The EU Commission has told Hungary it must slash its budget gap or face a penalty of almost half a billion euros.
The move is unprecedented and is sure to add to tensions between Brussels and Budapest after last month’s separate bust up over changes to Hungary’s constitution.
The latest decision means Hungary must get its annual deficit below three percent or miss out on cohesion funding next year.
“This decision today is to be regarded as an incentive to correct a deviation and not as a punishment. It is a fair and proportionate measure of a preventive nature,” said the European Commissioner for Economic and Monetary Affairs Olli Rehn.
But Budapest has hit back, describing the planned suspension as ‘unfounded and unfair’. The proposed cut will still need to be backed by the EU’s other 26 countries, however its impact amounts to almost 30 percent of Hungary’s cohesion cash, money which is designed to help the bloc’s poorest members.