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Future economy minister sees deficit reaching 4.5-6.5%

Hungary's general government deficit could be between 4.5% and 6.5% of GDP this year, György Matolcsy, the economy minister in Hungary's next government, said after his appointment was announced on Monday. Matolcsy added taxes could be cut yet this year.

It appears the Bajnai government's original deficit target of 3.8% of GDP cannot be achieved, Matolcsy said.

A review of the economy by a fact-finding commission led by Mihály Varga is expected to present a report in the middle of June, he said. Then the picture will become clear, and it will be seen, for example, whether or not there is a need for a supplemental budget, he added.

Next year's deficit is expected to reach 4.5%-5.5% of GDP, Matolcsy said. The Orbán government will continue a strict budget policy, he added.

Matolcsy said informal talks with the IMF were already ongoing. Later, the talks will include the prime minister, Varga, the representatives of the central bank and himself, he added.

The IMF expects Hungary to have a low general government deficit, to put its state deficit on the path of reduction, to start economic growth and to begin structural reforms.

Matolcsy said he saw room for a tax reduction already in 2010. Hungary's tax system, has to be turned around immediately, he added.

Bureaucracy has to be reduced and employment has to be entirely turned around, he said. The effect of the austerity measures adopted between 2006 and 2010 could last as long as five years, he added.

The turnaround in employment will put stress on telecommuting, expanding the number of part-time jobs and giving public work programs a bigger role, Matolcsy said. Public work programs cannot be expanded without the involvement of businesses, he added.

European Union funding must be better used and a new Széchenyi Plan has to be started, Matolcsy said. The last Fidesz government (1998-2002) introduced an economic stimulus package called the Széchenyi Plan.

Matolcsy said Hungary could not realistically pick a date to adopt the euro right now, but it could decide at the end of 2011 on a eurozone target date. (MTI-Econews)