Hungary's main objective is to strike an agreement with the European Union on its finances, Prime Minister Viktor Orbán told a news conference on Thursday. He said that Hungary would consult and negotiate with everyone but an agreement with the EU was of primary importance.
Orbán said that Hungary is thankful to the IMF for "its great help that was not a present but a loan", and Hungary will always appreciate the cooperation with the IMF in the past years. The stand-by agreement with the IMF, however, "will expire in October, so there is no need to break off or sign off anything", the prime minister said. To a question on the possibility of a new precautionary deal with the IMF for 2011 and 2012 Orbán said this matter was insignificant now, as the main issue was to reach a deal with the EU on bringing the budget gap below 3pc.
"Our talks with the EU are not over. Hungary is a member of the EU and all member states in the EU have undertaken to reduce their deficits below a certain level, namely 3 percent. Hungary's deficit today based on this year's target is 3.8pc, and we will achieve this", the prime minister said.
"But with this, the talks have not ended as the EU wants to negotiate with us, as well as 20 other member states in the EU, on how we will manage this 3 percent deficit. Hungary will be part of these negotiations. This is called an Excessive Deficit Procedure. We want to agree with the EU. This is not going to be a deal between Hungary and the EU, but a deal signed by all member states, specifying when countries above the desirable deficit level bring their deficits below 3pc. We will negotiate this agreement along with the other member states and as part of a budget policy based on equal treatment, bring our deficit below 3pc. Hungary has a good chance for this as in terms of the deficit we are the fifth or sixth best performer (in the EU)", Mr Orbán said.
"The Hungarian economy can boldly undertake this position in talks with the EU. We will have a single demand, namely that of equal treatment, that is, the same timeframe must be set for all to meet the EU's expectation. In the next few weeks and months Hungary will hold talks with the EU ..., and the IMF, as it has ended its mission and the agreement has expired, will deal with countries in need of the IMF's direct support", the prime minister said.
"We hope economic growth next year will be above 2pc ... and we plan further tax cuts that will boost the economy, so we have a good chance that, based on the agreements with the EU, Hungary will again become a successful country", the prime minister went on.
Analysts said Orbán's statements could indicate a delay in reaching the 3 percent budget gap level, as some European Union members are not expected to achieve that until at least 2014, Reuters reported. Analysts believe it is unlikely that the EU will negotiate any new aid for Hungary without the IMF.
The Finance Ministry sold all the bills it had put on offer at a 12-month Treasury bill auction, but yields rose, indicating that markets remained skittish.
"The fact remains that Hungary has an outsized stock of external debt and is reliant on capital flows from foreigners. These flows can be reversed very quickly," said Peter Attard Montalto at Nomura in London told Reuters. (MTI)