EU budget pact must back growth too-Hungary,Germany

Speaking after a meeting in Berlin with German Chancellor Gerhard Schroeder, Gyurcsany said the pact as it was set up at present carried the risk of hurting longer term growth.

"The Stability and Growth Pact as it currently applies appears to serve stability and growth in the short term but, as things stand, not always long term development," Gyurcsany told a news conference after a meeting with Schroeder.

"The chancellor and I agree that the pact should be discussed in such a way that it is balanced to support even development in Europe," he said. His remarks were translated into German by an interpreter.

EU member states are currently examining a reform of the pact that critics say risks loosening budget stability rules but which supporters say could give countries more freedom to adjust to periods of economic slackness.

Germany risks breaching the deficit limit of three percent of gross domestic product for a fourth successive year in 2005.

Hungary, which joined the European Union in May, aims to join the single currency zone in 2010 but its deficit is officially expected to be 5.3 percent of gross domestic product this year.

The European Central Bank last month criticised Hungary for its fiscal policies, which it said would not enable Budapest to meet the EU budget rules.

Both leaders said that a range of options for reforming the pact could be considered but Gyurcsany was cautious about a suggestion from Schroeder last month that transfer payments to the European Union could be excluded from deficit calculations.

Germany, the EU's biggest net contributor, would be a clear beneficiary of such a change but Hungary, a net receiver of EU transfer funds, would find its deficit increased if the payments were debited from its budget in return.

"If the rules were like this, net contributors and the beneficiaries would be on opposite sides. That would mean Hungary against Germany," he said.

But he said that if the proposal eased Germany's budget deficit without increasing the Hungarian deficit, Hungary would be prepared to give its support.

Source: Reuters