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Hungary unveils fiscal plan to cut deficit

09 June 2010 09:49 (UTC +04:00)

In a speech to parliament, Viktor Orban said a new 29-point fiscal plan will introduce a six-year tax for financial institutions and reduce red tape for investors. He also suggested it would cut public sector wages and eliminate benefits such as free cars and cell phones. A ban on foreign exchange mortgages is also in the works.

The comments shocked global markets and dragged down both the euro and the Hungarian forint on Friday and Monday. Hungary has since tried to backpedal, with Economy Minister Gyorgy Matolcsy saying Monday that his government would strive to meet the 2010 budget deficit target of 3.8 percent of gross domestic product set by the previous administration.

International Monetary Fund chief Dominique Strauss-Kahn has said he sees "no reason to be concerned" about the current situation in the Central European state. In fact, EU-member Hungary has already been saved from defaulting on its debts, having received a euro20 billion ($24 billion) loan in late 2008 from the IMF, World Bank and European Union.

Overall, the fiscal side of the Hungarian government’s plan is to reshuffle expenditures and revenues for less than 2 percent of GDP over a two-year-period, This can hardly be described as a major reform package and as such is disappointing.