Hungary to respond to IMF/EU by mid-week: minister

BUDAPEST Sun Sep 16, 2012 4:30pm EDT

Hungarian Prime Minister Viktor Orban attends a news conference in Budapest, July 25, 2012. REUTERS/Bernadett Szabo

Hungarian Prime Minister Viktor Orban attends a news conference in Budapest, July 25, 2012.

Credit: Reuters/Bernadett Szabo

BUDAPEST (Reuters) - Hungary will send its proposals to international lenders by the middle of next week to allow credit talks to resume but will not modify its economic projections for 2013, the minister in charge of talks with the IMF and EU said on Sunday.

The country, after months of delays, started talks about a financing backstop in July with the International Monetary Fund and the European Union. It has successfully kept investors on side this year with the promise of a deal.

Analysts expect drawn-out and tough talks in the autumn after Prime Minister Viktor Orban earlier this month rejected what he said were the IMF's tough conditions and said the government would work out its own "alternative" position for the negotiations.

Mihaly Varga, the minister who leads the Hungarian negotiating team, told national news agency MTI on Sunday that this proposal would be finalized and sent to lenders by the middle of the week.

"With this letter we want to signal that the Hungarian government is ready to continue talks," he said.

Varga did not wish to comment on concrete details of the proposal but he said there was no need to modify the government's economic forecasts for next year. The government predicts 1.6 percent growth, exceeding analysts' projections.

When the IMF/EU delegation left Budapest in July, the IMF mission chief said Hungary would have to take extra steps to meet its budget target next year and that the economy would contract this year, resuming only modest growth in 2013.

According to media reports the European Commission believes Hungary's 2013 budget deficit could be almost double the targeted 2.2 percent of economic output.

"We maintain the macroeconomic path laid out in the 2013 budget," Varga said. He added that the government was determined to keep the budget deficit below 3 percent of economic output next year, after a targeted 2.5 percent deficit this year.

Varga said the government's proposals would take note of the forecasts which the IMF made concerning financial stability and creating the basis for faster growth, but that they differed from the IMF's concrete recommendations.

He also reiterated that Hungary aimed to sign a precautionary credit agreement with lenders.

Varga said economic data in the second half of the year could be indicative of Hungary's prospects for 2013 and 2014.

(Reporting by Krisztina Than)

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