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JVSZ demands consensus in euro matters



The Joint Venture Association (JVSZ) came to a COMMON STATEMENT OF THE PRESIDIUM concerning the euro introduction in Hungary. To start with, and considering the economic and social significance of the topic, they believe that above all a free-from-politics, professional and cool judgement from all sides concerned would be required. In addition to the political and social consensus on national level, a permanent coordination process with countries in the region - foremost the "Visegrad Group" would be in place, because the simultaneous acceptance of the euro by these countries would bear a lot of additional advantage - told György Mosonyi, JVSZ President, Világgazdaság.

The Hungarian financial government is firmly convinced, that the country is able to meet budgetary indicators by 2008 in order to introduce the euro in 2010, this would however require, that the forthcoming government accomplishes on hand of broad national consensus, in the period up to 2008 the inescapable state budget reform. It would be a tragic shock for Hungary, if this objective would fall victim of the election campaign.
A late accession to the euro zone could inflict serious foreign exchange damages to the country. At the same time it must be remembered that the set of criteria of the Stability and Growth Pact have lately been widely criticised, although the EU stagnation in the global competition plus the enormous rate of unemployment is due much more to structural problems than to the existence of the EMU.
The current budgetary policy postpones the introduction of the euro, causes additional expenditure and may at the long term lead to financial crisis, hence: sustainability of the budget is a must, and not only for pleasing the EMU.
While accomplishing the convergence programmes the debate about the advantages and disadvantages is becoming timely also for employee as well as employer circles. The foreign exchange stability provides transparency, and boosts economic growth. The largest investors have already extensively converted their accounting to euro, the foreign exchange risk can still not be left out of sight.
Hungarian enterprises are heavily charged with debt in forint terms, at interest rates much exceeding euro interests. The euro would reduce costs as well as risk. The forint is not the solution, but part of the problems.
By the relief of transaction costs and interest risk, as well as the abolishment of the exchange rate risk, Hungary is not only becoming a more attractive investment target, but also gains momentum in the integration process.
A country converting to euro earlier - cf. the Slovakian target: 2009 - may realise relevant advantages earlier, and Hungary could easily slip back to the rear sectors in the region.
The single interest policy in the euro zone results certain asymmetry between emerging countries. The higher inflation rate in CEE coupled with lower euro interests may end up at negative real interest, which would encourage privates as well as enterprises to submerge deeper in debts.
Hungary is a small and open economy, exports generate large imports (energy, components). Competitive advantages of a devaluation are easily eroded by imported inflation.
Pillars of the cohesion process are EU aids for infrastructure investments, which in change require proper state funds. With a strong limit on raising taxes, the state must keep back its consumer spending, and this is another strong argument for thorough reforms of state finances and large redistribution systems (like health services and public service. Largest forint debtor nowadays is the state: a stock of 9200 bn forints worth of government bonds requires a risk premium of 200 bn forints a year. The later the euro is being introduced, this premium is to grow and distract billions from building motorways and renovation of hospitals.


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