The European Union will keep pressing Hungary's government to carry out its plan to cut the budget deficit, which was the 27-nation bloc's widest last year, EU Monetary Affairs Commissioner Joaquin Almunia said.
„We need to encourage day after day, week after week, the Hungarian government, the Hungarian authorities to implement the principles of the budgetary adjustment that they have decided,” Almunia said in an interview today in Brussels. „We will put on them peer pressure and also peer support to achieve these targets.” Prime Minister Ferenc Gyurcsány’s government has raised taxes and cut subsidies to reduce the budget shortfall from about 9.6% of GDP last year. Hungary aims to reduce the deficit to 3.2% by 2009.
The EU on February 7 warned the country that slower-than-forecast economic growth after next year may hurt the plan and told the government to take further measures if needed. Almunia today reiterated that reaching the budget targets hinges on the program's implementation. „In the EU, the most difficult situation indeed is Hungary,” Almunia said in the interview.
„The Hungarian government right now has adopted an adequate strategy for fiscal consolidation and they are adopting the adequate decisions, but the implementation risks continue to exist.” The forint weakened to 254.77 per euro at 2:40 p.m. in Budapest, from 253 late on February 9, reaching a week low. The currency is the world's fourth-worst performer this year, behind the Czech koruna, Polish zloty and the South African rand, having lost 1.4% versus the euro.
Finance Minister János Veres on February 7 said the government will use any excess revenue from faster-than-expected economic growth to cut the shortfall. The EU the same day said this year's economic growth forecast was probably underestimated. Hungary may also seek to follow the EU's recommendation of enacting tighter budget spending rules, Veres said.
There are currently expert-level discussions within the governing coalition about those measures, he said. The government on February 6 said the shortfall in January was narrower than expected as the state received more social security contributions than it targeted. Veres said he expects revenue to exceed government targets through March, while spending will probably be near the target. (Bloomberg)