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Structural reforms in Hungary to save HUF 2,354 bln over three years

The Hungarian government, expected to announce its long-awaited structural reforms today, plans to tighten budget spending significantly more in the coming years than expected by financial markets, figures from unnamed sources close to the ruling Fidesz party leaked on Monday to online news portal hvg.hu.

The structural reform program is designed to result in savings of HUF 550 billion next year, HUF 902 billion in 2013 and another HUF 902 billion in 2014, the figures showed.

The savings, if carried out as planned, would make it possible for Hungary to end, as it has pledged, the extraordinary, or "crisis," taxes it levied last year on banks, telecommunications, retail and energy firms, hvg.hu noted. Analysts had said financial markets would be satisfied with savings totaling about HUF 800 billion, or 3% of gross domestic product, over the next three years.

The private pension fund assets the government redirected earlier this year into state coffers will improve the budget balance by HUF 90 billion next year, and by HUF 220 billion both in 2013 and 2014, the figures obtained by hvg.hu show.

The government plans to use the remainder, about 60%, of the redirected private pension fund assets to reduce public debt as planned. Through canceling the government securities in the transferred portfolio, the government plans to lower public debt to 65% to 70% of gross domestic product, from the current 80% of GDP, the highest level in central and eastern Europe.

A further reform of the pension system is planned to lead to savings of HUF 93 billion next year, and HUF 213 billion in 2013 and 2014 each. Meanwhile, rising employment and other labor market policies not yet detailed by the government are to improve the budget balance by HUF 195 billion next year and HUF 213 billion in 2013 and in 2014.Also, Hungary plans to reduce spending on drug subsidies by HUF 83 billion next year and HUF120 billion in the subsequent two years each.

Hungary plans to save HUF 45 billion in 2012 and HUF 60 billion in 2013 and 2014 each by reducing subsidies for public transport. Reducing administration at the central government and municipalities are to yield savings of HUF 32 billion next year and HUF122 billion in each of the subsequent two years.

Revamping higher education is planned to save HUF 12 billion in 2012 and HUF 38 billion in 2013 and 2014 each.