hungary euro

Hungary shelves euro entry for two decades: minister

BUDAPEST (Reuters) — Hungary should eschew the crisis-hit euro for about two more decades and strengthen the economy its own way, its economy minister said in a newspaper column on Thursday.

Central Europe’s most indebted nation, expected to resume talks with the International Monetary Fund and European Union on a financing deal next month, meets only one of the criteria for euro entry at the moment and like others in eastern Europe has already pushed back any ambitions for joiПing the currency bloc.

After missing a series of target dates under different governments, Budapest had most recently flagged 2020 as a potential date of euro accession.

«The euro zone faces a protracted financial and economic crisis because it grasped too much and aimed too high,» Gyorgy Matolcsy, the architect of an economic program that has upset some in the pension and banking industry and prompted protests from abroad, wrote in his regular column in the weekly Heti Valasz.

«Hungarian policy can follow a multi-step strategy which strengthens the economy without the euro in the next two wartime decades and enters the euro zone following a new peace.»

While all of the European Union’s new eastern European members promised on joiПing that they would adopt the euro, they are not obliged to give a firm date and Poland and the Czech Republic have both pushed back any such ambitions.

Estonia and Slovakia have both joined the single currency and Lithuania and Latvia may still try to join if the debt crisis subsides, the turmoil has also drawn into question whether the currency bloc would readily accept any of the region’s larger economies.

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After a rare fiscal surplus in 2011, Hungary — which has a population of 10 million — targets a budget deficit of 2.5 percent of gross domestic product this year, one of the lowest in the EU thanks to a combination of tax rises and some spending side reforms.

The government is under pressure from the EU to maintain a low budget deficit but Budapest has rejected the painful austerity measures employed elsewhere in Europe and ruled out any cuts in family benefits and pensions.

Matolcsy has slapped banks with Europe’s highest bank levy, renationalized $14 billion of private pension savings and most recently proposed to levy a new tax on financial transactions that also involves central bank operations.

On Tuesday, Hungary’s central bank cut interest rates by 25 basis points to 6.75 percent, its first rate reduction in more than two years, to aid the shrinking economy, even though annual inflation is runПing at nearly double its 3 percent target.

The cut, which caught some market participants off guard, weakened the forint to a one-month low versus the euro.

(Reporting by Gergely Szakacs; editing by Patrick Graham )

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