Dear Prime Minister,
Thank you very much for your letter of 21 November requesting precautionary EU support, to be coordinated with support from the IMF, and for your letter of 5 December which arrived just in time before the European Council. I regret to note the lack of consultation with the Commission and Economic and Financial Committee, prior to asking IMF assistance. This is not in line with standard procedures and does not contribute to creating atmosphere of trust and predictability.
Nevertheless, the Commission responded positively to the request of your government to hold discussions about the support already in December, in order to prepare ground for formal talks scheduled for the beginning of January 2012. However, the talks had to be interrupted, given the lack of assurance on the side of Minister Fellegi that the adoption of two cardinal laws – Magyar Nemzeti (MNB) bill, and Financial Stability Law – would be postponed till we are certain they are compatible with the EU law.
These laws contain provisions which could be in contradiction with the Treaty and interfere with previously issued European policy advice. The Commission has serious doubts on the compatibility of the current version of the Magyar Nemzeti Bank (MNB) bill with Article 130 of the Treaty on the Functioning of the European Union. I also regret that the last drafts of these laws have not been subject to a consultation with the ECB which repeatedly expressed its concerns.
If the laws adopted are incompatible with the EU legislation, they will need to be changed. This creates atmosphere of instability. I would strongly advise you to withdraw the two cardinal laws (on the MNB and the financial stability law) from Parliament. Let us then work together to make sure they are compatible with the EU law.
Let me add one more general point. I agree with you that we should always take into account a wider context of the recent financial turbulences in Europe, but the origin of Hungary’s economic and financial troubles predominantly lies in the domestic policy decisions and measures. Therefore, a possible programme should carry appropriate policy conditionality. I fully share the ideas outlined and endorsed in the discussion of the Economic and Financial Committee include compliance with the Stability and Growth Pact and other issues related to central bank independence, the financial sector, fiscal governance, Country Specific Recommendations, and consultation on policy initiatives.
Further conditions may be considered during the negotiation phase. I hope that on this basis the talks about precautionary assistance could be renewed. I am looking forward to a fruitful co-operation with you on these matters.
José Manuel Barroso
President of the European Commission