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Hungary must reach agreement on fiscal policy, central bank with EU before IMF begins talks

Representatives of the International Monetary Fund told Hungarian minister without portfolio Tamas Fellegi in Washington that Hungary had to reach an agreement with the European Union on matters of fiscal policy and the central bank before it would start official negotiations on financial assistance for the country, a summary of the talks obtained by internet portal shows.

"The IMF stressed that it will not mandate official negotiations as long as Hungary does not reach an agreement with the EU on open questions," according to the summary, signed by National Economy Ministry Gyorgy Matolcsy. "The agreement must contain reassuring conditions for the IMF," the summary said.

"Progress must be achieved in several key areas: central bank independence, financial institutions, crisis taxes, the budget, taxes," according to the summary.

Hungary could get a precautionary-type Stand-By Arrangement of EUR 17bn-20bn from the IMF and the EU, said.

Talks on the financial safety net from the IMF and EU have been "complicated" by the recommendations and decisions of the European Commission, including the continuation of Hungary’s excessive deficit procedure (EDP), according to the summary.

"The [European] Commission made it clear that assurance of the National Bank of Hungary’s independence and full compliance with rules of the Union Treaties were a precondition to the start of negotiations on the credit programme," the summary said.

EU finance ministers will take up review of Hungary’s programme and the question of its request for financial assistance at a meeting on January 24 according to the summary, said.

The ministry expects Econfin could take a decision on the matter at their following meeting on February 21, the summary said, noting that Brussels warned that "they might suspend cohesion funds because of the failure to meet the recommendations related the EDP".

Official talks on the financial assistance can only start after the EU And IMF coordinate their positions, according to the summary.