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National Economy Minister to tell IMF about gov’t intention to cooperate on Friday, PM says

National Economy Minister Gyorgy Matolcsy is to inform the delegation of the International Monetary Fund (IMF) on Friday that Hungary wishes to conclude an "insurance" type agreement with the IMF, Prime Minister Viktor Orban said Friday morning.

The prime minister emphasised that Hungary’s economic independence cannot be restricted.

The Economy Ministry announced the plan for a new type of agreement with the IMF on Thursday.

Speaking to a public radio programme, the prime minister said the period of financially stabilising the country has been completed, with public debt considerably reduced and the deficit lowered below 3%, the next phase must be to stimulate growth.

Therefore, the government has asked the economy minister to submit to the cabinet a stimulus package for economic growth, and Gyorgy Matolcsy decided that an "insurance-type" agreement to be concluded with the IMF would be an important component of the package, the Prime Minister said.

Mr Orban said "the old type of IMF-agreement, which we closed in autumn 2010, involved the IMF telling Hungary what to do in the country, and if we do it, they will give money and we will not collapse".

The essence of the new type of agreement, on the other hand, is that "we would rather have a kind of insurance; we do not want to give up the policy of free hands," the prime minister said. No one can restrict Hungary’s economic independence anymore, Mr Orban added.

Asked about the possibility that the IMF might set conditions, Mr Orban said: "we shall see, I do not really think that in the current state of the Hungarian economy, which now rests on solid fundamentals, we would need a loan. If we need money, we go to the financial markets, issue government securities, bonds and bills, which will be bought". The only problem is that, due to the euro crisis, yields are rising across Europe, thus, higher interest rates must be paid than before, Mr Orban said, adding that Hungary is financially secure, its government securities are purchased and creditors trust that the country will be able to repay these, but that requires good economic performance.

Mr Orban did not exclude a downward review of the 1.5% growth projection for 2012 after a review of Germany’s prospects for next year was completed.

Both the EU and the World Bank has recently put Hungary’s 2012 GDP growth at 0.5%, down from the 1.5% on which next year’s budget calculations were based.

Answering the question whether he had expected setting the economy onto the right path would take 18 months, Mr Orban said "this is approximately how we imagined it". The most important thing was to "be able to be given free hands or obtain free hands for ourselves", and that there should be an opportunity to "organise our lives in Hungary the way it suits Hungarian interests, and we should not be hindered in this by the earlier agreements and restrictions, this is why we closed our old agreement with the IMF as soon as possible," the prime minister said, adding that "I am not happy though", because Hungary is as yet far from being the best place in the world.

He said that if the Hungarian government did not pursue a very active economic policy in the coming year, but just allowed things to happen by themselves on markets and the economy, Hungary would be in trouble because the country’s economic growth would adjust to the very slow economic growth of euro-zone member states. We wish to avoid that, this is why we need an economic growth stimulus policy, the prime minister said.