Key insights
- Hungary's central bank will support the government's plan to adopt the Euro by 2030, contingent on meeting Maastricht criteria. While reducing transaction costs and currency risks, potential downsides include loss of monetary policy independence and vulnerability to external shocks, as highlighted by the Polish central bank governor. This event has a slightly negative influence on US equities, as it reflects broader global economic uncertainty and potential for instability in the Eurozone.
Investing.com -- Hungary’s central bank governor Mihaly Varga said the bank will support the government’s plan to join the euro, speaking at a conference in Budapest on Monday.
Varga said the central bank will be a constructive partner and help keep inflation in check. He noted that joining the European Union’s single currency would be a political decision by Prime Minister Peter Magyar’s new government.
The governor’s support carries weight as he is a long-standing ally of former premier Viktor Orban, who lost office in April’s landslide election defeat. Varga is the only senior Orban appointee Magyar has not pledged to replace.
Varga said meeting the Maastricht criteria for joining the euro, which includes keeping inflation and public debt below certain thresholds, would benefit the country. The new government aims to join the euro by 2030, facing challenges with high public debt and a budget Magyar recently described as disgraceful.
Polish central bank governor Adam Glapinski, speaking at the same conference, said keeping a national currency could act as a buffer against external shocks. "Euro adoption could result in a boom-bust cycle," Glapinski said. He attended the conference to receive a prize offered annually by the Hungarian central bank to central bankers and monetary economists.
Martin Kocher, who sits on the European Central Bank’s Governing Council as head of the Austrian central bank, said joining the euro would reduce transaction costs and eliminate foreign currency risks for most corporate loans in Hungary. Kocher said these benefits would accrue over time during the convergence process.
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