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Gov't to stand by deficit target even if recession worse than expected

The disciplined operation of the state makes Hungary secure enough that the government can stick to this year's deficit target and will not make further amendments to the tax law even if the economic recession is worse than expected, Prime Minister Gordon Bajnai said in an interview with MTI.

However, while the government projects a 6.7% fall in GDP this year, “there could be a more positive scenario in the deck,” Bajnai said.

Bajnai said he did not think the budget would “soften up” when it is goes before Parliament, and if it does not, then the preferential VAT rate could be applied to the heat purchased by companies that provide district heating services from 2010. The VAT rate can be applied to the service only if Parliament approves the 3.8%-of-GDP deficit target in the government's 2010 budget draft, and that will only be known in October or November, he added.

Households with district heating will pay the 18pc preferential rate from August.

The government has given local councils greater independence to decide about their own operations, and the central government is assigning them fewer tasks, but this cannot be allowed to put the deficit target at risk, Bajnai said.

Bajnai said the governing MSZP supported the main figures in the 2010 budget draft, but the liberal SzDSz still needed to be won over. SzDSz members said in talks that they could only support a budget that stabilized the position of the country and opened up the path to growth. "That can clearly be said about this budget," Bajnai said.

This year's budget has reserves, but the government has taken decisive measures in the interest of keeping the deficit target in the last several weeks, such as closing some budget items at the ministerial level, requiring central approval for all big state expenditures, and appointing comptrollers to review spending at budget-funded institutions, Bajnai said. (MTI-Econews)