UPDATE 1-PM says Hungary must discuss budget with EU, not IMF

* Orban says 2010 deficit will not breach 3.8 pct

* Expiry of IMF agreement means EU is negotiating partner

(adds detail, background)

By Dave Graham

BERLIN, July 21 (BestGrowthStock) – Hungarian Prime Minister Viktor
Orban said on Wednesday that he would discuss the upcoming
budget with the European Union but there was no point discussing
long-term issues with the International Monetary Fund.

Speaking at a news conference with German Chancellor Angela
Merkel in Berlin, Orban said Hungary needed to agree with the EU
— and not the IMF — how the country reduces its deficit,
because its agreement with the fund expires in October.

“Therefore it makes no sense to negotiate long-term
questions with the IMF,” Orban said through an interpreter.

“We need to reach agreement not with the IMF, but with the
EU, on how we reduce our deficit from 3.8 percent to a level
below 3 percent as expected by the European Union.

“We need to negotiate that with the European Union. We will
do that,” Orban added. “Our budget for next year we will do with
the European Union in accordance with these negotiations.”

The forint tumbled more than 3 percent on Monday after talks
between Budapest and the IMF and EU were suspended and Hungary
rebuffed calls for tougher spending cuts.

The lenders suspended a review of a 20 billion euro funding
agreement signed in October 2008 to avert financial meltdown.

Orban, who was elected in April, rejected suggestions that
Hungary’s budget deficit in 2010 would end up breaching an
agreed target of 3.8 percent of gross domestic product.

“I have reassured everyone — investors and IMF specialists
— that Hungary will not have a deficit of more than 3.8 percent
by the end of the year,” he said. “And with this, our contract
with the IMF runs out. From that moment on, we must no longer
deal with the IMF but with the European Union.”

Merkel noted that although Hungary was not a member of the
euro zone, as an EU member it also needed to respect the bloc’s
budgetary rules limiting deficits to 3 percent of GDP.

“I think Hungary has taken very energetic steps in the last
few years to meet the demands of deficit reduction,” she said.

Stock Report

UPDATE 1-PM says Hungary must discuss budget with EU, not IMF