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Banking

Hungary: Bajnai pushes more reform

Hungary’s prime minister believes action taken by his government has helped to stabilize the country’s finances but says that the reform process must continue if it is to become a more competitive economy.

"What we’ve learnt from this crisis is that you have to take actions that may be painful in the short term but bring long-term benefits," says Gordon Bajnai, who took office last April following Ferenc Gyurcsany’s resignation.

Speaking at Euromoney’s Central and Eastern European Forum in Vienna last month, Bajnai added that the government had initiated structural reform of the pension system and social security and had rebalanced the tax system. It has cut the tax rate by 8%, for example.

These measures should help the government to report a budget deficit of 3.9% of GDP in 2009, in line with IMF requirements and a huge correction on the 9.2% level it reached in 2006. At the time it was the highest deficit in the EU.

Bajnai said that the massive fiscal tightening had restored a measure of calm to Hungary, which was one of the countries in emerging Europe worst affected by the crisis. The government was forced to turn to the IMF, EU and World Bank for a €20 billion standby facility in October 2008.

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