Abstract

The central question of this study is to what extent the EU could influence the evolution of budgetary rules in the New Member States, prior to membership in the euro-zone and facing the challenge of fiscal adjustment. The paper compares the experiences of Slovakia and Hungary, which represent most similar cases as both have struggled with fiscal imbalances and weak budgetary institutions since the beginning of transition. While theories of Europeanization and policy transfer would have predicted reforms in both cases, only Slovakia can be considered successful in addressing these problems. The main insight from the comparison of the two cases is that instead of promoting policy transfer, the major influence of the EU was essentially the facilitation of domestic aspirations – in the case of Slovakia it provided both incentives and assistance for the strengthening of budgetary management, while in the case of Hungary the credibility offered by the EU made the postponement of necessary adjustment possible.