The intention of the Hungarian government is unchanged: this is the message that Mihály Varga, Minister without portfolio responsible for liaising with certain international financial organisations, stressed at an economic forum in Budapest organised by the portfolio.hu web portal. As previously stated in November 2011, the Government would like to reach an agreement with both the International Monetary Fund and the European Union.

According to Mr. Varga, the Hungarian economic situation has undoubtedly improved in recent months, but the country is still far from that ideal state in which it can renounce external support.

In a presentation entitled ‘The prospects of the Hungarian economy – evaluation of current issues,’ the minister said that international creditors are still assessing the negotiation proposals of the Hungarian government, which is confident that an agreement can be reached not too long after negotiations.

Mr. Varga mentioned that among the benefits of a financial safety net was the fact that the market had started pricing in an agreement, and he also said that credit default swaps on Hungarian sovereign debt had decreased from 720 basis points in January to below 300 today. He added that with the agreement Hungary will have a programme that guarantees much tighter public finances.

According to the minister, the Hungarian economy is only now ready to reach its potential, as its performance was hampered by borrowing and increasing public debt in past years. If these factors are set aside, then even in the years prior to the crisis the general trend was stagnation with fluctuations.

He stressed the necessity to find partners to generate and improve growth, identifying decreasing potential growth as one of the greatest problems in recent years.

With regard to government debt, the minister said that he sees the decreased debt-to-GDP ratio as one of the best achievements in recent years. The country is among those EU Member States that are taking steps to reduce their budget deficits. ’We can improve our structural deficit, and that has positive consequences,’ he said.

He said that 2013 would be a very important year, since there would be no room for a high budget deficit, and he made it clear that Hungary cannot afford to slip back to the level from which it has taken so much effort to emerge.

(Prime Minister’s Office)