The Hungarian government elected in April 2026 supports euro adoption and aims to meet the adoption conditions around 2030. For adoption to happen, certain criteria must be met, but these can mask fiscal weakness, credit booms and competitiveness losses that become harder to correct without national monetary and exchange-rate policies.
We propose five domestic readiness tests for the Hungarian government to consider in its euro-adoption strategy. These would help assess whether Hungary’s institutions, policies, productive capacity, shock absorbers and proposed forint-euro exchange rate will be sufficiently ready for it to prosper within the euro area, while identifying the necessary reforms and sequence.
In a context of a budget deficit near 7.3 percent of GDP, high debt-service costs, weak productivity and price and credit distortions, institutional repair and fiscal consolidation should come first. Consolidation should redirect resources from poorly targeted subsidies, low-return investment and politically directed support towards health, education, research and infrastructure. Price and credit distortions should be phased out or retargeted, monetary transmission restored and wage growth aligned with productivity. Entry into the Exchange Rate Mechanism should wait until the fiscal and inflation paths are credible. The central exchange rate should be consistent with long-term competitiveness and robust against major shocks. A strong exchange rate should not be used to meet the inflation criterion.
The adjustment will take several years. Alongside these reforms, euro adoption could strengthen credibility, investment and income convergence. Premature entry would risk weak growth, renewed inflation and a painful adjustment inside the currency union.
About the authors:
Zsolt Darvas is a Senior Fellow at Bruegel. He specialises in macroeconomics, European Union governance and inequality.
Gene Frieda is a Non-resident Fellow at Bruegel. His work focuses on the interaction between macroeconomic policy, capital flows and systemic risk.