Economy
IMF chief sees no choice for Hungary's next cabinet but to remain on set path
Following talks with Prime Minister Gordon Bajnai in Washington, Strauss-Kahn said the 2010 Budget approved this Monday saved the country for an extended period. “We have a lot of examples to show, but none of these is as good as Hungary," he said, referring to the IMF’s viewpoint that the Bajnai cabinet has implemented the necessary measures to overcome the crisis.
Strauss-Kahn sees no alternative to the current crisis management solutions. To a question whether he has concerns about the next government changing direction, he said it would not be possible. He recalled a meeting with every parliamentary party last December, saying that he had the impression “there is a consensus on this issue irrespective of political rhetoric".
To a question whether he felt the same way about the main centre-right opposition party Fidesz, Strauss-Kahn said he did although he has not talked in person with Fidesz officials since December 2008.Regarding the cabinet’s 2010 budget deficit goal for 2010 he noted the IMF mission that has recently consulted local authorities in Budapest nodded on a 3.8% of GDP gap, adding that “3.7% would be too small and 3.9% would be too large."
Senior Fidesz officials, including President Viktor Orbán and the party’s chief economist Mihály Varga, have said the government overestimated next year’s budget revenues and underestimated expenses, which could lead to a deficit of around 7.0% of GDP. As the IMF and the European Commission both clearly said this would be unacceptable, it is no wonder Strauss-Kahn claims there is no turning back from the current track. This view is underpinned by the fact that the Bajnai cabinet has not drawn the due trenches of the IMF credit facility in two quarters in a row, by which it leaves over EUR 1.5 bn worth of the Stand-By Arrangement to the next government.Missions from the IMF and the European Commission were in Budapest between November 4 and 16, discussing the first draft of the next quarterly review. In this they formulated a positive view of the local authorities’ crisis management measures. The only are where a more critical tone was hit was regarding policies.
“[...] strict expenditure control will be needed to reduce the general government deficit to 3.8% of GDP in 2010 . Over the medium term, a substantial decline in the fiscal deficit is needed to put government debt as a share of GDP firmly on a declining path."
Strauss-Kahn sees no alternative to the current crisis management solutions. To a question whether he has concerns about the next government changing direction, he said it would not be possible. He recalled a meeting with every parliamentary party last December, saying that he had the impression “there is a consensus on this issue irrespective of political rhetoric".
To a question whether he felt the same way about the main centre-right opposition party Fidesz, Strauss-Kahn said he did although he has not talked in person with Fidesz officials since December 2008.Regarding the cabinet’s 2010 budget deficit goal for 2010 he noted the IMF mission that has recently consulted local authorities in Budapest nodded on a 3.8% of GDP gap, adding that “3.7% would be too small and 3.9% would be too large."
Senior Fidesz officials, including President Viktor Orbán and the party’s chief economist Mihály Varga, have said the government overestimated next year’s budget revenues and underestimated expenses, which could lead to a deficit of around 7.0% of GDP. As the IMF and the European Commission both clearly said this would be unacceptable, it is no wonder Strauss-Kahn claims there is no turning back from the current track. This view is underpinned by the fact that the Bajnai cabinet has not drawn the due trenches of the IMF credit facility in two quarters in a row, by which it leaves over EUR 1.5 bn worth of the Stand-By Arrangement to the next government.Missions from the IMF and the European Commission were in Budapest between November 4 and 16, discussing the first draft of the next quarterly review. In this they formulated a positive view of the local authorities’ crisis management measures. The only are where a more critical tone was hit was regarding policies.
“[...] strict expenditure control will be needed to reduce the general government deficit to 3.8% of GDP in 2010 . Over the medium term, a substantial decline in the fiscal deficit is needed to put government debt as a share of GDP firmly on a declining path."
