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Hungary to cut budget gap faster than planned – PM

  Hungarian Prime Minister Ferenc proposed cutting the 2008 as well as the 2009 fiscal deficit targets and postponing the tax cuts planned for 2009 as part of a 12-point action plan revealed at a meeting with the parliamentary party group leaders on Friday.


The plan was prepared after consultation with the central bank governor, Gyurcsány said. Simor, present at the meeting, said that of the steps outlined in the action plan, cutting the 2008 and 2009 deficit goals, rewriting 2009 plans, and asking support for a public finances bill long before parliament, and for plans for a budget spending ceiling and for the creation of a fiscal council were proposed by him.

The government proposes to cut this year’s government spending in order to cut this year’s general government deficit to 3.4% of GDP from the original target of 4% under the action plan. The new target equals to 2.9% of GDP after the Brussels-approved adjustment for the cost of pension reform, meaning Hungary will meet the respective Maastricht criterion this year, the Prime Minister said.

The government will amend the already submitted 2009 budget bill in a way to reduce the 2009 fiscal deficit target from 3.2% to 2.9% of GDP -- or to 2.6% if adjusted for the pension reform.

The government would postpone the planned 2009 tax cuts, Gyurcsány said, adding that any extra funds available while meeting the deficit target would be used either to cut the deficit further or to reduce taxes.

The government will prepare a new GDP growth forecast, Gyurcsány said. He did not reveal specific numbers but said they would plan growth more cautiously, along the lines of analysts’ latest forecasts. A government will suspend the so-called New Ownership program under which small investors would be offered state-owned shares at preferential rates.

Parliament will vote on a government proposal regarding an unlimited state guarantee of deposits on Monday, he said.

Gyurcsány asked opposition parties to provide the necessary two-third majority support to a government bill on state finances, long before parliament. He said they would build in the bill the budget ceiling as proposed by the former coalition partner SZDSZ as well as the budget council proposal of main opposition party Fidesz.

The PM asked employers and employees to suspend negotiations on 2009 wages until next June, and keep wages unchanged in real terms until that date. The government will amend regulations to improve banks’ access to funding so that they could maintain finance to businesses, Gyurcsány said. They plan to amend regulations to attract foreign investment funds to buy Hungarian government securities.

The government will extend its program for SME support which is expected to generate Ft 800 billion in funding support. The government will make a proposal to strengthen Hungarian financial market supervision and it will repeat a Hungarian proposal for a European-level supervision in Brussels next week. (MTI-Econews)