Comments from state secretary on Hungary deficit, budget

BUDAPEST (BestGrowthStock) – Hungary’s new government will strive to meet the deficit target agreed with international lenders, but a series of fiscal measures will be necessary to meet that goal, State Secretary Mihaly Varga said on Saturday.

Here are selected comments from Varga, a senior Fidesz economist who submitted a draft report from a fact-finding committee he chairs and whose mandate is to draw up the “true” state of the Hungarian economy.

ON ‘DEFAULT’ COMMENTS

“Those remarks were not fortunate.

“For us the question is not how we can solve market financing – today the question is how we can maintain the planned budget deficit. I have said that any comparison with countries with much higher CDSs is unfortunate. These do not give a credible picture of the state of Hungary. A country to which the question is whether it can meet the 3.8 percent (of GDP) deficit target or not is in an entirely different situation than a country where the question is how much above 10 percent the budget deficit is going to be, and whether they can refinance their expiring debt or not.

“Those comments which were made on this issue were exaggerated, and if a colleague makes them it is unfortunate. I have to say that the situation is consolidated, and the planned deficit (target) is attainable, but for it to be attainable the government must take measures.”

ON BUDGET

“We were not surprised. As was expected, the previous government left us a much worse situation than what they had talked about. As in 2006, the previous government’s 2010 budget has little to do with what is going on in the country.

“Data on planned tax revenues … differ from reality by an order of magnitude. Especially registration fees, excise taxes, and corporate tax payments differ from reality

“Data regarding public transport firms’ expenditure … differ from reality by an order of magnitude.

“Data about social security funds, local governments and separate state funds are not truthful….

“Very serious expenditure items are not listed in the budget at all, even though it was absolutely clear that they will surface during the course of this year. We would like to execute a deficit reduction, but we also see that these (expenditure) items do exist.

“With my current knowledge, I can tell you about the work of the fact-finding committee that if nothing changes in this budget then the planned deficit is not attainable. But we strive for the planned deficit (target) to be met.”

ON GOVT ACTION PLAN

“Calmly, but firmly, we must prepare an action plan as soon as possible, a series of measures that can help us attain the deficit target.

“The Hungarian economy needs immediate, urgent measures. And these measures have to run deep, so that the periodically returning problems that many governments wasted their energies on will not return.

“This morning I gave the report to the Prime Minister and proposed to call an extraordinary meeting of government where the government can work out an action plan, which aims to meet the deficit target despite all difficulties. The prime minister accepted the proposal. The (2010 deficit) forecasts are all over the map. It is very difficult to give a summary estimate, and I do not want to enter this numbers game.

“The prime minister, I feel, supported the proposal and he shares the view that in the current global and European situation it is reasonable that a country strives to reduce its deficit as much as possible.”

ON 2011 DEFICIT

“(Meeting the 2010 budget deficit) will obviously be instrumental in this respect as well. I trust that the government will make decisions this weekend that can meet, or even reduce, the previously planned 2011 budget deficit.”

ON IMF TALKS NEXT WEEK

“The current meeting will be one where the IMF will get information about the planned measures of the new government. This will not yet be an official monitoring paper (review).”

ON EURO

“I am glad that the prime minister understood and accepted this proposal, moreover, he supported my point of view that I expressed to him verbally, that for Hungary adopting the euro must remain an important goal. It is clearly visible that there is no other path for the country. No matter what problems the euro area has right now, the country must continue to strive to achieve the criteria that will lead the country into the euro zone, such as state debt, the magnitude of interest rates, the magnitude of inflation, and the magnitude of the budget deficit.”

ON TAXES

“The government program includes the tax cuts. There will be tax cuts.”

Investing Research

(Reporting by Marton Dunai and Krisztina Than; editing by John Stonestreet)

Comments from state secretary on Hungary deficit, budget