Commerzbank Says Hungary Budget Plan Shirks ‘Deeper Reform’

Tatha Ghose, an economist at Commerzbank AG in London, comments on Hungarian plans revealed today to reduce public debt to 50 percent of gross domestic product by 2018 and for deficit cuts of 900 billion forint ($4.6 billion) in 2013 and 2014.

Ghose made the comments in an e-mailed note.

“The objective of the plan is to boost trend growth, and make Hungary’s fiscal and debt situation long-term sustainable. While neither of these objectives were met to any great extent, some of the announced measures target micro inefficiencies which have plagued the Hungarian system for decades. Tackling these would help in the long term. But, the observed headline budget improvements accrue from continuing crisis taxes and pension changes, not from deeper reform.

“Our conclusion is that many of the micro changes being introduced, on medical benefits, drug law, disability pension, withdrawal of transport subsidy, are long overdue reforms, which are all positive.

“However, the major medium-term headline improvements claimed by the plan are being achieved by the easier route of retaining the crisis taxes, and cutting transfers to the private pension system.”

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net.

To contact the editors responsible for this story: Willy Morris at wmorris@bloomberg.net.

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