Hungary won't join 'Euro Pact' to keep its lower taxes

(BUDAPEST) - Hungary will not join a planned eurozone pact to coordinate economic policy, as this would require harmonising the country's tax regime, Prime Minister Viktor Orban announced here Tuesday.

"For the time being, Hungary will not join the Competitiveness Pact of the eurozone," he told a press conference.

The prime minister, whose centre-right Fidesz party has a two-thirds majority in parliament, said the decision was taken in "complete national unity," in order to retain Hungary's independence on tax policies.

The eurozone's 17 members reached a preliminary agreement earlier this month on a so-called "Euro Pact" to coordinate economic policy, which was to be endorsed by all 27 EU members at a March 24-25 summit.

In return for strengthening debt rescue funds, the pact -- drawn up under pressure from Germany and France -- foresees greater budgetary discipline and economic policy convergence in order to ensure that countries rein in national debt.

Countries that are not part of the eurozone may also join the pact.

Last April, Orban's party won a landslide election victory on promises of growth by lowering personal and corporate income taxes.

"The goal of the pact is not to have competition in the field of taxes. However, an economically weaker country can hardly refrain from (offering lower taxes)," Hungary's Foreign Minister Janos Martonyi explained last Friday.