"Fears about the achievability of Hungary's 2009-2010 budget goals are unfounded, Prime Minister Ferenc Gyurcsány said on Friday. He added that the government has almost reached the end of the austerity phase of the fiscal adjustment scheme, with a radical crunch of the spending side, but reforms would not be halted.At a conference organised by think tank GKI, Gyurcsány said the reforms currently underway “were consequences", adding that what the cabinet is doing now was “a change of attitude and mentality"
It was an important statement from the PM that “it can be stated with great assurance that concerns regarding the 2009-2010 budgets are not or only partially grounded".
“What we must aim at is not a deficit below 3% (of GDP) but an entirely balanced budget," Gyurcsány said. He added that the short-term objective was a public sector gap smaller than 3% of GDP, for which “there is a need for strong institutional safeguards". To this end the government has recently submitted a package of public finances laws, he reminded. “This is one of the most important bills of the (current) four-year cycle."
Gyurcsány pointed out that the scale of Hungary's budgetary adjustment is outstanding in European terms (7.5% of GDP in two years), adding that “nearly the whole of the adjustment will be the curbing of spending over (these) four years."
“[...] we are on the track we need to be on. We can see the end of the tunnel," he noted.
To a general question how the measures will create growth, Gyurcsány said growth must not be focused on boosting domestic consumption and investments. “This was one of the biggest mistakes of the past five years, there is no turning back to this."
He said growth could basically be spurred by a balanced budget and a clear, comprehensive and long-term development policy. He stressed the importance of the smallest red tape possible and lower public charges.
The PM underlined that “changes to the volume of taxes is not possible in the short run; the only means could be the expansion of the tax base and a focused reshuffling of the system (aimed basically at lowering the burden on earnings)".
"We expect that growth in 2008 will be considerably larger than this year, around 3% and a growth of around 4% is realistic from 2009 onward," Gyurcsány said."
Source: Portfolio Online Financial Journal
16.11.2007