By Gemma Lougheed - 16th November 2005
The Hungarian government has refused to cut public spending despite threats from the European Commission to enforce EU budget deficit targets.
Budapest is refusing to cut investment or social welfare benefits in response to commission recommendations on reducing Hungary’s budget deficit, FT Europe reports.
The European Commissioner for Economic and Monetary Affairs, Joaquin Almunia, last week implied he might hold back EU funds unless Hungary met targets.
In an interview with FT Europe, Hungarian Prime Minister, Ferenc Gyurcsany, slammed the EU's threat of suspending funds as 'unfair'.
Gyurcsany acknowledged the need to reduce the deficit but in light of an upcoming election, he wouldn't cut investments in infrastructure or reduce social welfare benefits.
“'I think it would be unfair to Hungary, which is not a member of the euro zone,” said Gyurcsany.
"Hungarians' living standards are much lower than the European average. What the hell would Europe like to have from us?"
Hungarian finance minister, Janos Koka insisted Brussels would be making a big mistake in suspending funds.
“Brussels would be on a totally wrong track if they thought about stopping the transfers to Hungary from which we are building highways, airports, et cetera,” said Koka.
Although not a member of the eurozone, Hungary is subject to restrictions under the EU growth and stability pact as it has not yet adopted the euro.
But, Budapest has agreed to lower its deficit to three per cent of GDP by 2008 in order to comply with Maastricht Treaty criteria for adopting the euro.
Hungary's deficit situation is set to worsen from 5.4 per cent of GDP in 2004 to at least 6.1 per cent in 2005.
The country's draft budget for 2006 envisages a deficit target of 5.2 per cent.
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