Hungary, which is relying on international aid to cope with the global financial crisis, should work to adopt the euro as soon as possible, said Mihaly Varga, a deputy chairman of the largest opposition party Fidesz.
“The euro is needed, it’s important,” Varga told a conference in Budapest today. “The goal is to have the earliest possible date that’s also realistic.”
Hungary was the first European Union member to obtain an International Monetary Fund-led bailout last year to avert a default. The forint fell to a record low against the euro in March and has since strengthened as the government cut spending and investor confidence increased in the country. Hungary has no euro adoption target date.
Fidesz leads all opinion polls ahead of next year’s parliamentary elections. Varga was a finance minister during the party’s term in office, which was 1998 to 2002.
The forint traded at 270.67 per euro at 12:29 a.m. in Budapest from 271.28 late yesterday. The currency fell to a record of 317.22 on March 6.
The forint may remain in the 260 to 270 range in the first half of next year and is unlikely to be “much stronger,” Varga said. He added the “really strong” forint of about 230 per euro in August 2008 was now “off the agenda.”
“A stronger level wouldn’t be bad” for entering the exchange-rate mechanism, in which countries fix their currency to the euro for two years before the switchover, Varga said. The market would ultimately decide the exchange rate appropriate for the economy, he added.
The country’s budget shortfall rising “temporarily” could be justified if the additional funds were used to create jobs during the country’s recession, Varga said.
Prime Minister Gordon Bajnai, who leads a crisis-management government backed by the Socialist Party, pledged to meet IMF- approved deficit targets of 3.9 percent of gross domestic product this year and 3.8 percent next year. The government argues that overshooting the target threatens to jeopardize investor confidence.