Hungary on September 30 submitted an updated version of its deficit-reduction plan, pledging to cut the shortfall to less than 3% of GDP, the limit for euro adoption, from this year's estimated 10.1% by 2009. The government earlier scrapped a plan to correct the deficit by 2008 and adopt the euro in 2010. „This new deadline, which implies a substantial correction of the structural deficit by more than 6% of GDP over three years, seems realistic,” the ministers said in a ruling adopted at a Luxembourg meeting today. The ministers endorsed Prime Minister Ferenc Gyurcsány’s plan to cut the EU's widest budget shortfall at a time when the Hungarian premier is facing the fourth week of protests calling for his resignation. Demonstrators have demanded his removal since it was revealed he lied about the economy. EU ministers, who will check on Hungary's progress twice a year after the government missed its deficit targets every year since 2001, will require Gyurcsány’s cabinet to present detailed plans for reducing the shortfall further by April 10.
By then, Hungary should „take effective action regarding the measures to achieve the deficit targets for 2006 and 2007 and the further specification of the multi-annual program of budgetary consolidation,” the ruling said. Hungarian Finance Minister János Veres today said the government's 2007 budget draft, which the cabinet will debate in the first reading on October 18, will contain the measures required by the EU. Gyurcsány already raised taxes and cut subsidies this year to cut the deficit. The EU's ruling urges Hungary to „rigorously implement” the measures and to do most of the deficit cuts next year. The government should also be prepared to make additional reductions if there are slippages, it said. „The planned correction of the excessive deficit by 2009 will require the Hungarian government to strictly achieve its budgetary targets, which hinges upon an effective implementation of all the measures announced in the program,” the EU said. The EU still considers Hungary at „high risk” because of its budget deficit, according to the ruling. It warned that the government may not be able to execute spending cuts as planned and pointed out that the plan has no margin of error. Hungary should also strengthen the institutional framework of its budget execution and specify fiscal rules to prevent more deficit overruns, the EU said. (Bloomberg)