Part I — Situation overview

On the evening of 14 July 2026, finance minister András Kármán submitted two bills to the National Assembly. The first (T/372) would amend this year’s budget on three points. The Hungarian Development Bank (MFB) would receive a capital increase of 688.3 million euros — about 248.2 billion forints — charged to the loan taken from the EU’s recovery fund (RRF); the municipal payments financing the Competitive Districts Programme would be rescheduled; and the guarantee frames of four state financial institutions would be cut by 1,600 billion forints. The second (T/371) would transform the budgetary framework: in future the budget must be submitted in the autumn, between 1 and 31 October, and the Fiscal Council (KT) receives its own budget sub-heading within the National Assembly’s chapter — at the same time it loses its veto, and in future may only give an opinion on whether the budget complies with the government-debt rule. The news was covered in detail by Portfolio, 24.hu and HVG; in the background stands a strained deficit path (this year’s deficit under the EU methodology — the so-called accrual-based ESA — may reach 7.5% of gross domestic product, GDP, according to the Finance Ministry’s report). The 7.5 billion forints freshly collected from the capital city’s account by direct debit has meanwhile reopened the old tension in central-municipal financial relations.

The historical context is twofold. The KT’s veto was entrenched by the 2011 constitution-making, and the body’s chair, Gábor Horváth, himself called it an empty formality: the council could only examine compliance with the formal debt rule, while governments submitted formally compliant budgets built on the most optimistic assumptions. At the same time, the same veto could in principle have led, as an emergency brake, to the dissolution of the National Assembly — it was thus a double-edged institution. MIAK’s reading: the question is not whether the veto survives, but whether the set of rules taking its place creates stronger or weaker discipline — a fiscal brake may be phased out only once the new one is already working.

Part II — Literature foundation

Before turning to MIAK’s proposals, it is worth fixing the theoretical frame. According to the 2025 World Economic Outlook report of the International Monetary Fund (IMF), the key to turning the debt path around is credibility: governments must publish a medium-term fiscal framework built on clear rules and containing a pre-announced adjustment path, and the report stresses separately that macroeconomic performance rests on the quality and independence of institutions — including the fiscal framework and the statistical system. According to the study by Carmen Reinhart and Kenneth Rogoff (Harvard economists, researchers who processed eight centuries of the history of financial crises), the recurring prelude to crises is the “this time is different” illusion — fiscal institutions exist precisely to make this self-deception structurally harder. And Kornai János (economist of Hungarian origin, author of the theory of the soft budget constraint; professor at Harvard between 1986 and 2002) teaches that a constraint is a constraint not because it is written down, but because breaking it has consequences — a rule without enforcement is a soft constraint that does not change behaviour. The detailed literature treatment — by author, with quotations — can be found in the 6.4 Literature in detail section.

Part III — MIAK’s concrete proposal

MIAK proposes three measurable measures for the transformation of the fiscal framework.

3.1 A strengthened Fiscal Council: capacity instead of the veto (in the debate of the bill, immediately)

If the veto goes, the council must in exchange receive genuine analytical capacity: an own budget protected by statute (the separate sub-heading under T/371 is a good direction), its own expert staff, access to the Finance Ministry’s models and data, and a mandatory government response — if the government departs from the KT’s opinion, it must give public, itemised reasons, under the “comply or explain” principle established in Anglo-Saxon practice. The EU’s standards on independent fiscal institutions (IFI — Independent Fiscal Institution) and the model of the Dutch CPB and the British OBR show that the strength of a credible fiscal council lies not in the veto but in unavoidable, public analysis (see 6.4.1). The institutional-independence index of programme point A6 should extend to the KT as well.

3.2 A medium-term expenditure rule and a public debt path (together with the 2027 budget)

The formal debt rule — which the KT veto guarded — was demonstrably gameable with optimistic planning. MIAK proposes the framework under programme point G23: a multi-year, numerical expenditure-growth rule (in line with the EU framework), an annual public Debt Sustainability Report and an early warning system, and a consolidation mechanism activated automatically above a debt threshold — counterbalanced in recession by the countercyclical stabiliser of G15, so that the brake does not amplify the downturn. The autumn budget submission (1–31 October) is professionally the right step: the practice of spring adoption demonstrably bred inaccurate planning — but the new timetable is worth something only if the macro-path assumptions are validated in advance, publicly, by the strengthened KT.

3.3 Constitutional settlement and an itemised review of the amendment points (by the end of 2026)

The KT’s prior consent is a constitutional institution entrenched in Article 44 of the Fundamental Law — the settlement of the veto therefore cannot be closed with an ordinary statute: the framework reform must be accompanied by the simultaneous, express settlement of the constitutional level, otherwise the statutory and the constitutional rule come apart, creating legal uncertainty. As part of the same package, MIAK asks for an itemised, public account of the three budget-amendment points under the data-driven budget logic of G1: the utilisation plan and performance indicators of the MFB capital increase, the risk analysis of the guarantee-frame cut (which programmes’ lending it affects), and the effect of the rescheduling of municipal payments — together with the capital-city direct debit — on the liquidity of the municipal sector.

