Hungary will be able to repay its debts earlier than expected due to the effects of the global financial and economic crisis, thus moving the country closer to joining the euro zone, Finance Minister János Veres told the APA News Agency in Brussels on Wednesday.
Veres said that though there is no target date for Hungary’s introduction of the euro, the country will fulfill the criteria necessary to join the European Exchange Rate Mechanism (ERM II) by the end of 2009. Before joining the euro zone, Hungary will probably introduce structural reforms to the local government, the tax and the social system. Veres said he expects inflation to slow quickly.
Veres added that the requirement regarding long-term interests will be hard to fulfill (the 10-year yield is 8.88% in Hungary, while it’s 3.1% in Germany). Veres said that Hungary’s current 11.00% base rate is rather high.
The government has maintained its 2008 deficit target of 3.4% of GDP, Veres said at a press conference in Budapest on Wednesday. Veres made the announcement in response to a question regarding a Wednesday-morning statement from National Bank of Hungary (MNB) Governor András Simor suggesting that Hungary’s deficit could drop below 3% of GDP in 2008 if the government does not overspend during the final weeks of the year.
Veres added that in accrual-based terms, Hungary’s deficit will certainly come in at over 3% for the year, though an 0.6% correction for pensions would push the deficit to below 3% of GDP, likely to 2.8%. (MTI-Eco)