws the outlines of several, long-awaited reforms of almost the entire sphere of the social welfare systems. As the primary focus is on the feasibility of the budgetary consolidation strategy, the paper deals with these reforms only in the context of the long-term sustainability of public finances.