The common principle of the three proposals comes from Kornai: budgetary discipline is a question not of documents but of enforcement capacity (see 6.4.3) — the measure of the reform’s success is whether the new framework is a harder constraint on the government of the day than the old one.

Part IV — Expected effects and risks

Dimension Expected effect Risk
Economy A more realistic, autumn-planned budget; a credible medium-term path towards the markets, a lower risk premium If the new rule after the veto’s removal is weak, the deficit path can run loose — starting from a 7.5% ESA deficit this is an acute risk
Checks and balances With its own budget and capacity, the KT can become a substantive analytical institution instead of a formal rubber stamp Without consequences, the opinion of a veto-less council can become weightless (a soft constraint)
Municipalities The rescheduling of payments is a short-term liquidity relief Continuing the capital-city direct debit preserves the unsettled state of central-municipal relations; ~150 million forints of monthly interest burden for Budapest

The main question of judgement is sequencing: the government would now remove the old brake and promises the new one at the same time. International experience — according to the IMF’s analyses, unjustified departures from fiscal rules are frequent in emerging economies — warns that credibility is asymmetric: it takes years to build and a single softened rule is enough to lose. A separate risk is that the framework transformation is tied to the fulfilment of an EU milestone: if the reform becomes a formal box-ticking exercise, the essence — enforceability — is lost.

Part V — Measurability and summary

5.1 What is worth tracking? (proposed KPIs)

MIAK proposes tracking the following key performance indicators (KPIs):

  • Within 6 months: the KT’s own budget sub-heading and the staffing of its expert team (at least 10 analysts); the “comply or explain” duty written into law.
  • Within 12 months: autumn submission of the 2027 budget with the KT’s public opinion on the macro path; the number and quality of the departure justifications.
  • Within 24 months: the ESA deficit on the path announced by the government (falling substantively from 7.5%); the first edition of the annual Debt Sustainability Report; the closing of the constitutional settlement.

5.2 Summary

MIAK asks the National Assembly to tie the phasing-out of the veto, in the debate of T/371, to three conditions: the simultaneous creation of the KT’s analytical capacity and of its right to reasoned departures, the adoption of the medium-term expenditure rule, and the express settlement of the constitutional level — the old brake may only be removed once the new one already grips. The proposal connects to two MIAK foundational values: to accountability — because the transformation of fiscal institutions must be measured by the same yardstick for every government, and the government now holding a majority must forge a harder constraint upon itself —, and to data-drivenness — because the strength of the system replacing the veto lies precisely in public, verifiable numbers: a transparent deficit path, an itemised account of the amendments, validated macro assumptions.

Part VI — Justifications and further sources

6.1 The press framing by spectrum

The economic band dominated the topic: Portfolio presented the three amendment points and the EU-milestone link in a technical-analytical frame, item by item, while in a separate analysis it wrote in an expressly appreciative framing about the new government’s budgetary transparency “not seen for a long time” — while also signalling its “sense of something missing” on some of the details; its article on the capital-city direct debit is by contrast critical: in a “new government, old troubles” frame it presents the continuation of the predecessors’ practice.

The left-liberal band highlighted the institutional dimension: HVG’s choice of headline (“Tisza takes away the Fiscal Council’s veto”) calls up the frame of checks and balances, while the article fairly quotes the KT’s chair, according to whom the veto was an empty formality; in a separate analysis the paper warns of the high cash-flow deficit this year (“we may yet see appalling budget deficits this year”).

The public-affairs band (24.hu) gave a fact-reporting summary following Portfolio. The pro-government-conservative band (Magyar Nemzet, Mandiner) did not rank the topic among its highlighted news that day — the transformation of the budgetary framework did not appear on the front pages of the right-wing outlets, which, beyond the technical nature of the topic, also signals that the KT-veto issue (a legacy of the 2011 constitution-making) creates an awkward framing situation.

6.2 Facts and data

Data Value Source
MFB capital increase under T/372 688.3 million EUR (~248.2 bn HUF), from an RRF loan Portfolio, 15 July 2026
Frame of the MFB capital injection approved by the European Commission 2 billion EUR (~760 bn HUF) HVG, 14 July 2026
Cut in the guarantee frames of state financial institutions −1,600 bn HUF (largest item: Start Garancia Zrt.) Portfolio, 24.hu, 15 July 2026
This year’s ESA deficit (as the budget was taken over) 7.5% of GDP Finance Ministry report / HVG, 14 July 2026
New timetable for submitting the budget 1–31 October HVG, 15 July 2026
Composition of the KT chair (Gábor Horváth), the governor of the Hungarian National Bank (MNB) (Mihály Varga), the president of the State Audit Office (ÁSZ) (László Windisch) HVG, 15 July 2026
Solidarity contribution collected from Budapest this year ~29 bn HUF (of which the fresh direct debit is 7.5 bn) Portfolio, 15 July 2026
Interest cost of the payment burden for the capital ~150 m HUF/month Portfolio, 15 July 2026

6.3 Policy dimensions

  • Economy (programme points) — data-driven budget (G1), government-debt sustainability framework (G23), countercyclical fiscal stabiliser (G15);
  • Transparency and anti-corruption policy (programme points) — measuring checks and balances, including the independence of fiscal institutions (A6);
  • Public administration and e-government (background) — settling central-municipal financial relations.

