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Economic policy to repair structural flaws as well

Prime Minister Gordon Bajnai said in a magazine interview published on Thursday that the government is taking measures to correct structural weaknesses in Hungary's economy in addition to those aimed at managing the effects of the global economic crisis.

Speaking to the weekly Magyar Narancs, Bajnai cited the government's pension reform as an example of such economic measures intended to address structural defects, asserting that the reform has made Hungary's pension system sustainable for the next 30 or 40 years and increased job incentive and spurred economic growth as well. 

The prime minister noted that skilled workers will remain on the active employment market for three more years as result of the rise in the pension age in 2012. 

Bajnai said that 2010 tax amendments will reduce the amount of taxes that companies pay by HUF 400 billion (€1.44 billion), while cuts in employee and itemized healthcare contributions will decrease employment taxes by 7-8 percentage points. 

The prime minister remarked that Hungary will not require further loans from the International Monetary Fund (IMF) if the market's confidence in the country continues to increase at the same pace as it has over recent weeks, if the government can maintain its current budget-deficit target and if global economic conditions do not deteriorate significantly. 

Bajnai said that it would not, however, be a tragedy if it were necessary for the government to initiate negotiations with the IMF this fall regarding the maturity or size of the organization's stand-by loan to Hungary, since this would provide the county with a buffer. The PM noted that IMF loans are currently cheaper than market loans.

The prime minister commented that the forint is among the five global currencies that have strengthened the most recently, adding that forint's firming reflects the market's increasing confidence in Hungary and is not simply a regional phenomenon. 

Bajnai said that the global economic crisis has established the political conditions necessary to implement needed economic restructuring, stating that Hungary's political leaders previously delayed taking such steps in order to preserve their popularity. (MTI-Econews)