Hungary's Gyurcsány pledges to press on with economic overhaul

„Only the long-recognized necessity of reforms and their much-delayed execution can ensure the long-term reduction of public expenditures,” Gyurcsány wrote in a report published on his government's Web site. „Not only budget correction, but a social policy turnaround is needed for a sustained balance.” Gyurcsány has raised taxes and cut subsidies since winning a second consecutive term in power in April. His government told the EU it will overhaul health care, education, transport and public administration to make sure the shortfall doesn't miss targets again after five consecutive overruns. That is a requirement for euro adoption.

Hungary has pledged to cut its budget deficit to 3.2% of GDP by 2009 from this year's estimated 10.1%. The European Commission endorsed that plan, though it warned the government that any further slippage may lead to a loss of EU grants. The government had to start fixing the budget by increasing revenue this year to lay the foundation, Gyurcsány wrote in the report about the first six months of his second administration. The economic overhaul will be the next stage and developments, financed mostly by the EU, will cap it all off, he wrote. He pledged to work to cut the budget deficit by reducing spending, rather than increasing taxes. From an estimated 38.1% of GDP next year, tax income will drop to 37% by 2010, according to the document. Expenditures will decline to 42.8% from 43.1%, it said. Gyurcsány reiterated the government's forecast that Hungary's economy will grow 2.2% next year, the slowest in a decade. He forecast 2.6% growth in 2008, 4.2% in 2009 and 4.3% in 2010. (Bloomberg)