Limits And Braking Countermeasure On Compliance With The Public Debt Rule

Limits And Braking Countermeasure On Compliance With The Public Debt Rule Presented by: Prof. Dr. Nagy Date: 15 February 2024 The Economic Importance Of The Budget Deficit And The Debt Rule - In a society with limited resources, fiscal policy plays a crucial role in financing public expenditure. Through fiscal policy, nation states make sovereign choices in the management of public finances. - However, the fiscal sovereignty of nation states is not absolute. The literature points out that at the global level, two important sets of rules affect the fiscal policy of nation states: the rules of international organizations and international public debts. - The system of rules severely constrains economic governance, as public debt has to be financed. In this case, market players influence economic policy decisions, as indebted countries become more vulnerable on the international financial market, needing to finance debt. Hungarian Rule-Based Fiscal Policy As A Self-Limitation Of Public Management - The essential elements of a rule-based fiscal policy are set out in the literature: • Fiscal policy rules, • Planning requirements, • Procedural rules, • Reporting system • And institutional safeguards for compliance with the rules. The Public Debt Rule - The systematic importance of the public debt is justified by the existence of the debt rule in the constitutional law and in the budget procedure. - The optimal public debt level in Hungary: • 50% of GDP - The essence of the rule: • Sustainable public finance management and responsibility for future generations Special Provisions Relating To The EU Budget And Supports - In relation to EU subsidies, the legislator applies permissive rules. In the case of this type of aid, the law allows pre-financing of aid and the provision of own resources even if this increases the government debt ratio. - Domestic legislation allows the government to enter into a Member State payment obligation on the basis of an individual decision to honor a debt obligation entered into by the European Commission on behalf of the European Union and to grant a loan or guarantee by a financial institution jointly owned by the Member States of the European Union. - However, a restrictive rule on EU borrowing was introduced in 2023. The essence of this provision is that Hungary does not support an exceptional and temporary increase in the ceiling of the European Union's own resources if it is intended to provide the guarantee or cover necessary for borrowing on the capital market on behalf of the European Union. The Institutional Guarantee Of A Rule-Based Budget - An important institutional guarantee for the Hungarian rule-based budget is the Fiscal Council. Its role is important because independent budgetary institutions can exercise control over budgetary processes and public debt. - Its duties and powers cover three areas: Summary • Giving opinions on the central budget, • Decisions on ex-ante approval, • Assessing the level of public debt. - Summarizing the main points of my presentation, it is clear that the Hungarian fiscal rules are set out in detail in high-level legislation. - The constitutional rules are exhaustive, in particular the debt rule and related rules. Rules in line with EU rules have been introduced. - The indicators tell us a lot about fiscal management, but they do not fully reflect the extent to which society is managing efficiently, i.e. how it uses its resources in detail. What are resources spent on? - Consumption or investment? On what kind of investment?