Defining Economic Governance Through Critical Junctures and Learning by Doing

Following its accession, Hungary was subjected to an excessive deficit procedure by the European Commission and emerged as one of the EU’s early victims of the global financial crisis. These developments compelled the Hungarian government to adopt rules-based economic policies promoted by the EU. Although Hungary continued to comply with the economic governance framework after 2010, it did so by employing unconventional instruments, such as introducing special taxes and nationalizing mandatory private pension contributions. This chapter contends that the EU was unprepared for these non-standard measures and lacked an adequate response during the 2010s. The COVID-19 pandemic and the subsequent introduction of Next Generation EU, along with the so-called rule of law mechanism, marked turning points in this respect. Drawing on the experiences of Hungary, the chapter argues that since 2020 the EU has been attempting to overhaul its system of economic governance by conditioning access to EU funds on compliance with specific criteria. This approach compels member states not only to adhere to particular rules but also to uphold European values. The conditionality attached to EU funds transcends economic considerations, underscoring the notion that the European Union is more than a single market—it is a union of shared values and standards of behavior.