Hungarian PM proposes freezing real wages

By Sandor Peto

BUDAPEST (Reuters) - Hungarian Prime Minister Ferenc Gyurcsany proposed on Saturday freezing real wages until the middle of next year due to risks posed by the global financial crisis.

"Let's consider that we go along with the current wages from January 1 (2009), maintaining real wages, and there will be a wage hike only from July 1," he told an extraordinary congress of his Socialist Party.

The congress met to discuss the political situation as the Socialists have been ruling in minority since April and seek parliament support for the key tax and budget bills amid the global crisis which is seen cutting economic growth.

The government announced measures on Friday to shore up steep price falls in the country's financial markets, including cuts in state debt issuance and the redrafting of the 2008 and 2009 budgets, aiming at lower than earlier planned deficits.

Gyurcsany said deep cuts in the deficit since 2006 reduced Hungary's vulnerability to the global crisis and the banking system was strong, but further measures were needed to fend off the financial and real economic impacts of the crisis.

"In the past days, an attack hit Hungary (markets)," he said. "In these days we are taking concrete measures, we strengthen Hungary's defense ability with a series of measures."

With Hungary's main export markets in Europe are on the brink of recession, the country must reduce its borrowing needs, Gyurcsany said.

The measures announced earlier this week included postponing cuts in taxes on companies and wages planned for next year.

The wage costs of firms must be kept as low as possible now so as to prevent an unemployment wave, Gyurcsany said.

Earlier this week, the government postponed the start of wage talks with employers and trade unions, saying that it planned to recalculate and cut the underlying 3 percent economic growth assumption in the 2009 draft budget by next week.

(Reporting by Sandor Peto, editing by Mike Peacock)