'World champion' Hungary does not need IMF: PM

21st July 2010, Comments 0 comments

Hungary's prime minister said Wednesday his "world champion" country did not need a new IMF credit line when the current one expires in October, after talks with the lender broke down last weekend.

"Hungary and the International Monetary Fund had a deal, which expires in October. So there is no point in negotiating long-term questions with the IMF," Viktor Orban said in Berlin after talks with German Chancellor Angela Merkel.

"Once it expires, we no longer have to negotiate with the IMF, but with the European Union ... We have to agree with the EU, not with the IMF, how we will reduce our budget deficit ... to less than three percent," he said.

"We are world champions when it comes to cutting spending."

Orban added that Hungary would still manage to cut its budget deficit to 3.8 percent of ecoomic output in 2010, as agreed with the IMF and the EU in return for a 20-billion-euro (25.6-billion-dollar) credit line, untapped so far in 2010.

The comments followed a break-down last weekend in talks between the Hungarian government and the IMF and the EU on reviewing the country's efforts to rein in its deficit.

As a result the Hungarian currency, the florint, tumbled to fresh lows when markets opened again on Monday, and the country's borrowing costs rose as investors jitters resulted in a disappointing auction of government debt.

The IMF and the EU were critical of Hungary's efforts to balance its books, saying Orban's centre-right government, elected in a landslide victory in April, had to do more to meet its targets.

They also attacked a planned bank levy which Orban hopes will generate 650 million euros in extra revenues, saying it will would do serious damage to Hungary's investment climate and hit growth.

Merkel, who as head of Europe's biggest economy would be the largest contributor to any further EU credit line, steered clear of criticising Orban, at least in public.

"Hungary in the long term must return to a stable footing. With a deficit of 3.8 percent it doesn't look that bad, although we have to look at next year," Merkel told a joint news conference.

She also stopped short of directly criticising Orban's planned bank levy, saying only that proceeds from a similary planned levy in Germany were not intended to reduce Berlin's deficit but to create a rescue fund for any future financial crisis.

© 2010 AFP

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