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Hungary Budget Steps Threaten Deficit Goal, Fiscal Council Says

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July 2 (Bloomberg) -- Hungary’s proposed amendments to the 2012 budget “significantly raise” the risk of the government overshooting its budget-deficit target, the Fiscal Council said.

The changes widen the 2012 shortfall as calculated under European Union methodology, the Council in charge of overseeing budget planning an execution said in an opinion posted on parliament’s website.

Economy Minister Gyorgy Matolcsy proposed raising revenue and spending this year by 145 billion forint ($641 million) each, keeping the deficit unchanged at 2.5 percent of gross domestic product, according to a draft posted on Parliament’s website. The government raised this year’s sales-tax income projection and target for revenue from state assets to cover higher spending including on EU development and the buyout of public-private partnership projects.

Hungary pledged to keep its shortfall below the EU limit of 3 percent of GDP this year to end an excessive-deficit procedure it has been under since joining the block in 2004. The Cabinet is seeking to revive bailout negotiations with the International Monetary Fund and the EU, frozen for seven months, as the economy is forecast to slip into recession.

The changes would “somewhat” boost Hungary’s debt level, which the government may mitigate by using forint and foreign-currency deposits, the Council said. Public debt fell to 79 percent of gross domestic product in the first quarter from 80.8 percent in the final three months of 2011, the central bank said on its website today.

To contact the reporter on this story: Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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