Key comments from IMF Mission chief on Hungary

Following are key comments from an interview which the International Monetary Fund's mission chief Christoph Rosenberg gave to Reuters on Saturday.

2010 BUDGET

"There is a small residual fiscal gap for this year that needs to be addressed ... That residual should really be the opportunity to start implementing the kind of durable measures that will be needed to get to next year's fiscal target. We had 0.3 percent of GDP (as residual gap for 2010)."

2011 BUDGET

"The under 3 percent target has its origins in three ways. First of all it was in the IMF agreement. The second is that it's in Hungary's own fiscal responsibility law and third ... it is a commitment that Hungary has made under the EU's Excessive Deficit Procedure (EDP). But beyond the formalities it is a target that makes eminent economic sense because Hungary is an emerging market country with a very high level of public debt."

"I think the authorities are well advised to stick to that target (2011) ... An important issue is not only achieving a target but how it can be achieved. And what we find important is that ... one uses durable non-distortive measures because they in the long run will achieve this kind of adjustment and help Hungary."

"By definition when we come next time, unless we come next week, the government will have made more progress on the 2011 budget and that will be a very important budget (how it is contructed, what measures it relies on)."

PLANNED TAX ON FINANCIAL SECTOR

"The bank tax is ... not a very good measure, not because it hits the banks but because it is bad for the economy.

"It undermines the banks' lending capacity and the banks' lending willingness, it depletes their capital and because of that it has an effect on economic growth and may also induce banks to withdraw funds and by that effects financial stability."

"The big picture is 2011 ... there is a lot of economic adjustment necessary and that should not be achieved through a short-term distortive measure like the bank levy."

To the question: do you mean that the bank tax should not be in place next year or could be in place but to a much smaller extent? "I think that's probably the way to put it, the latter."