Hungary blames economic problems on eurozone

(BUDAPEST) - Hungary defended Monday its economic policies as successful and that the country was forced to turn to international lenders due to the eurozone's problems.

"The economic policy is undoubtedly successful thanks to the unorthodox, non-traditional but daring and unusual steps which restored the economy of the country," Economy Minister Gyorgy Matolcsy said in parliament.

He cited having decreased the budget deficit to under three percent of gross domestic product (GDP) for the first time since 2004 and bringing the rate of unemployment to under 10 percent.

Matolcsy attributed the risks surrounding Hungary's economy to the eurozone debt crisis.

"That is why we need the protective shield of the IMF," he said.

In a major policy U-turn, Hungary last week said it was turning to the International Monetary Fund and the European Union for a precautionary assistance programme.

Many analysts saw the policy reversal as a reaction to the growing threat that Hungary would have its debt rating downgraded to junk bond status, and also blame the country's problems on the economic policies pursued by Prime Minister Viktor Orban's centre-right government, which has made investors wary.

A downgrade to non-investment level would send Hungary's borrowing costs up further.

Hungary has struggled in recent weeks to raise funds with several flopped bond auctions, with the price of insurance against bond defaults hiked to levels unseen since March 2009 and its currency hitting record lows.

The forint fell to 306.61 against the euro and 247.96 against the Swiss franc following the minister's speech.

Official figures recently showed that the total debt of Eastern Europe's most indebted nation had risen to 82 percent of Gross Domestic Product by September from 75 percent at the end of June, which the authorities blamed on a weakening forint.

Although the government expected to run a surplus of over 2 percent of GDP in 2011, this is thanks to 11-billion-euro worth of effectively nationalised private pension assets.

For 2012, the European Commission expects a deficit of 2.8 percent of GDP and a return to above the three-percent mark by 2013 when the pension fund assets run out.

Analysts expect the jobless rate to be around 11 percent in 2011.