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The absorption of the New Member States (NMS) after the 2004 enlargement and their integration into Economic and Monetary Union (EMU) is perhaps the most important challenge facing the European Union (EU). The article seeks to address the issues.

The article is based upon observations of contemporary events within Hungary and relates the political process with issues of fiscal governance.

The NMS of the EU, unlike Great Britain and Denmark will not have an “opt‐out” – the right to remain outside EMU. Indeed, the NMS have declared that they want to join the monetary system as soon as is feasible. This is the next major step in the integration process for Hungary. In particular, the article observes that there has been an electoral business cycle which overrides Hungary's longer term commitment to qualify for EMU and provides an insight into the process of achieving EMU membership in one NMS.

The article discusses how Hungary has elaborated its strategy for entry into EMU, but the target date has been changed mainly because of the problems of significant budget deficits. This inability to maintain consistent progress towards entry indicates that there are issues of fiscal governance which need to be resolved.