Hungary hopes to hit EU budget limit '07

Draskovics told Reuters in an interview his country could bring its budget deficit to below three percent of gross domestic product in 2007 from 4.6 percent this year as long as growth accelerated to five percent in 2006-2007.

"We will meet the EU budget criteria in 2008 at the latest, but if everything goes well it could be a year earlier," he said after the meeting of EU finance ministers in Brussels.

Asked how fast growth would have to be, Draskovics said: "At least roughly five percent in 2006 and 2007."

Hungary is among 10, mostly central and east European countries that joined the EU on May 1.

Six newcomers, including Hungary, were reproached by the EU's 25 finance ministers for breaching the bloc's budget deficit level enshrined by the EU's Stability and Growth Pact.

Hungary was given until 2008 by EU ministers to reduce its budget gap to the required level, which is also a key criterion for any EU member that wants to join the euro zone.

Draskovics said that Hungary's budget deficit reduction programme was not solely focused on meeting euro area entry criteria nominally, but was designed mainly to allow his country to catch up in wealth with the euro zone's current members.

"We are trying to use the financial criteria as a tool to achieve the real convergence," he said.

"We are combining the reduction of the budget deficit with the reduction of the public sector and the reduction of taxes."

He confirmed that 2010 was Hungary's target date for adopting the euro.

Hungary's central bank believes there is a risk the fiscal deficit will overshoot and is using the domestic bond market as a measure of the confidence of international investors in the government's ability to deliver on its target of cutting the budget deficit to 4.6 percent of GDP in 2004.

Draskovics boasted that Hungary's budget deficit reduction plans for 2004 are the most ambitious among EU newcomers.

"This year, we are reducing the deficit by 1.3 percentage point, which is far more ambitious than any other country in Europe. Then we can make small steps in the coming years to create room for the tax reduction."

Source: Reuters