Hungary sets new taxes to address deficit target

By VERONIKA GULYAS

BUDAPEST—Hungarian Prime Minister Viktor Orbán said the country will rely on temporary new taxes on telecommunications and energy companies and supermarkets as the government struggles to meet budget-deficit targets required by the European Union.

In a speech Wednesday, Mr. Orbán, who has pledged not to implement further austerity measures in his recession-hit country, outlined his administration's plans to shrink the budget gap enough to win the confidence of skeptical financial markets.

Investor willingness to fund Hungary's debts is critical because Mr. Orbán has said he won't seek a new loan package from the International Monetary Fund, which would have provided a safety net for the country's finances.

Details of the government budget are expected to be released Monday. But Mr. Orbán said levies on telecoms, energy and supermarket businesses would raise 161 billion forint, or about $818 million, annually through 2012. He said the taxes would be calculated based on companies' 2009 results.

The IMF and the European Union walked away from loan talks with Hungary in July in part because they worried Mr. Orbán's government was relying too much on temporary measures, including a large temporary tax on banks, to meet its budget targets instead of making longer-lasting changes to state spending programs.

As it moves to hold this year's budget deficit to 3.8% of gross domestic product and next year's gap to 3% of GDP, the government will also suspend government payments into private pension funds from November until the end of next year, Mr. Orbán said.

The details of the pension measure weren't immediately clear. It wasn't expected to affect pension payments, but is aimed at temporarily reducing the deficit-widening impact of a revamp of the country's pension system.

Hungary and other countries that are shifting to privatized pension funds have asked the EU to change the rules for how the costs of the revamp are accounted for in their budgets. The EU hasn't responded yet.