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Hungary liberals want flat tax after belt-tightening

"Hungary's Free Democrats (SZDSZ), coalition partner of the re-elected Socialist Party (MSZP), said it would support the government's austerity measures only if a flat tax were implemented in 2009. We consider the public sector adjustment, which involves tax hikes and austerity steps, as a compromise, which is a necessary precondition for meeting the goals set out in the election programme of the SZDSZ," the party said in a statement. They said it would like to see a flat tax being proposed by Economy Minister, János Kóka, which can significantly improve competitiveness after fiscal discipline has been restored. SZDSZ also proposed setting up a Convergence Council to help creating balance between monetary and fiscal policy in the “sensitive period" of euro introduction. Prime Minister Ferenc Gyurcsány announced major austerity measures on 10 June to cut the bloated public sector deficit (by 350 bn Ft this year and 1,000 bn Ft in 2007) and put Hungary back on track to join the euro zone in 2010 or 2011. The Socialists need liberal votes to maintain their majority in parliament. The two parties have ruled together since 2002 and were re-elected for four more years in April 2006.