I missed this earlier. When will one of these countries seriously seek alternatives to playing this game. How many fingers does the ECB have? I only ask because they are trying to plug so many dykes you have to wonder how many fingers they really have? And just how many middle fingers do they have, because they seem to be flipping people the middle finger at an ever increasing pace.
BN 02/22 11:00 EU Proposes Freeze of 495 Million Euros in Aid to Hungary
BN 02/22 10:40 *EU PROPOSES TO SUSPEND EU495 MLN IN COHESION FUNDS TO HUNGARY
EU Proposes Hungary Aid Freeze, Prompting Spending-Cut Plan (1)
2012-02-22 14:04:54.251 GMT
(Updates with government spokesmen in fourth paragraph,
markets in sixth, Economy Ministry in seventh.)
By James G. Neuger and Zoltan Simon
Feb. 22 (Bloomberg) — The European Commission proposed to
suspend 495 million euros ($655 million) in development
subsidies to press Hungary to narrow its budget deficit,
prompting Prime Minister Viktor Orban to announce spending cuts.
The freeze would affect 29 percent of Hungary’s so-called
cohesion fund allotment for 2013, the European Union executive
said in a statement today. The commission last month said the
country failed to curb its budget deficit in a sustainable way.
“This decision today is to be regarded as an incentive to
correct a deviation, not a punishment,” European Union Economic
and Monetary Commissioner Olli Rehn told reporters in Brussels.
“It is a fair and proportionate measure of a preventive nature.
Hungary has until the first of January next year to bring its
deficit back on track and avoid these consequences. I trust it
can and will do so.”
Hungary considers the Commission’s proposal “unfounded and
unfair,” government spokesmen Peter Szijjarto and Andras Giro-
Szasz said in a joint e-mail. It’s also “legally debatable”
and is contrary to the “spirit” of EU treaties by imposing
sanctions on a violation which has yet to take place, they said.
Orban is trying to revive bailout talks with the EU and the
International Monetary Fund. The premier ordered his Cabinet
ministers to propose cuts in drug spending for 2012 and 2013 and
to reduce expenditures on the Budapest public transport company
next year, according to a directive published in the Official
Gazette that was e-mailed today. He also ordered an immediate
freeze in the government’s purchases of cars and mobile phones.
The forint dropped 0.9 percent to 288.93 per euro at 1:10
p.m. in Budapest, weakening the most since Feb. 10. Drugmaker
Egis Gyogyszergyar Nyrt. dropped 2.5 percent, the most in a
week, to trade at 16,300 forint. Gedeon Richter Nyrt., the
country’s biggest drugmaker, slid 0.5 percent to 38,000 forint.
Hungary will use “all tools” to meet its budget-deficit
target of 2.5 percent of gross domestic product this year
“under all circumstances,” the Economy Ministry said in an e-
mailed statement today.
“We are cautiously optimistic about these announcements”
by the Cabinet, Janos Samu, an economist at Concorde Securities
in Budapest, said in a report today. “They indicate that the
government is aware of the fiscal challenges, though it should
be no revelation after so many warnings.”
The government has argued that its planned multiyear
spending cuts will yield the necessary savings to end the
reliance on one-time revenue measures to meet deficit goals. The
government targets a shortfall of 2.2 percent of GDP in 2013.
The European Commission on Jan. 11 said the government has
failed to take “effective action” to rein in the deficit in a
“sustainable nature.” Budget sustainability underwent a
“severe deterioration” last year, which was masked by one-time
measures, the EU executive said.
Since coming to power in 2010, Orban has effectively
nationalized $14 billion of private pension funds and levied
extraordinary taxes on energy, financial, retail and
telecommunication companies to plug budget holes from tax cuts.
The Cabinet plans to end special taxes on the energy,
retail and telecommunications industries and cut the bank levy
by half from next year. The government targets savings of 550
billion forint ($2.5 billion) this year and 900 billion forint
in 2013 from budget-consolidation steps, including welfare cuts,
Economy Ministry State Secretary Zoltan Csefalvay said Feb. 14.
The shortfall without one-time measures reached 252 percent
of the government’s initial target for 2011, the Economy
Ministry said on Jan. 9. For 2012, Hungary may narrow the
deficit to within 3 percent of GDP “on the back of a close to
0.9 percent of GDP one-off revenue” from extraordinary industry
levies, the commission said. For 2013, the commission forecast a
shortfall of 3.25 percent.
Losing cohesion funding may threaten investments aimed at
fostering economic growth. Hungary’s forecast for GDP this year
ranges between stagnation and 0.5 percent growth, Mihaly Varga,
Orban’s chief of staff, said on Feb. 19. The government’s
official forecast is still 0.5 percent.
The IMF is reviewing its 0.3 percent growth forecast for
2012 and may reduce the estimate because of the euro area’s
deteriorating outlook, Iryna Ivaschenko, the lender’s
representative in Budapest, said Feb. 9. Hungary may be
challenged to meet its debt payments this year if the euro
crisis worsens and the economy slips into a recession, the IMF
said in a Jan. 25 report, underscoring the need for a loan.
“Given the downward revision of the growth forecast for
Hungary, it seems likely that additional measures will be
needed,” Rehn told reporters today.
Hungary can’t start talks on an international loan with the
IMF and the EU until the government meets preconditions,
including addressing concerns on monetary policy, the judiciary
and the data-protection agency. The EU has no deadline or
timeline to assess Hungary’s Feb. 17 response on the
infringement procedures, a commission spokesman told reporters
yesterday in Brussels.
For Related News and Information:
Top regional news: TOP EEU <GO>
Top Hungarian news: NI HUNGARY <GO>
Developing economy market moves: EMMV <GO>
–With assistance from Andras Gergely in Budapest. Editor:
Balazs Penz, Andrew Langley
To contact the reporter on this story:
Zoltan Simon in Budapest at +36-1-475-1181 or
James G. Neuger at +32-2-285-4301 or