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Convergence program falls short of Maastricht criteria even in 2009

A draft of the government's convergence program to be presented to employers and unions later in the week projects Hungary's general government deficit will be 3.2% of GDP in 2009, still over the 3.0%-of-GDP target required to meet the Maastricht criteria for adopting the euro. The program, presented by Prime Minister Ferenc Gyurcsány at a press conference on Tuesday, projects accrual-based general government deficits of 11.6% of GPD in 2006, 6.8% of GDP in 2007, 4.3% of GDP in 2008, 3.2% of GDP in 2009 and 2.9% of GDP in 2010. Expenditure cuts are expected to account for 80% of the targeted reductions, with increased revenue making up the rest. The 2006 figure excludes fiscal adjustment measures approved in June. However, including these, the deficit would narrow to 10.1% of GDP excluding the effects of pension reform, and to 8.6% of GDP including these effects. This effect will gradually be phased out by 2010.

The program projects state debt, without any exclusion, will rise from 71.5% of GDP in 2007 to 72.7% of GDP in 2008, after which it will fall to 70.9% of GDP in 2009 and 68-69% of GDP in 2010. The program puts GDP growth at 2.2% in 2007, 2.8% in 2008 and 4.1% in 2009. Almost all of the figures are identical to those taken from a leaked draft of the convergence program and published by dailies on Friday. Gyurcsány said the government would meet to discuss the program with unions on Wednesday and with employers on Thursday, after which the program will become official. The program deals with the period between 2006 and 2011, Gyurcsány said. It outlines steps to create balance between 2006 and 2009, and the conditions for creating growth between 2009 and 2011. Gyurcsány said Hungary could meet the technical requirements for joining the ERM-2 in 2007-2009. He added that Hungary could join the ERM-2 without meeting all of the Maastricht criteria. (