Hungary to send alternative proposal on IMF/EU deal next week, says Varga
The Hungarian government will send its alternative proposal for the talks about financial assistance with the International Monetary Fund and the European Union by the middle of the week, the minister in charge of the talks said on Sunday.
Mihály Varga said the preparation of the government's alternative proposal is in its final phase and a letter containing the proposal will be sent to the IMF and the European Commission soon.
By sending this letter, the government wants to respond to the points made by the IMF and the European Commission delegation after talks in July, Varga said. "We want this letter also to indicate that the Hungarian government is ready to continue talks," Varga added.
Varga said the Hungarian proposal did not change the government's macro-economic projections for 2013 as approved in next year's budget bill. An agreement will be possible even if it affects the 2013 budget, he added. The government proposal takes into consideration "projections" the IMF has put forward regarding ways to sustain macro-economic and financial stability and boosting growth, but Hungary's proposals for the talks differ from the IMF's, said Varga.
Varga said the government's proposal does not include cuts in pensions and wages or a new property tax but he declined to reveal further details. He said the government is determined to keep the budget deficit under 3% of GDP even after 2012 and this is possible even if a job protection plan is implemented.
The government announced the job protection plan, worth HUF 300 billion, late June, after the 2013 budget bill had been submitted to parliament. Hungary targeted to reduce the deficit to 2.2% of GDP in the latest update of its EU convergence programme and also in the original 2013 budget bill before parliament. The letter will reiterate that the government still believes that a precautionary credit line should be prepared, he added.
"For the time being, we see our financing secured, but at times like this, the real question is the price, in other words, the interest rate," Varga said. The government wants to agree with international lenders because of the high price of the country's debt servicing, he added. Varga said there were similar elements in way the government and the international organisations have assessed the current situation. They agreed for example that the deterioration of growth prospects abroad, and specifically in the Europe posed risks.
"This is why economic figures in the second half of 2012 will be important because these can influence our outlook for 2013 and 2014," he said. Stands have also been similar regarding the importance of reducing debt risks both in the public and the private sector, and that the tightening lending of foreign banks is a risk to growth, Varga said.
Varga referred to a statement by IMF official for external relations Gerry Rice last Thursday that negotiations were still ongoing. Varga said "we, too, believe this is a dialogue." The Hungarian letter can speed up this process because once it is sent, it will be only up to the IMF and the EU when the talks can resume, Varga said.
On September 6, Prime Minister Viktor Orbán said that Hungary would not accept an IMF agreement according to the current conditions set by the Fund, and added that the government would put forward an alternative proposal soon. Orbán referred the conditions published in a newspaper report that day, confirming a reduction in pensions, a cut in bureaucracy and the elimination of the bank levy as well as monies for banks among the IMF/EU conditions. Both institutions said later that there were significant inaccuracies in the newspaper report.
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