Hungary says it meets EU deficit limit in 2008

(BUDAPEST) - Hungary, struggling in the global slump, met the public deficit limit required to join the eurozone last year and expects to do so again in 2009, Finance Minister Janos Veres said on Wednesday.

"In 2008, Hungary complied with the Maastrict requirement on the public deficit," Janos Veres said after a cabinet meeting.

"Last year, Hungary's public deficit was 3.4 percent (of gross domestic product), but stripping out the costs of Hungary's pension reform, the public deficit is 2.8 percent (of GDP), under the three percent target," he said.

"We have every chance to keep the deficit under three percent in 2009 as well," Veres added.

Hungary cut its deficit from a massive 9.3 percent of GDP in 2006, then the highest in the European Union, to 3.4 percent in 2008, which Veres called "a record rate" of progress.

As part of the conditions of a 20-billion-euro International Monetary Fund-led bailout in November, Hungary pledged to keep its public deficit under three percent of GDP in 2009, a goal that analysts consider increasingly difficult in the face of a deepening recession.

International ratings firm Standard and Poor's and Moody's both downgraded Hungary's ratings this week, citing the pressure being put on its public finances by the economic crisis.

"On the basis of available data, the recession is likely to be deeper than expected," Veres said, noting growing problems in Germany, a key trade partner and the biggest European economy, and a darkening outlook overall.

As the economy slows, goverments tend to spend more in an effort to boost demand while tax revenue falls as jobs are lost, resulting in wider budget deficits.

For the EU, keeping the public deficit below three percent of GDP is a key requirement among others for eurozone entry.