BRUSSELS (MNI) – Officials from the European Commission and the
International Monetary Fund will travel to Budapest on July 17 to begin
talks with the Hungarian government about a precautionary aid programme,
a spokesman for the Commission said on Friday.
The announcement follows the adoption by the Hungarian parliament
Friday of changes to a law that EU and IMF officials had criticized for
undermining the independence of the country’s central bank, an issue
which has held up consideration of Budapest’s request for a
precautionary credit line, made last November.
Hungarian Prime Minister Victor Orban last year introduced a number
of sweeping constitutional reforms including a law affecting the central
bank’s handling of foreign-currency reserves, the powers of its
rate-setting monetary council, as well as a rule concerning the
dismissal of council members and the central bank governor. The
amendments passed by the Hungarian parliament today undo those changes.
Earlier this year, Hungary, an EU member state that does not use
the euro currency, also ran into trouble with its EU partners for its
fiscal deficit. The European Commission said that although the country
had technically met its target for 2011, the measures used were
“unsustainable.”
EU finance ministers agreed as punishment to withhold future EU
development aid for Budapest worth an estimated E495.2 million,
equivalent to 0.5% of the country’s GDP, but they withdrew that decision
last month after the government announced new measures.
Hungary is looking for a precautionary credit line to help it cope
with surging borrowing costs and a plummeting currency just one year
after leaving a previous E20 billion programme with the EU, IMF and
World Bank.
Investors have been shunning the country because of its use of
unorthodox economic policies including special taxes on the finance,
energy and telecommunications sectors, and a nationalization of pension
fund assets.
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