January 11, 2012 / 1:05 PM / in 7 years

Hungary could lose up to 1.7 pct of GDP in EU fund suspension

BRUSSELS, Jan 11 (Reuters) - Hungary could lose up to 1.7 percent of its gross domestic product as a result of a suspension of European Union cohesion funds from 2013 if Budapest fails to correct its budget deficit, EU officials said on Wednesday.

The officials said the 1.7 percent figure would be the total effect on the Hungarian economy of the funds being suspended in 2013, rather than the precise size of the funds withheld.

Hungary’s deficits have exceeded the European Union’s threshold of 3 percent of gross domestic product since it joined the bloc in 2004 and the European Commission ruled on Wednesday that Budapest had failed to take effective action to reduce the deficit by 2012 in a sustainable way.

The Commission said that although Hungary did take steps to reduce the gap, they were mainly one-off measures that would not bring the shortfall down in a sustainable way.

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