To a question by The Financial Times on how large a realistic target would be instead of the current official goal of 3.8% of GDP, Orbán respondend that his party Fidesz will aim to reduce the shortfall. The party will focus on fostering growth and enhancing the country's competitiveness rather than implementing further austerity measures, he stressed.

Fidesz wins 1st round. Good or bad for the markets?

"The bigger the mandate of the next cabinet will be, the faster it could lead the country out of the crisis," Orbán told an international press conference on Monday.

The centre-right Fidesz was allocated 206 parliamentary seats out of the 265 distributed now, well above 193 needed for simple majority though still short of 258 for 2/3rds. This is an unprecedentedly strong result since the fall of the communist regime.

There are 121 parliamentary seats to be distributed on 25 April, the second round of the election.

Analysts view the importance of a possible 2/3rds majority differently.

2/3rds not vital, growth is

Orbán said whether or not Fidesz will control two-thirds of the votes is "merely a technical issue".

He reiterated his party’s plan to reduce the number of MPs as well as deliver major cuts to local governments (e.g. halve the number of councillors).

He named three (plus one) priorities regarding the party’s first measures:

- reducing taxes;
- cutting red tape;
- reforming the public sector.
+ boosting competitiveness.

"We need to make Hungary the most competitive country in the region in the shortest possible time," Orbán stressed.

While pursuing this goal, however, the government must observe social aspects, he added.

"The biggest challenge professionally is to increase competitiveness markedly while strengthening social security."

What is a realistic deficit target?

Considering the repeated warnings by Fidesz that the 3.8% of GDP deficit target will be greatly overshot this year (7.0-7.5%), a reporter from The Financial Times asked Orbán what he thinks would be a realistic target and whether the cabinet will need to cut spending as well?

"We have no target. The question is not what target we’ll have, but how large the deficit is," Orbán responded.

He said the full-year deficit target will be reached by the end of May. "This needs to be acknowledged first; and the IMF, the European Commission [...], analysts and journalists must understand this."

Hungary’s public sector deficit reached 69.4% of the full-year projection by the end of March. The gap is not as wide as the ministry expected. According to the latest projection by the Finance Ministry, Hungary will post a budget deficit of HUF 81.9 bn this month that will take the cumulated shortfall to HUF 691.8 bn, which would correspond to 78.7% of the full-year deficit estimate.

Orbán said a fact finding committee set up by Fidesz is likely to "provide a clearer picture" on the state of the economy by the middle or the end of May.

The question, he said, is how large the deficit is. Only having that knowledge will allow Fidesz to come up with a "credible schedule" of measures.

No austerity measures to bite

"Austerity measures are not measures. That’s a concept, a way of economic thinking that radically reduces chances of economic growth," he said.

"In Hungary, every austerity measure led to economic contraction," Orbán added.

He emphasized that austerity measures can be considered successful if no further austerity measures are needed after such a tough package.

"Our economic policy focuses on growth, not austerity measures," he stressed.

"Every rationalization must rely on economic growth. Without growth you cannot carry out structural reforms or modernization."

Orbán also noted that Hungary’s real unemployment rate is around 16-20% and that is not tolerable. If it remains this high, democracy will pay the price in the long term, he added.

Talks with the IMF

Orbán reiterated that until the formation of the government Fidesz is not in a position to conduct official talks with the International Monetary Fund (IMF) and hence it can reach no agreement with the lender, either.

He acknowledged, though that informal discussions have already been held with the IMF.

"Hungary will need every agreement" (it can get), he said. The country is engulfed in a "huge amount of uncertainties and unconfidence. The only way out of this is as may agreements as possible, but only such that serve Hungarian interests," Orbán said.

He said he was "thinking in alliances" with international lenders, employees, employers, etc."

Source: Portfolio Online Financial Journal