Hungary PM, lenders at odds about prospects of agreement
BUDAPEST (Reuters) - Hungarian Prime Minister Viktor Orban on Saturday struck an optimistic tone that a financing deal with foreign lenders was within reach, at odds with signals from his negotiating partners that the year-old talks were at a stalemate.
Central Europe's most indebted nation signaled a year ago its plan to seek International Monetary Fund and European Union help to stabilize its economy when its debt rating was cut to "junk" due to a weak growth outlook and unpredictable policies.
Hungary wants insurance from the prospective lenders to shield its markets against turmoil in the euro zone and rein in borrowing costs but is not ready to give up its free hand in policy making, which has complicated progress towards a deal.
"Over the past two months we have made enormous strides towards an IMF/EU agreement," Orban, whose government is running a media campaign against any IMF-imposed austerity measures, told the national news agency MTI in an interview.
There is no date for the next round of IMF/EU talks.
Orban, who reneged on a pledge to halve Europe's highest bank levy next year and plans to launch a new tax on financial transactions and public utilities to plug budget holes, abruptly ended another IMF program just after taking power in 2010.
He said after the European Commission unveiled its assessment of Hungary's budget earlier this week, forecasting a deficit below its 3 percent ceiling this year and next, the main obstacles to an agreement were removed.
But the EU Commission has criticized Orban's unconventional tax measures for being "distortionary" and dampening growth over the long run and said there was "considerable uncertainty" over prospects for an IMF/EU financing deal.
The IMF said last week that progress in the talks would require a clear indication from the Hungarian side "that they see the IMF and EEC (European Economic Community) as valuable partners in designing the reform".
Helped by monetary easing measures by United States and euro zone central banks, Hungary has rolled over debt from domestic issuance this year but has not tapped international debt markets.
But it must refinance about $7.2 billion worth of bonds and $5.9 billion of International Monetary Fund repayments next year, with almost half due in the first quarter, according to Reuters calculations based on data from debt agency AKK.
Analysts attach only a 50 percent chance to an agreement.
Earlier this week, Mihaly Varga, Orban's minister in charge of the talks said the government's media campaign has led to a cold snap in relations with the IMF and while reiterating that Budapest wanted a deal, he said talks could not go on forever.
(Reporting by Gergely Szakacs; Editing by Toby Chopra)
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