6.4 Literature in detail

6.4.1 IMF: World Economic Outlook 2025

In its fiscal chapter, the IMF’s autumn 2025 world economic report names credibility as the condition of turning the debt path around:

“Credibility is central to putting government debt clearly on a declining path. Governments must publish a medium-term fiscal framework built on clear rules, containing a pre-announced adjustment path and contingency plans for handling shocks.” (editorial translation)

The report warns separately: a fiscal strategy built on a benign baseline or extraordinary growth is in itself a source of fragility — and macroeconomic performance ultimately rests on the quality and independence of the institutional ecosystem (fiscal frameworks, oversight, the statistical system). Translated to the Hungarian reform: the autumn submission and the KT’s own sub-heading point in the direction of these conditions, but a path starting from a 7.5% deficit is exactly the situation in which, according to the IMF, the frameworks must be at their hardest.

📖 Source: IMF: World Economic Outlook — Global Economy in Flux (2025)

6.4.2 Carmen Reinhart – Kenneth Rogoff: This Time Is Different (NBER study)

From Reinhart and Rogoff’s crisis database covering eight centuries and 66 countries, the pattern that emerges is that before sovereign defaults and debt crises, decision-makers and investors fall into the same illusion again and again:

“The widely held belief that ’this time is different’ is precisely why it usually is not — and why catastrophe eventually strikes again.” (editorial translation)

The authors separately highlight the role of hidden, under-measured debt elements in the outbreak of crises. In this light the Hungarian framework reform is a double test: the autumn, more realistic planning and the public path can be institutional protection against the “this time is different” illusion — but only if the guarantee frames, state bank capital increases and reschedulings (that is, the off-balance-sheet and time-shifted items) also remain part of the public accounting.

📖 Source: Carmen Reinhart – Kenneth Rogoff: This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises (NBER Working Paper 13882)

6.4.3 Kornai János: Economics of Shortage

Analysing the hardness scale of behavioural constraints, Kornai shows that a constraint can be almost as hard as physical law, can be medium, and can be outright soft — that is, breakable without trouble or consequence; and the soft constraint, apart from exceptional cases, is never effective, because it does not change the actors’ behaviour. The concept of the soft budget constraint stems from here: where overspending has no real consequence, the written rule is mere decoration. The Kornai yardstick for the KT reform is therefore a single question: in the new system, what happens if the government departs from the rule? If the answer is only that the council gives an opinion — without consequence, a duty to give reasons and a public price —, then the Hungarian fiscal constraint becomes softer with the reform, not harder.

📖 Source: Kornai János: A hiány (Economics of Shortage)

6.5 International comparison

The fiscal councils of advanced economies typically operate without a veto but with strong capacity. The British OBR (Office for Budget Responsibility) produces the official macroeconomic and budgetary forecast — the government is forced to build not on its own numbers but on the OBR’s, a disciplining force even stronger than a veto. The Dutch CPB has for decades even costed party programmes before elections. The Irish Fiscal Advisory Council was created after the 2008 crisis, with a “comply or explain” mandate. The Slovak Council for Budget Responsibility oversees a debt brake entrenched in a constitutional act and combined with automatic sanction steps. The common lesson: nowhere is the veto the essence, but three elements — independence and a budget protected by statute, own analytical capacity, and the government’s obligation to justify departures publicly. The Hungarian reform reaches the international standard if it grants all three in exchange for the veto.

Economy

  • G1 — Data-driven budget
  • G23 — Government-debt sustainability framework
  • G15 — Countercyclical fiscal stabiliser

Transparency and anti-corruption policy

  • A6 — Strengthening checks and balances

Proposed new programme point: A strengthened independent fiscal institution — with a “comply or explain” duty to justify departures — for the Economy area.

6.7 List of sources

Press sources (MIAK press monitor, 16 July 2026 — topic 4):

Knowledge-base references (literature):

  • 📖 IMF: World Economic Outlook — Global Economy in Flux (2025)
  • 📖 Carmen Reinhart – Kenneth Rogoff: This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises (NBER Working Paper 13882)
  • 📖 Kornai János: A hiány (Economics of Shortage)

MIAK internal materials:

  • MIAK policy area: Economy (programme points; programme point ID: G1, G23, G15)
  • MIAK policy area: Transparency and anti-corruption policy (programme points; programme point ID: A6)
  • MIAK press monitor, 16 July 2026 — topic 4, score: 82/100

Additional public data sources:

  • Fundamental Law of Hungary, Article 44 (the Fiscal Council)
  • National Assembly bill tracker: bills T/371 and T/372
  • EU Independent Fiscal Institutions standards; European Fiscal Board annual report
  • Eurostat EDP notification; World Bank WGI 2024

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