Cen bank warns Hungary may miss euro goal-agency

The central bank (NBH) is locked in a tussle with the centre-left government and each often criticises the other's management of policy.

Earlier this year the government postponed the target date for joining the euro zone to 2010 from 2008.

"We will be unable to adopt the euro in 2010 if we do not shift to a much stricter revenue, public sector and economic policy," national news agency MTI quoted NBH governor Zsigmond Jarai as telling a conference in the southern town of Szeged.

The pro-growth cabinet has urged the central bank to cut its base rate, now at 10.5 percent, and to weaken the forint.

Jarai said interest rates in Hungary were at levels needed to secure financing for a growing state debt, and added that the government should focus on restoring market confidence, accelerating reforms and cutting the budget deficit.

"There is nothing worse than postponing...(euro zone) entry," he said, adding that Hungary needed to make political sacrifices.

"The government must decide whether it wants a more rapid euro introduction and faster growth and then undertake the political risk of putting the budget in order, or it must decide not to make political sacrifices...and give more room to those who oppose the introduction of the euro," he said.

The government recently revised its budget deficit forecast for 2004 to 5.3 percent of GDP from 4.6 percent. To qualify for the euro zone Hungary needs to cut the budget deficit to 3 percent of GDP.

Tension between the NBH and the government has been growing since the government said it supported a bill proposed by lawmakers that would give the prime minister power to reshuffle the central bank's rate-setting Monetary Council.

Source: Reuters