Hungary redoubles austerity efforts

(BUDAPEST) - Hungary's government announced new austerity measures on Wednesday, almost doubling a package of savings announced only two weeks ago which the European Union found to be insufficient.

"Even though we disagree with this hypothesis (of the European Union), we have decided on additional measures," Economy Minister Gyorgy Matolcsy said.

On October 4 Matolcsy unveiled planned savings of 397 billion forints (1.4 billion euros, $1.9 billion) aimed at cutting the budget deficit to 2.7 percent of output in 2013.

Brussels, however, thinks that "these measures are not enough and that the deficit will reach between 3.7 percent and 3.9 percent of gross domestic product (GDP)," Matolcsy said.

He said that EU experts thought that a third of the savings announced were unlikely to be achieved. The upper limit for budget deficits for members of the EU is three percent of GDP.

The new package is worth an additional 367 billion forints.

Measures include doubling a financial transactions tax and keeping in place a bank levy due to have been halved next year. The government also plans to tax foreign-owned underground gas, water and power lines.

Matolcsy also trimmed the government's forecast for growth next year to 0.9 percent from 1.0 percent previously.

In April, Brussels froze 495 million euros in EU funding to Hungary because of worries about its public finances, but later unlocked the funds after Hungary convinced EU authorities that it would bring its deficit down.

Hungary is currently in recession and in talks about a stand-by credit line worth about 15 billion euros from the International Monetary Fund and the EU.