The government deficit reached another election-year peak in 2006 and fiscal consolidation has become the focus of policy. This first chapter of the OECD’s 2007 Economic Survey of Hungary begins with examination of the impact of the poor budgetary record on the economy, why previous governments have failed to adequately address the problem and the prospects of success in the latest consolidation programme. Raising Hungary’s low employment rate also remains a significant policy challenge. The chapter examines progress in unemployment, disability and early-retirement schemes, as well as reforms to active labour market policy and the new system of minimum wages. The chapter also reviews developments in business policies, in particular the ease of doing business and competition issues, as well as progress in environment policy.