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Fellegi says budget depends upon Malév

The government's economic action plan is enough to achieve this year's deficit target, National Development Minister Tamás Fellegi said when asked about the scale of austerity measures needed to meet the deficit targets for 2010 and 2011 in an interview published in the new issue of weekly Heti Válasz. Mr Fellegi said next year's budget was still being planned.

The government's 29-point action plan, unveiled in June by Prime Minister Viktor Orbán, broadens the scope of companies that may avail of the preferential corporate tax rate and introduces a flat-rate personal income tax. It also introduces an extraordinary levy on the financial sector that is expected to raise HUF 200bn, including extraordinary taxes already in place. Parliament will vote on Thursday on a package of legislation introducing measures related to the plan.

Asked about talks on the extraordinary bank levy, Mr Fellegi told the paper that National Economy Minister György Matolcsy was leading the negotiations, but the National Development Ministry had a place in the delegation for talks affecting the establishment of an national asset management company that would buy the homes of troubled borrowers.

Speaking about recent talks with a delegation from the IMF on the conditions of Hungary's financial aid package, Mr Fellegi said the IMF mission "was surprised by the actual situation of [national carrier] Malév". Whatever happens, there is no script for the airline that does not affect the budget, he added. The National Development Ministry is in regular consultations with European Union officials on Malev's future and possible restructuring from the point of view of rules on competition and state aid, Mr Fellegi noted.

The talks with delegations from the IMF as well as the EU were suspended at the weekend to give the government more time to clarify open questions. Mr Fellegi said a HUF 40bn cut in subsidies for public transportation stipulated in Hungary's contract with the IMF could not be made. Pulling that amount of funding would cause "Hungary public transport system to fall apart".

The government told the IMF delegation at the talks in July that the Orbán government had not signed the contract on the financial aid, thus there could be commitments in the agreement that were unsubstantiated, he said. Still, the government is bound by the agreement, he added. (MTI)