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Banking

Hungary: New government says IMF plan fits too tightly

Fidesz party seeks to expand state spending limits; Analyst warns on dangers of political rhetoric

Hungary’s centre-right Fidesz party cruised to power in the first round of April’s parliamentary elections after securing more than 50% of the popular vote. And as Euromoney went to press it was seeking a two-thirds majority in the April 25 second round that would enable it to make sweeping changes to the constitution.

But the new administration has its work cut out in convincing the global financial community that it will show the type of fiscal rectitude necessary to impress the IMF and other lenders that bailed the country out to the tune of $27 billion in late 2008.

Fidesz leader Viktor Orban, who was prime minister from 1998 to 2002, returns to power with Hungary bogged down in a recession in which GDP shrank by 6.3% last year. Unemployment is testing new highs at 11.4%. Fidesz has touted a fight against corruption, together with job creation, simplification and lowering of taxes, and tighter financial system regulation, as its economic priorities. But there were early signs that it would seek to run a much larger budget deficit in 2010 than the one agreed with the IMF under outgoing premier Gordon Bajnai.

Mind the gap

In the immediate aftermath of the party’s first-round victory Orban claimed that Hungary’s IMF-approved budget deficit target of 3.8%

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