Mihály Varga, Governor of the MNB, said the goal is a successful eurozone accession rather than a swift one, emphasizing that preparation must extend beyond meeting the Maastricht criteria. He spoke at the Magyar Polgári Együttműködés Egyesület Polgári Gondola event about the benefits and risks of adopting the euro.
Benefits and risks of euro adoption
Varga highlighted potential savings from avoiding currency exchange costs, which could amount to about 130 billion forints annually. He pointed to lower interest rates and elimination of foreign exchange risk as additional benefits. At the same time, he warned that Hungary would lose independent monetary policy with the euro’s introduction, ending domestic interest-rate setting.
He noted that the common monetary policy of the euro area may not be able to address country-specific economic shocks differently, implying risks for Hungary. The governor said the euro is not a cure-all and does not by itself solve economic challenges.
Price stability as a key milestone
Varga stated that maintaining price stability is the most important goal for achieving the common currency and sustainable growth. He said the MNB’s inflation target has been reduced to 2.5 percent and that inflation was 1.6 percent in September, which he described as historically and internationally low. This outcome reflects consistent monetary policy, according to him.
He added that external inflation risks justify a cautious and disciplined monetary policy. Preparation also includes restoring budget balance, increasing productivity, and improving competitiveness. Results from successful preparation may be noticeable even before the euro is adopted.
Related: Hungary prepares inflation target cut for euro path
Source: Hungarian National Bank | Data: European Central Bank
