October 29, 2012 / 11:20 AM / 8 years ago

"Life would go on" without IMF deal, Hungary says

BUDAPEST (Reuters) - Hungary appeared to cast doubt on Monday on prospects for an International Monetary Fund/European Union funding pact, with Budapest’s negotiator saying “life would go on” even without a deal.

Mihaly Varga, Hungary’s minister in charge of the negotiations, also played down what an IMF/EU deal would do to attract investors.

The remarks came after the IMF’s local representative said the latest fiscal measures taken by the government to reduce the budget deficit ran counter to its recommendations.

“Obviously, life would go on that way too,” Varga told public radio in an interview when asked whether it would be a disaster if Hungary failed to secure an agreement with the IMF and the European Union after months of stop-start talks.

“I would still find it good if we could agree because there would be a minimal, several tenths of a percent, impact of such a deal that could help foreign investors buying government papers feel safer,” he said.

The volatile forint added to its morning losses after Varga’s remarks, falling to three-week lows of 284.80 per euro.

Central Europe’s most indebted nation requested IMF/EU help to stabilize its economy and rein in borrowing costs nearly a year ago, when its debt rating was slashed to “junk” due to a weak growth outlook and unpredictable economic policies.

Varga said there were differences in views between the two sides that made an agreement difficult.

“We are working to try and bring our views closer, and have the IMF accept or make them understand why the Hungarian government makes certain decisions,” Varga said.

Earlier this month Prime Minister Viktor Orban’s government announced 764 billion Hungarian forints ($3.50 billion) worth of deficit cuts for next year, mainly geared towards tax increases, to keep the budget deficit below the EU’s 3 percent of output level.

But some of the measures applied, such as reneging on a pledge to halve Europe’s highest bank tax or doubling a planned new tax on financial transactions, went against the proposals of the IMF and the EU after a first leg of talks in July.

Reporting by Gergely Szakacs and Sandor Peto; editing by Jeremy Gaunt

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