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Romania, Bulgaria may switch to Euro before Hungary

Romania and Bulgaria may join the euro before Hungary because of the country's widening budget deficit, said Kai Stukenbrock, associate director at Standard & Poor's. “Hungary could join later than Romania and Bulgaria which are on a better fiscal path,'' said Stukenbrock at a conference in London today. “Hungary is the strongest challenge. We see a desolate state of public finances, much more needs to be done.'' S&P forecasts that Slovakia may adopt the euro in 2009, the Czech Republic in 2011, Poland in 2012 and Hungary in 2014. Hungary's budget deficit may exceed the government's revised target in 2006 and 2007 even after measures to reduce it, the government said June 28. “We expect the budget deficit this year at 11% of GDP and this is after the relatively ambitious fiscal consolidation program by the government,'' said Stukenbrock. “The deficit in 2008 could be 8% of GDP and it could be 7% of GDP in 2009.'' Hungary is raising taxes, increasing regulated prices and cutting the size of state bureaucracy to reduce the deficit by Ft 350 billion ($1.6 billion) this year and a further Ft 1 trillion in each of the next two years. But by Ecosat report the shortfall may even reach 10.2% of GDP this year, instead of the 8% target, and still be as much as 7% next year, above the 5% goal for 2007. On June 28. Hungary's Prime Minister Ferenc Gyurcsány said we may miss the official budget-deficit target for a fifth consecutive year. His plans to raise taxes, increase government-controlled prices and cut the size of state bureaucracy may not be enough to bring the deficit in line with the target, Ecostat said. (Bloomberg)