Hungarian opposition leader wants to use IMF loan to fund tax cuts

The leader of Hungary's opposition centre-right Fidesz party, Viktor Orban, said Monday the government should reduce taxes and interest rates to kickstart the economy, reported dpa.

Orban criticized the minority Socialist government for sticking to an austerity drive that started back in 2006 when Hungary had the highest budget deficit in the EU, at 9.2 per cent of gross domestic product.

He said the 20 million-euro credit line offered jointly by the IMF, EU and World Bank at the end of October to shore up an economy on the brink of collapse could now be used to fund growth-stimulating tax and interest rate cuts.

"Instead of using this new room for manoeuvre, the government continues with its old policies," said Orban, speaking at a meeting of foreign journalists in Budapest.

The icon of the Hungarian right, who has led Fidesz since 1990 and was prime minster from 1998 to 2002, called for a immediate overhaul of government policy, the tax system, the labour market, and national development policy.

He noted that Hungary was the only new EU member in Central Europe to have already entered recession, and predicted that unless the government followred his advice, the economy was more likely to contract by -3 per cent next year than the official prediction of -1 per cent.

Orban said it was time to start discussing the economy in more "human" terms. As an example, he said that the current high central bank base rate of 11 per cent means that small businesses can only get credit at rates of around 20 per cent.

"There is no legal activity that could pay that back... it's impossible," said Orban, adding that the same is true of the high taxes that Hungarian firms have to pay.

Fidesz is widely tipped to win the next elections in April 2010, although the governing Hungarian Socialist Party (MSZP) has closed the gap slightly in recent months.

A Tarki poll at the end of November showed that, of committed voters, 54 per cent would vote Fidesz and 32 per cent for the MSZP.

A Szonda Ipsos poll published on the Monday Orban was speaking ranked him the most popular politician in the country, with a rating of 45 points compared to 30 points for Prime Minister Ferenc Gyurcsany.

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