In order to cope with the effects of the European recession and to put an end to the excessive deficit procedure against Hungary, fiscal adjustment measures have been approved by the Hungarian Parliament on 15 November.

These measures were necessary to enable continued progress along the path of stabilized and constant growth. The fiscal adjustment measures include keeping the current banking tax level instead of halving it in 2013 as planned earlier to generate 72 billion HUF in revenue next year, and setting the financial transaction tax to 0, 2 per cent in general and 0,3 per cent for cash transactions, instead of the 0,1 per cent planned earlier to raise 130 billion HUF. The central bank would be exempted from the transaction duty. Furthermore, the Parliament adopted changes to local taxes and approved the introduction of a new public utilities tax. In order to enhance investment predictability, the setting up of „free economic zones”, priority areas eligible for tax relief for investments, have been decided on and four strategic partnership agreements have also been concluded with various international companies.

The Hungarian Government has thus removed all obstacles to concluding a loan agreement with the International Monetary Fund and the European Union. The Government’s chief negotiator Mihály Varga, however, put forward in an interview provided to Hungarian public radio that the IMF and the EU will wait until the adoption of the 2013 EU budget and only after that can there be progress on the negotiations with Hungary. As he said, what will take place in 2013 in terms of talks does not only depend on what economic measures the Hungarian Government implements but also what decisions will be made within the eurozone and how the situation will develop.

In a letter written to Olli Rehn yesterday, György Matolcsy pointed out that he hoped the decisions approved by the Parliament would reinforce the Government’s commitment to taking Hungary out of the excessive deficit procedure.

With reference to the European Commission's autumn report which forecast a deficit-to-GDP ratio of 2.9 per cent and a growth rate of 0.3 per cent for Hungary next year, Prime Minister Viktor Orbán put forward that Hungary had succeeded in consolidating the financial foundations of its economy. At present, Hungary is one of only five EU member states with a decreasing level of public debt and it is the country that is cutting debt the most rapidly.

(Prime Minister’s Office)