Hungary finmin backs more flexible EU deficit rule

"I think if changes could be achieved in these two issues that would be good," Draskovics told a meeting of Hungarian ambassadors.

However, he said that it was of even greater importance that the much-debated Stability and Growth Pact should be equally applicable to all EU member states.

"For us the most important would be...that the rules of the game must be observed by everyone, big and small alike, to have fair and equal treatment," he said.

Hungary at present treats state transfers to privately run pension funds, created in the 1990s under a sweeping pension reform, to be outside the public sector.

Draskovics said this year's public sector deficit, targeted at 4.6 percent of GDP, would be 0.7 percentage points smaller if these transfers were to be included in the public sector.

The EU's statistical office Eurostat said earlier this year that Poland should not treat such pension transfers as part of the public sector.

If Poland complied, this would inflate its deficit by some 1.6 percentage point, making it virtually impossible to cut its budget deficit to the Maastricht level of three percent of GDP in time to be able to join the euro zone in 2009.

Draskovics said that Hungary, even though it is a small new EU member, could make its voice heard in the enlarged bloc by forming smart alliances.

"I don't think we should discount our role...We may not be able to push through what we we'd like, but we can prevent others from being able to push through what they want. And then, with smart coalitions, well-chosen positions we may as well be able to push through what we would like," he said.

On a separate issue, Draskovics said Hungary should object to the idea of launching a minimum corporate tax in Europe, as suggested by Germany and France.

"This EU minimum tax, in its present form, we definitely should not support," he said.

Hungary has one of the lowest corporate tax rates in the EU at 16 percent.

Source: Reuters