Monday, March 30, 2009

Hungary faces ‘painful crisis management’

From the financial times:

Hungary faces ‘painful crisis management’

By Thomas Escritt in Budapest

Published: March 30 2009 16:33 | Last updated: March 30 2009 16:33

Gordon Bajnai, the Hungarian economics minister who is set to become prime minister next week, promised a period of ”painful” crisis management at a press conference on Monday, as the country’s finance minister suggested the new leader may get less than a year to do his job.

Mr Bajnai said: ”It will be painful. Crisis management will demand sacrifices from every Hungarian family.” He is expected to announce spending cuts, which could include dramatic cutbacks to Hungary’s generous social safety net.

Mr Bajnai, a political independent who is a close ally of Ferenc Gyurcsany, the outgoing prime minister, was the fifth and final candidate floated after a week of increasingly chaotic and leak-strewn negotiations between the governing Socialist party and their liberal Free Democrat allies following the deeply unpopular prime minister’s announcement last week that he would stand aside.

Hungary, which turned to the International Monetary Fund for a €20bn bail-out last autumn, is sliding into a deep recession even as a heavy burden of public and private sector debt limits the country’s ability to spend its way through the downturn. The export-dependent economy is forecast to shrink by 4 per cent this year, while the debt burden remains large, despite Mr Gyurcsany’s achievement in shrinking the budget deficit from 9 per cent to 3 per cent over the past three years. The unemployment rate, currently at 9 per cent, is rising.

Parliament will vote on Mr Bajnai’s appointment on 14 April. Janos Veres, the finance minister, said he was confident the Socialists and Free Democrats could muster the majority needed to appoint him. ”This government must last long enough to prepare and pass in parliament a budget for 2010,” he told the Financial Times. Hungary passes its budget in December, while elections must be held by spring 2010 at the latest.

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