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IMF, EU Review Multi-Billion Dollar Hungary Rescue Package

  • Stefan Bos

Hungary says it will not ask for further international aid, despite international concerns over its economic risks. European Union and International Monetary Fund officials have reviewed the effectiveness of a multi-billion-dollar rescue package Hungary received to avoid bankruptcy.

Hungarian Finance Minister Peter Oszko says his recession-hit nation will not need more funding from an international loan because, in his words, Hungary can "drum up financing from the markets on its own."

Officials said the country has used about $19 (billion) of the $25.1 billion in credit it received from the International Monetary Fund, the European Union and the World Bank.

Hungary was the first EU-member state to ask for such international assistance to help it avoid economic collapse.

But the head of the IMF delegation in Hungary, James Morsink, made clear tough austerity measures should continue.

"Government debt is now about 80 percent of GDP, which is high compared to other emerging countries," said James Morsink. "With this additional effort in 2011, debt could decline over the next five years to about 65 percent of GDP."

But with a general election scheduled for April there are international concerns about Hungary's economic outlook. Western investors have warned the budget deficit may increase to fulfill campaign promises.

Hungary's center-right Fidesz party, which is leading in the polls, has pledged to reverse unpopular IMF-backed austerity measures.

The head of the delegation of the European Commission, Barbara Kaufmann, said Hungary faces budgetary risks.

"We look for the same determination that we have seen in the past also in the future, also to make sure that the deficit target is met this year and the deficit is brought below three percent next year," said Barbara Kaufmann.

Reducing the budget deficit is a key condition for Hungary to introduce the European currency, the euro, later this decade.

But a major economic crisis in Greece, which had a budget deficit of nearly 13 percent last year, has underscored the vulnerability of the euro-zone.

Kaufmann told VOA News that Greece's troubles should not stop the European Union from allowing emerging market countries, such as Hungary, to adopt the euro.

"We have clear criteria for membership to the euro-zone that we examine case by case," she said. "Obviously right now Hungary does not yet meet those criteria. But I would not say, just because there is Greece, we exclude that at some point other countries will [join] the euro-zone, if they fulfill the criteria."

The economic developments in Hungary are closely monitored in Europe as the euro region buys an estimated 60 percent of products made or assembled in Hungary, including cars and mobile phones.