Varga says economy much less vulnerable

Tokyo, October 12 (MTI) – The Hungarian economy is far less vulnerable than before and if the global environment stays stable until the middle or the end of 2013, Hungary will not require external financing, Mihaly Varga, Hungary’s chief negotiator at talks with the International Monetary Fund, said on Friday.

Varga, who attended IMF’s general meeting in Tokyo, told MTI that Hungary would issue euro-denominated bonds only after an IMF deal is sealed and added that it would be wrong to send out a message that the agreement is not important to Hungary.


He told MTI that he had met IMF officials and informed them about the situation of the Hungarian economy and about the government’s economic policy moves.


Varga added that there was still no date set to resume negotiations with the IMF/EU on financial assistance.


He said Hungary’s fiscal position had improved much in the past two years, but the country remained vulnerable because of the worsening outlook for growth.


“[Hungary] is far less vulnerable than two years ago. Then, we were on a top-ten list of countries most expected to default soon. Fortunately, we are now far from that,” he added.


Vulnerability today results from a decreased growth outlook because necessary fiscal adjustments have unavoidably resulted in the deterioration of factors that stimulate growth, Varga said.


On the European economy Varga said that shaping future cooperation within the euro zone and in the EU, and the degree of giving up national sovereignty in that process were crucial issues. At some point the Hungarian government will have to make a decision concerning these issues.


According to Varga, Europe’s problems were rooted in a “one-sided” introduction of the euro: while a uniform monetary policy was adopted, fiscal policies remained under national control, which suggested that cooperation would be difficult to maintain in the long run.


Europe should make decisions aimed at correcting errors made before the introduction of the euro, rather than ones that run contrary to the process of fiscal integration, he added.


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