Economy 26 November 2009, 9:29am

Hungary leading opposition force to set eurozone target date next year

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Hungary’s leading opposition party, heavily tipped to win a landslide victory in next year’s general ballot, is seeking to set a target date for euro adoption by the end of 2010 because “markets need an anchor", former Finance Minister and top Fidesz advisor Mihály Varga told Reuters in an interview. Varga reiterated a former comment that he foresaw budget deficit to jump to 7.0%-7.5% of GDP next year.

In the former Finance Minister’s calculations, government deficit may surge to 7.0%-7.5% next year, as opposed to the 3.8% government target approved by international by the IMF and other creditors. Varga sees one-off expenditures not included in the 2010 budget draft as the culprit that could boost the budget deficit.

“I believe it's more important that by the end of 2010 we should be able to announce a euro target date," the Fidesz advisor told Reuters, adding that it is of key importance to provide “fixed points of reference to market players and try to stick with those".

Responding to an interview question, Varga said the analyst expectations for Hungary to join the eurozone in 2014 in the latest Reuters poll is an optimistic estimate, “but I personally trust very much that 2014 could be a realistic date," he added.

Tax cuts and job creation

If Fidesz wins the 2010 general elections (which is highly likely in light of the party’s current high approval rate), the new government will put major tax cuts in place as of January 2011 in order to stimulate economic growth, Varga said.

Job creation will be the top priority for the next government. The only way to attain this goal is by lowering taxes, Varga emphasized, adding that Fidesz has no specific plans for tax changes at this point.

The former Finance Minister censured the National Bank of Hungary for “mishandling" the crisis and not cutting interest rates fast enough in 2009 as the global outlook improved.