Hungary signals IMF deal over

HUNGARIAN PRIME minister Viktor Orban signalled he wouldn’t renew a safety net with the (International Monetary Fund) IMF.

He also said he would row back on a commitment to cut the budget deficit to European Union-prescribed levels next year in his latest statement which has stunned markets.

He said yesterday that Hungary would meet its budget target under the agreement but the issue of a new safety net was “insignificant” in light of much more important negotiations with the EU about how Hungary would bring its budget deficit below 3 per cent.

He signalled that he would not renew a safety net with the IMF and would row back on a commitment to cut the budget deficit to European Union-prescribed levels next year.

But Mr Orban has spurned warnings that Hungary could face market pressure and currency weakness without support from its lenders, and said the €20 billion EU and IMF aid deal would expire in October.

The comments from Mr Orban, who took power in May with the largest majority in Hungary’s post-communist history, is in favour of a domestic-focused agenda and has pledged to end the belt-tightening pursued by the previous Socialist government.

His eye appears to be on October 3rd municipal elections, where he can consolidate his party’s grip on Hungarian politics.

Analysts said his centre-right Fidesz cabinet’s rejection of more austerity measures in favour of a “pro-growth” policy comprising a tax on banks and possibly other businesses might be softened after the municipal vote.

And, in a move that could indicate a delay in budget consolidation, he called for EU states to have the same time frame to reach the bloc’s 3 per cent of gross domestic product budget-gap level. Some members may not achieve it until at least 2014.

“We will have a single demand, namely that of equal treatment . . . the same time frame must be set for all to meet the EU’s expectation,” Mr Orban said. – (Reuters)