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Have the IMF talks broken down?

October 29th, 2012

A conservative columnist comments on rumours about the breakdown of IMF talks. The government is right to resist IMF pressure to cut wages and pensions, he suggests. But he is at a loss to explain why the government has launched an insulting media campaign against the IMF to coincide with its yearly summit.

According to a report on Origo.hu, the IMF has expressed serious concern about the Hungarian government’s media campaign, which presents itself as resisting austerity measures demanded by the IMF. Origo writes that the IMF will not continue the credit line talks until a U-turn takes place in Hungary’s economic policy. Mihály Varga, the cabinet minister in charge of the talks, denied that the negotiations had broken down, but admitted that the Hungarian government and the IMF could not so far reach agreement on several points. On Saturday, the IMF issued a short press release, in which it was stated that the latest tax reforms (see BudaPost October 19) announced by the government are not in line with the IMF’s recommendations, and that there has been no date set for the next round of talks.

The IMF has been offended, Mihály Szalontai comments in Magyar Hírlap. Szalontay points out that the Hungarian government tries to meet all the IMF expectations, but rather than reducing wages and pensions, it prefers to increase the taxes on banks, energy suppliers and telecom companies in order to avoid a further decline in demand, which would lead to even slower economic growth. This is reasonable, he writes, but finds it puzzling that the government started the media campaign against the IMF right at the time of the Tokyo IMF summit. Szalontay considers it understandable that the government wants to strengthen its popularity among Hungarians by sending the message that it opposes any austerity proposals, but adds that the timing of such a provocative and insulting campaign is highly unreasonable.

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