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UPDATE - PM says from now on private pension fund contributions to be transferred to state

Prime Minister Viktor Orban said on Friday morning that private pension fund contributions will from now on be transferred to the state pension fund.

Speaking on a radio programme, Mr Orban said private pension fund contributions will now always be transferred to the state pension fund. He said this was not a one-off decision and that the 10% contributions paid by the approximately 100,000 people who stayed in the private pension funds will always go to the state pension fund and "this will now stay like this".

Economy minister Gyorgy Matolcsy announced on Thursday that a HUF 302bn adjustment to original 2012 budget plans will include using as state revenue the HUF 120bn pension contributions paid by those who remained in private pension funds, adding that the private pension membership fees will probably redirected in 2013 too.

Mr Orban emphasised that the main figures of the 2012 budget are expected to remain unchanged and the government will try to keep to the original schedule for adopting the budget.

Referring to the Thursday agreement between the government and the Hungarian Banking Association on a repayment scheme for borrowers with foreign-currency-denominated mortgages, Mr Orban characterized the problem faced by troubled forex borrowers as a genuine "modern disaster", which the government managed to solve by the agreement signed with the banking association on Thursday.

The prime minister asked people to think twice before embarking on such high-risk loan facilities again because this time the government managed to rescue them, but this meant that they had to "come to loggerheads with half the financial world and all of Hungary’s banks", and they will hardly be able to do this once more.

Mr Orban emphasised that National Economy Minister Gyorgy Matolcsy deserved special praise as "he made very hard manouvres for long months" in the interest of the agreement.

The prime minister pointed out that neither in concluding the agreement concerning forex borrowers nor in recalculating the 2012 budget was the government’s main goal to avoid antagonizing the IMF, but to protect the interests of Hungarians.

Mr Orban emphasised that the government has not conducted any negotiations with the delegation of the IMF and they will not be discussing economic policy at the u%oming talks. The prime minister said the IMF is a bank, which is designed to provide a loan, or safeguard to the countries it is in relation with when necessary, that is to say, "we are conducting talks with our own bank, if you like".

The prime minister emphasised that the restructuring of the pension system will now become complete. The system will become voluntary, he said, since people wishing to make savings in addition to the contribution payable to the state can do so through the private pension funds, but "what has to be paid to the state must be paid to the state from now on, it cannot go elsewhere".

Speaking of the economic growth plan, he said growth requires lending, and the government is in talks with the commercial banks on how they could lend to Hungarian SMEs under better conditions and in greater amounts, and the Hungarian Development Bank (MFB), and the National Bank of Hungary (MNB) also has such instruments, and "a financial group will be established around the ministry of Gyorgy Matolcsy, which will help boost Hungarian exports". Furthermore, specific investment plans will also be necessary, broken down to areas and sectors, the prime minister emphasised.

In connection with the EU’s intergovernmental agreement, Mr Orban emphasised that Hungary has followed a very disciplined economic policy over the past 18 months, therefore "it is justified to claim that we should not be made to pay for the damages caused by other, less disciplined countries." He added that the government has built the most competitive tax system and will not "back down from this".

Mr Orban said he could see good chances that the member states can be persuaded through clever negotiating tactics that the agreement should not include any tax harmonisation elements. The prime minister said this is also in the interest of the European Union as there must be competition within Europe, or Europe will not be competitive on a global level.