New Hungarian government wants a pact with IMF and reduce rates

BUDAPEST (Reuters) – The new Hungarian government will not accept orders from the IMF or the European Union when it renegotiated an agreement with creditors, while seeking support for cutting taxes and implementing a debt reduction plan, said on Monday elected prime minister.

Viktor Orban, whose center-right Fidesz party won a two-thirds parliamentary majority in Sunday”s election, also criticized the PSZAF financial regulator and central bank saying there was doubt whether the institutions did their job properly.

Orban and the central bank already discussed in the first days after the elections, confirming investors” concerns about possible tensions between the new Government and President of the institution Andras Simor, who was named in 2007 for a term of six years.

Hungarian currency, the forint, and government bonds have risen since the first round on April 11 driven by the prospect of a strong government of Fidesz, and hopes of further reductions in interest rates by the central bank (NBH, by its original acronym).

The bank reduced its key rate by 25 basis points to a historic low of 5.25 percent on Monday and analysts said they were shuffled deeper relief if the new Government seeks a tougher fiscal policy and launch reforms.

Orban said his government will seek to partner with the International Monetary Fund (IMF) and the European Union, with whom he has a financial agreement that expires in October, and ensure their support for Fidesz plans to boost the economy.

Orban again attacked a larger budget deficit for this year.

“In my view, neither the IMF nor the financial institutions of the EU are our leaders . We are not subordinate to them, “Orban told a news conference.

” We agree with the IMF on the contents of a package that will take effect this year, but (…) not accept dictates but will present our own views and then try to enlist the support of financial markets, financial institutions of the EU and the World Bank and IMF representatives, “he said.

CONTROf16LLING THE DEFICIT

Orban said that the budget deficit would exceed the target of 3.8 percent of GDP this year due to the legacy of the outgoing Socialist government.

The elected prime minister added that his government would seek an agreement with lenders on measures to contain the deficit while reducing taxes significantly to boost the ailing economy.

Analyst 2010 deficit forecast at 4.9 percent.

Hungary was rescued from collapse in 2008 by an IMF-led loan and the agreement expires in October. The biggest economic strategist Fidesz, Gyorgy Matolcsy, told Reuters last month that the party wanted a new agreement with lenders to use as a backup.

Investors want to see clear plans of the new soon Government on how to reduce taxes in the coming years and also to maintain the fiscal stability of hard-won, reducing the Hungarian public debt, which currently borders on 80 percent of GDP.

(Additional reporting Sandor Peto and Marton Dunai, editing by Marion Giraldo Spanish)