September 6, 2012 / 7:37 AM / 7 years ago

IMF seeks tough Hungary spending cuts for aid: report

BUDAPEST (Reuters) - The International Monetary Fund is seeking cuts in Hungary’s pensions, family benefits and an increase in personal income tax in return for a financing deal, the daily Magyar Nemzet reported on Thursday without revealing its sources.

The demands would collide head-on with the economic policies advanced by Prime Minister Viktor Orban, who has stabilized the budget with unconventional measures such as Europe’s highest bank tax, which the newspaper also said the IMF wants scrapped.

The paper said lawmakers of Orban’s ruling Fidesz party were informed about the loan conditions during a three-day party meeting, which ends on Friday.

A spokeswoman for Mihaly Varga, the minister in charge of Hungary’s talks with the IMF/EU, had no immediate comment on the report.

The IMF’s representative in Hungary, Iryna Ivaschenko, was not immediately available for comment.

Orban told reporters on Wednesday that he was hoping for an agreement with the IMF and the EU on a multi-billion euro backstop in the autumn despite the differences in views.

After an initial round of talks in July, negotiations with the IMF and the European Union could resume in the next few weeks but the government first needs to respond to lenders’ proposals.

Central Europe’s most indebted nation needs a financial safety net to cut its high borrowing costs and shield its markets from the debt turmoil in the neighboring euro zone.

Without naming its source, the conservative newspaper said the IMF also sought an increase in the retirement age, privatizations, cuts in public transport subsidies and bureaucracy, as well as a new value-based real estate tax.

In another potential hurdle to the aid talks, news website Bruxinfo reported on Wednesday that the European Commission was preparing a legal challenge against Hungary’s financial transaction tax, a revenue mainstay of the 2013 budget.

The controversial new tax, part of which is levied on central bank operations, would help finance an economic stimulus program to save jobs as Hungary’s economy is mired in its second recession in four years.

Reporting by Gergely Szakacs; Editing by Susan Fenton

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