The Hungarian Model: Hungarian Crisis Management in View of the Mediterranean Way

This paper examines the crisis management measures used by Mediterranean euro area countries and Hungary. Such a comparison is justified, because in certain periods of the crisis these countries faced similar challenges necessitating rapid economic policy intervention as previous practices proved to be unsustainable. However, the tools used – and thus also the results – were different. After 2010, Hungary sought to achieve economic balance by improving employment and growth, mainly driven by a tax reform and structural reforms of the budget and, from 2013, after the turnaround in monetary policy, also supported by targeted measures of the Magyar Nemzeti Bank (the Central Bank of Hungary). Overall, the harmonisation between the two main branches of economic policy gave rise to an innovative, growth-friendly economic policy, which since 2013 has created a balance between macro-financial equilibrium and growth not seen for a long time. By contrast, the Mediterranean countries using the euro basically opted for traditional crisis management: they sacrificed growth for balance, yet even the latter was achieved much later than in Hungary. In their case, recovery was also hampered by monetary policy constraints due to euro area membership. The targeted Hungarian steps may provide a good example to other countries facing similar challenges.