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Hungary: Govt does not support Reform Alliance proposals

  The Gyurcsány government does not support the Reform Alliance’s economic-reform proposals in their present from, an analysis from government specialists indicates.

Government specialists believe that the Reform Alliance’s proposals would generate lower economic growth, higher inflation and greater government debt than the government’s economic package, according to a copy of the analysis obtained by MTI.

The Reform Alliance, a group of economic experts and business leaders, assembled a package of economic-reform proposals in February.

On Tuesday, Hungary’s parliament will begin debate on an Alliance of Free Democrats (SzDSz) draft resolution requesting the government to submit bills containing the Reform Alliance proposals to parliament.

The government has already submitted two economic bills to parliament, one modifying tax laws and another revising pension regulations. Committee debate on these two bills will begin this week as well.

Government sources have informed MTI that the governing Hungarian Socialist Party might support the SzDSz’s parliamentary initiative if the Reform Alliance proposals are modified.

According to the government-specialist assessment, implementation of the Reform Alliance’s proposals would generate a general government deficit of 3.4% in terms of GDP this year, while its proposed cuts in government expenditures would exceed the contraction in revenue stemming from tax reductions over the next two years.

The government economic specialists say that the Reform Alliance’s proposed economic reforms would result in 0.7-0.8% point higher inflation over the next three years than the government package.

The assessment asserted that the Reform Alliance’s proposals would produce an 8-10% reduction in public-sector employment, more than offsetting gains in private-sector employment stemming from the proposals.

The specialists said that the rise in inflation stemming from the Reform Alliance proposals would make it significantly more difficult for Hungary to meet the Maastricht criteria, thus invalidating the alliance’s target of 2012 for the country’s introduction of the euro.

The government assessment stated that the Reform Alliance’s proposed elimination of the annual pension bonus equaling an entire month’s retirement allowance would weigh the most heavily upon those subsisting on smaller pensions, while its proposed elimination of the annual public-sector bonus equaling an entire month’s pay would most adversely affect at least 240,000 lower-wage households.

The specialists added that the government should consider adopting the Reform Alliance’s proposed elimination of the local-business tax, though cautioned that resources would have to be found to compensate for the significant fall in local-council revenue that would result from the elimination of this tax. (MTI-Econews)