Hungarian PM pledges big reform after election

Prime Minister Ferenc Gyurscany yesterday vowed to launch Hungary's biggest reforms since the fall of communism following his Socialist-led coalition's resounding victory in a general election.

He promised to reduce Hungary's huge budget deficit but gave no details of how or when he would do so, despite pressure from business leaders, the European Union and Hungary's central bank to act fast to avert a financial crisis.

The Socialists and the Alliance of Free Democrats increased their parliamentary majority in Sunday's election, giving them more clout to carry out the painful spending cuts they avoided in their first four-year term.

"The first 100 days (of the second term) will be more than 100 steps. It will be the most intensive reform period since the change of regime," Mr Gyurcsany told a news conference, referring to the collapse of four decades of communist rule in 1989. He appeared to be referring to pledges he made in the election campaign to shake up the inefficient state administration and to reform healthcare, education and pensions.

Mr Gyurcsany said he would start talks with his coalition allies on Thursday and that a new government would be in place by mid-June. Some economists expect some short-term measures to reassure markets which rallied on news of the election outcome.

In the past four years, the government has spent its way to the biggest budget deficit in the EU relative to the size of the economy - 6.1 per cent of gross domestic product.

Mr Gyurcsany reiterated he would cut the deficit to three per cent of GDP by 2008, the level required to adopt the euro.

However, that looks virtually impossible as economists forecast the gap will spiral to eight per cent of GDP this year.

Central Bank Governor Zsigmond Jarai said the government should seek help from the International Monetary Fund to tackle the budget problems, adding: "As I see it, without external help, it's difficult (for the government)."

Others echoed the call for urgent action in a country which led the way in economic reform after the collapse of communism, but has recently seen its fortunes wane.