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Hungary sees no solitary veto of new Brexit delay - PM aide

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By Krisztina Than and Gergely Szakacs

BUDAPEST (Reuters) – Hungary on its own will not veto a new delay to Britain’s departure from the European Union, a top minister said on Monday, adding that a disorderly Brexit would dent Hungary’s strong economic growth.

With less than seven weeks until Britain is due to leave the EU, British Prime Minister Boris Johnson has yet to agree with Brussels on how to manage the separation between the world’s fifth-largest economy and its biggest trading partner.

Johnson has pledged to leave the 27-member bloc with or without a deal on Oct. 31, even though British lawmakers have passed a law which would force him to request a delay beyond that date if he is unable to reach a deal.

Gergely Gulyas, Prime Minister Viktor Orban’s chief of staff, told Reuters there was no Hungarian government decision that would veto a Brexit delay: “No decision has been made in this respect.”

“The Prime Minister, similarly to the prime ministers of the 26 other countries, is free to decide on what he will do in case there is a fresh (Brexit) delay but it can be excluded that Hungary would make a move alone,” Gulyas said in an interview.

Gulyas said a no-deal Brexit would be harmful to Hungary’s economy, although the impact would be less severe than in some other member states. He said he was hopeful that a no-deal Brexit would reduce Hungary’s growth by less than 0.5%.

However, Gulyas, who is one of Orban’s closest aides, said that in its present form Hungary would veto the EU’s next budget as it was unacceptable that political aspects would count when it came to the distribution of funds.

Orban, a nationalist with a strongly anti-immigrant platform, has frequently clashed with Brussels over migration and democratic rights.

Brussels is considering making access to EU budget funds from 2021 conditional on respecting democratic principles. Hungary and most other ex-communist EU members receive large sums from the budget for infrastructure and other projects.

“What we reject is that it is not the standard of living and the (fiscal) performance that would matter,” Gulyas said. “In this (present) form Hungary would definitely veto it.”

He added that Hungary was ready to accept a potential additional payment into the EU’s budget after Britain leaves, or if Brussels decides not to make up for the loss caused by Brexit Hungary could also accept a proportionate cutback in funds.

GROWTHBOOSTERNEEDED

Orban’s economic policy has focused on maintaining an economic growth rate exceeding the EU’s average by 2 percentage points.

Hungary’s economy expanded by an annual 4.9% in the second quarter, but it is expected to decelerate as growth in its main trading partner, Germany, slows.

Gulyas said if the external environment in the EU turns unfavourable in the longer run, stronger economic incentives were needed to boost the Hungarian economy.

He said while Hungary would stick to its deficit target of 1% of economic output next year, the budget still had ample buffers worth about 500 billion forints (£1.33 billion) that could be used for boosting the economy.

He said the government also postponed some big state construction projects to 2021 from 2020 to upkeep a strong output in the sector.

The current weaker forint exchange rate could help exports too, Gulyas added.

The forint eased to an all-time low of 333.46 to the euro earlier this month and traded at 332.1 on Monday, weakening about 3.3% this year and underperforming other Central European currencies.

Gulyas said the government had no exchange rate target but the current exchange rate “posed no threat to the success of Hungarian economic policy.”

He said that with households’ foreign currency mortgages converted into forints and Hungary’s foreign currency debt reduced sharply, the exchange rate had no decisive impact on the budget and economy.

“For the time being, the exchange rate move is not causing inflation pressure that would pose a threat to the success of Hungarian economic policy or would erode the significant wage rises,” he said.

(Reporting by Krisztina Than and Gergely Szakacs, Editing by William Maclean)

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