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Analysts call Oszkó remarks positive development

Analysts have called Finance Minister Péter Oszkó's mention of Hungary starting to consider entry into the ERM 2, the waiting room for adopting the euro, a positive development.

Oszkó said in an interview with Dow Jones on Tuesday that with the budget deficit decreasing, and public debt on a declining path from the middle of 2010, the country may start thinking about euro adoption plans again.

“Today, the currency is much more stable and Hungary's economic path is significantly more predictable. So it's probably timely to start thinking about this (ERM2 entry) again,” Oszkó said.

In a comment on Wednesday Wood and Co said Oszkó's mention of possible early ERM2 entry was positive, but added that it was too early to say whether Hungary would seek entry in 2010 given the uncertainty about the government. (Hungary will hold general elections in the spring.) ERM2 entry in 2011 is a more likely scenario assuming a continuation of the current fiscal plans, Woods and Co said.

Zsolt Papp, an analyst for KBC in London, said in a comment in the morning that entering the ERM2 in 2010 would be hasty, as the country should first be put on a sustainable growth path, which is not likely before 2011. Hungary also has to estimate how long it will take for the gap in real wages to narrow to a level that allows the country to adopt the euro with a minimal loss of competitiveness, he added. Any statement about entering the ERM2 cannot be taken seriously until after general elections, he noted.

In a research note published last week, JP Morgan said Hungary may be the first to adopt the euro among the three remaining Visegrád countries (after Slovakia, which joined the currency area on January 1, 2009) as it has the highest chance of lowering government debt to the required level in the foreseeable future. It said the three countries would join the eurozone between 2014 and 2016. Each country must spend two years in the ERM2 before adopting the euro. (MTI-ECONEWS)