By Simon Miller

The European Union has paved the way for sanctions against Hungary for its failure to comply with measures to bring its deficit under 3%.

In November 2008, Hungary received €6.5bn (£5.4bn) from the EU as part of a €20bn international assistance package in return for following revised recomendations from the EU setting a 2011 target for deficit reduction.

Although Hungary is expected to bring in a 3.6% deficit in 2011, the Economic and Financial Affairs Council said this was only thanks to one-off revenues of over 10% of GDP "mainly linked to the transfer of pension assets from private pension schemes to the state".

"Without these the deficit would have reached 6% of GDP, while the structural deficit has deteriorated as well," according to an EU statement.

It added that according to the European Commission's autumn economic forecast, the deficit is projected to reach 2.8% of GDP in 2012, only falling short of the 3% reference value thanks to one-off revenues.

The statement continued: "On the basis of a no-policy-change assumption, the deficit is projected to deteriorate again in 2013, to 3.7%, mainly on account of the one-off revenues expiring,while planned structural reforms are insufficiently specified."

The Council found that while Hungary has formally respected the reference value by 2011, it had not done so on the "basis of a structural and sustainable correction".

Although Hungary cannot face sanctions under the excessive deficit procedure as it is not a member of the euro area, "failure to comply with teh Council's recommendations can lead to the suspension of cohesion fund committments", according to the EU.

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