Gov't approves convergence program

Initiatives

Hungary's government has finalized and approved the country's euro convergence program at a meeting in Balatonöszöd in western Hungary on Thursday.

The main targets contained in the plan, which is to be submitted to Brussels on Friday, are unchanged from a previous draft version, government spokesperson Emese Danks said. The draft outlined cutting the budget deficit to 3.2% of GDP in 2009 from 10.1% this year but at the same time swelling the public debt to over 70% of GDP in the same year before a gradual easing over the following years.
At the meeting, chairman of the National Bank of Hungary (MNB) Zsigmond Járai said the program gave a realistic assessment of the condition of the budget and the Hungarian economy. At the same time, Járai said the central bank and the cabinet held different views on the evolution of inflation but that these differences were part of the normal framework of expert arguments. He said that as far as the date for introducing the euro was concerned, the plan's credibility was enhanced by that fact that an adoption target date had not been explicitly outlined. Járai said there were no significant drawbacks in the plan with regard to Hungary's fiscal strategy and the correction path to the budget and current account balances were credible. He said however that revenue-building measures contained in the program would slow down growth.
No one at the meeting questioned the approach of the program or its figures, Finance Minister János Veres told reporters. The comments of participants in the session suggested that they backed the plan and saw it a credible program, he said. Veres added that Hungary could realistically count on meeting the macroeconomic targets outlined in the program by 2009. He said that as a result of a wide-scale public debate on the program over 20 changes would be made in its text, however, the core of the program would be left unaffected. Veres said his ministry would send the program to Brussels on Friday and it would be published on the internet next Monday.
Finance expert András Simor, a member of the convergence council, said it was important that internal structural reforms were implemented for the sake of competitiveness and further details were needed for the period after 2009. The plan however was credible, he said.

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