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Gov’t plan: $5.9 bln spending cut, VAT hike

Hungary’s new government plans spending cuts worth HUF 1,300 billion in 2009 and 2010 but also needs measures to restart the economy, Prime Minister Gordon Bajnai was quoted as saying on Thursday.

Bajnai took over at the helm of the government earlier this week from Ferenc Gyurcsány who had stepped down to open room for a cabinet with wider backing for leading the country out of crisis and its deepest recession for almost two decades.

Bajnai on his website said to parliament members of the Socialists and Free Democrats, who support him, that earlier and planned government decisions would cut spending by HUF 400 billion this year. Further cuts worth HUF 900 billion are to come in 2010.

The total figure, which is close to data published earlier in the media, equals cuts worth 5% of the country’s GDP in 2008. Incoming government plans a four-point hike in the top value-added tax rate to 24% from July. Government officials were not immediately available to comment on the reports.

The new government, which is scheduled to hold its first meeting on Friday, is expected to reveal the concrete measures of his crisis-handling program later this week. (BBJ, Gazdasági Rádió)