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Hungary minister: Country's crisis is over

From Richard Quest, CNN
June 9, 2012 -- Updated 1756 GMT (0156 HKT)
  • Hungary has emerged from crisis, its finance minister says
  • Gyorgy Matolcsy says Hungary has had to use unconventional economic policy measures
  • Matolcsy: These measures have been lambasted but they are the future
  • Matolcsy: EU badly needs some creativity

(CNN) -- Hungary -- whose economy is shrinking amid political wrangling -- has been vindicated for its use of "unconventional" policies and has emerged from crisis, its finance minister says.

Gyorgy Matolcsy has overseen an economy that contracted 1.3% in the first quarter of this year, the worst performance in the European Union. However, it is expected to meet its 2012 budget deficit target of 2.5% of GDP, and Matolcsy said the country's "crisis is over."

Matolcsy said the country had to implement a series of "unconventional economic policy measures" to bring down the deficit, including one-off levies and the effective nationalization of private pensions.

The EU has lambasted the measures as unsustainable, but Matolcsy said such moves are "the future." The country was "forced to be innovative and creative," he added.

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The EU froze €495 million of development funds for 2013 in response to the policies, but last month proposed lifting these sanctions as it felt the country was taking the right action to tackle its deficit. A meeting of EU finance ministers is expected to make a final decision later this month.

Matolcsy said the moves may have been unusual, but had led to "growth, jobs and creativity." The EU "badly needed" some creativity, he said.

Friction remains between the Hungarian government and its lenders, the EU and International Monetary Fund, over additional funds. The main sticking point is a law passed last year that the EU, European Central Bank and International Monetary Fund believe jeopardizes the independence of Hungary's central bank, the Magyar Nemzeti Bank.

The law paved the way to an increase in council members and deputy governors, along with a new president who would have authority over the bank's governor. The plans raised concerns the bank's independent decision-making process could be undermined.

The Hungarian parliament delayed a vote on amendments to the law this week after the ECB indicated that the changes had not gone far enough.

Despite the pushback, Matolcsy is confident on Hungary's future. "The whole central European region will be the next hub for the global business community", he said. "It will be a region between Europe and Asia, between the States and the EU."

He added: "It is the next emerging region and you can find Hungary at its heart."

CNN's Anna Stewart contributed to this report.

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