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Járai warns of drastic adjustment if market forces consolidation

Hungary's twin deficit is unsustainable and the adjustment will be drastic if the market forces the consolidation of the general government, central bank governor Zsigmond Járai told a conference in Budapest on Tuesday. The new government to be elected next year will have to adopt a new economic policy to avoid a painful adjustment, meaning a sharp weakening of the forint, rising rates and slowing growth with investors' withdrawal, Járai said. Hungary has failed to utilize the chance offered by an extraordinarily favorable international environment, which, however, can not last long, Járai said, noting that an adverse turn in investors' sentiment could come soon. The country needs structural reforms and the general public must be prepared for the series of such reforms ahead, he said. Járai argued for the quickest possible adoption of the euro, which is still theoretically possible by the targeted date of 2010.