Hungary's liberals seek massive tax cuts in 2009
( dpa )- Hungary's junior coalition member the Alliance of Free Democrats (SZDSZ) on Thursday said it wants to see tax cuts of up to 600 billion forints (2.33 billion dollars) in 2009, opening the way for a battle with its coalition partner.
SZDSZ party chairman Janos Koka , a former economy minister, said that the move was a "one-off, determined step" that was needed to create jobs and boost economic growth.
Hungary's growth has suffered as a result of austerity measures aimed at cutting the budget deficit, which was 9.2 per cent of gross domestic product in 2006, to 3.2 per cent in 2009.
Third quarter economic growth in 2007 came in at an eleven-year- low of 0.9 per cent and the overall target for 2007 growth dropped to 1.7 per cent, compared to previous average annual growth of around 4 per cent.
Officials projections say GDP growth will recover slowly to only 2.8 per cent in 2008, although some analysts are now predicting this will be worse after fears of a US recession prompted panic on global markets.
The SZDSZ's proposition is likely to meet resistance from the senior Hungarian Socialist Party.
The Finance Ministry, controlled by the Socialists, envisages room for cuts of 100-200 billion in 2009, and Koka admitted that an agreement on the final figure was still far off.
Such a large cut is not likely to be welcomed by international observers and credit rating agencies, who have warned that fiscal discipline could slip in advance of the 2010 elections as the unpopular government tries to win over voters that have turned to the opposition.
The Organization for Economic Cooperation and Development and the International Centre for Economic Growth both warned this week that further measures, particularly on expenditure cuts, are needed in order to keep Hungary's consolidation programme on track.