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Hungary fights for control of its €9.5bn private pension system

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  • Hungary fights for control of its €9.5bn private pension system

HUNGARY - Hungary's World Bank-style three-pillar pension system is an international imposition, according to the prime minister's top economics adviser, who said the country should be free to account for and structure its pension system as it sees fit.

Mihaly Varga, who was the prime minister's representative at ill-fated negotiations with the International Monetary Fund and the European Union last month, said the deeply indebted country was being held to a dual standard by international lenders, that were demanding a tougher standard than countries yet to carry out a pension reform.

"My firm opinion is that the European Union cannot prevent us from deciding as we see fit on the question of private pension funds," he told Hir TV, a news channel.

Varga argued that, since the EU had "forced" the country to introduce a funded pension system, diverting some HUF300-400bn (€1-1.4bn) a year away from the state pillar in order to do so, Hungary should be allowed to run a larger budget deficit to compensate for the resulting budgetary shortfall.

"It would be fair on the part of the EU to allow us to offset that deficit," he said.

Varga's remarks suggest an earlier budget-balancing plan - to nationalise the country's HUF2,700bn in pension assets - is back on the agenda.

The conservative-populist government is under pressure from the lenders that bailed the country out at the height of the credit crunch 18 months ago to meet an agreed budget deficit target of 3.8% for this year and 3% the next.

But the Fidesz party, which won a landslide election victory in the spring after promising to cut taxes and maintain social spending, is reluctant to embrace a fourth successive year of austerity, and has been seeking alternative sources of finance after its requests to run a laxer fiscal policy for this year were rebuffed by Jose Manuel Barroso, the European Commission president.

Last month, it clashed with the EU and the IMF over a plan to raise some HUF400bn from a windfall tax on banks.

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