Hungary in bid to calm the markets
Source: Agencies |
June 8, 2010, Tuesday
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HUNGARY tried to minimize fallout from comments about a potential debt crisis yesterday as analysts stressed the country's fiscal situation is nowhere near as dire as that of Greece.
Economy Minister Gyorgy Matolcsy said his government will strive to achieve the 2010 budget deficit of 3.8 percent of gross domestic product set by the previous administration, downplaying recent comments by other officials suggesting the deficit could reach 7-7.5 percent of GDP and that the country was close to defaulting on its debts.
The statements stunned financial markets and caused both the euro and the Hungarian forint to nosedive. Attempts to backtrack over the weekend did not appear to ease global concern linked to the Central European country.
Speaking as the country's Cabinet met to come up with a so-called action plan, Matolcsy also raised the possibility of a flat tax, as well as tax cuts.
Analysts - such as Sandor Richter of the Vienna Institute for International Economic Studies - said Hungary has done its homework and is now where Greece should be in two or three years.
Comparing the two is "absolutely not" correct, he said, adding that Hungary started implementing austerity measures in 2006 to decrease the deficit. He said the center-right Fidesz party that recently won a two-thirds parliamentary majority now faces the tough task of trying to save face as it realizes that its campaign promise of radical tax cuts is not feasible.
"It is a very delicate situation but I hope very much that reason will win and that they will follow the economic policy of the previous government," Richter said.
Budapest analyst Gyorgy Barcza said meeting the deficit target of 3.8 percent for this year was possible. Going forward, a flat tax could help keep the deficit down.
Economy Minister Gyorgy Matolcsy said his government will strive to achieve the 2010 budget deficit of 3.8 percent of gross domestic product set by the previous administration, downplaying recent comments by other officials suggesting the deficit could reach 7-7.5 percent of GDP and that the country was close to defaulting on its debts.
The statements stunned financial markets and caused both the euro and the Hungarian forint to nosedive. Attempts to backtrack over the weekend did not appear to ease global concern linked to the Central European country.
Speaking as the country's Cabinet met to come up with a so-called action plan, Matolcsy also raised the possibility of a flat tax, as well as tax cuts.
Analysts - such as Sandor Richter of the Vienna Institute for International Economic Studies - said Hungary has done its homework and is now where Greece should be in two or three years.
Comparing the two is "absolutely not" correct, he said, adding that Hungary started implementing austerity measures in 2006 to decrease the deficit. He said the center-right Fidesz party that recently won a two-thirds parliamentary majority now faces the tough task of trying to save face as it realizes that its campaign promise of radical tax cuts is not feasible.
"It is a very delicate situation but I hope very much that reason will win and that they will follow the economic policy of the previous government," Richter said.
Budapest analyst Gyorgy Barcza said meeting the deficit target of 3.8 percent for this year was possible. Going forward, a flat tax could help keep the deficit down.
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