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Sustainable deficit among key tasks of fiscal policy

  György Matolcsy, the new government's candidate for economy minister, told Parliament's budget committee on Tuesday that reducing the level of state debt, achieving a sustainable general government deficit and adopting the euro are the three main tasks of financial policy.

The new government aims to create one million jobs in ten years with the tools of employment policy, Matolcsy said. It wants to restart economic growth and take steps to boost investment growth, he added.

Matolcsy also told the committee how real economic trends in Hungary would justify a central bank base rate of 4.50%.

The National Bank of Hungary's Monetary Council has cut the base rate a combined 425bp at each of its meetings since July, bringing it to a historical low of 5.25%.

The new government's goals cannot be reached with a reduction in the base rate, Matolcsy said. The aim is to get banks to take liquidity out of the MNB's two-week deposits and use it for lending, he added.

The government and the central bank have to cooperate and could even begin a joint programme to jump start growth, Matolcsy said. The economy minister, as the author of the country's financial policy, has to cooperate with the central bank governor, he added.

There is no room for fiscal stimulus, Matolcsy said.

Matolcsy said the new government's inheritance from the previous government was „substantially weightier” than the 3.8%-of-GDP general government deficit target for 2010. Local councils have debts of more than HUF 1,000 billion, but their operation can be ensured only until August or September, he added.

More and more "stains" are coming to light, he told the committee, citing the positions of national carrier Malév and the Labour Force Fund as examples. (MTI-ECONEWS)