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Gov't was wrong to allow illusion of prosperity, says Gyurcsány

It was wrong of Hungary's Socialist-led government to give the illusion for so long that the country was enjoying prosperity, said Prime Minister Ferenc Gyurcsány in an interview with a Sunday paper.

It was also a mistake to cut the top rate of value-added tax at the start of the year to 20% from 25%. The government recently announced that VAT components will be hiked once again. He added that the Socialist party was wrong to have tried to ignore the woeful state of the budget during the election campaign. "I admit that the past six years we haven't been able to properly reconcile the needs of society with the economic possibilities available," he said. Hungary's political parties got into a vicious circle of false promises to the electorate, said the prime minister. The government recently upped its projection for the budget shortfall this year from 6.1% to 8.5% while at the same time introducing Ft 350 billion worth of tightening measures, mostly in the form of tax hikes. Asked why his government did not at the time retract those elements of its legislative agenda that have since turned out to have been misguided, Gyurcsány said "No one would have accepted the political risks associated with an ill-considered correction". The tax exemption of the minimum wage will be cancelled next year because currently 40% of employes are registered at the minimum wage and 3 out of 4 of these employees get extra cash in the pocket. This loophole will be closed.