Budapest is trying to join the European Exchange Rate Mechanism amid devaluation of the forint.
Hungary will try to join the European Exchange Rate Mechanism (ERM II) this year or next year. This is what Hungarian Finance Minister Mihaly Varga said, Bloomberg reports.
So, this will be the first step necessary for the transition to the euro and the abandonment of the forint.
Under the ERM II mechanism, a base euro conversion rate is set for local currencies. States applying for membership must remain in ERM II for two years. The exchange rate of their national currency during this period can only change within a fixed corridor.
A country wishing to join ERM II must obtain the approval of the finance ministers of the euro area, the European Central Bank, the ministers and central banks of non-eurozone countries participating in ERM II.
Varga said that joining ERM II does not mean switching to the euro. However, the talk of steps in this direction means radical changes in the government of Hungarian Prime Minister Viktor Orban, the newspaper notes.
The reason for this change is the rapid devaluation of the Hungarian forint. In 2022, the Hungarian national currency became one of the weakest currencies in the world. Only the Argentine peso and the Turkish lira fell more.
Varga believes that joining ERM II will help increase Hungary’s competitiveness, given its reliance on the eurozone.
The Hungarian government is now reviewing the conditions under which Croatia will join the mechanism in 2020.
Note that the Hungarian national currency has fallen to a record low – 430 forints per euro.
Recall that the Hungarian forint has fallen to a record low against the euro. As a result, Prime Minister Viktor Orban had to negotiate from the EU to unfreeze the frozen funds.
We added that earlier the Orban administration assured that Europe will face economic problems due to the imposition of sanctions against the Russian Federation for its aggression in Ukraine.
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Source: korrespondent
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