* Action plan to include steps to improve finances- PM Orban
* Govt plans deep reforms, and also tax cuts-PM spokesman
* Forint firms slightly but markets nervous, eye govt plan
(Adds more comments, detail, background)
By Krisztina Than
BUDAPEST, June 4 (Reuters) - Hungary's new government plans
to take steps to improve public finances and also wants deep
reforms and tax cuts to boost competitiveness after it reveals
the "true" state of the 2010 budget, the prime minister's
spokesman said on Friday.
Hungary's forint <EURHUF=D2> plunged and government bond
yields soared by around 30 basis points on Thursday as investors
financing Budapest's high debt worried about finances under the
new centre-right administration.
Prime Minister Viktor Orban's spokesman said the government
will produce an economic action plan within 72 hours after
releasing its report on the budget, which is expected this
weekend or early next week.
The forint -- whose collapse in 2008 forced Hungary to seek
$25 billion in IMF and EU aid -- recovered slightly on Friday
morning, but markets remained nervous, eyeing details of the
government's plans.
"After the figures reflecting the true state of the economy
(become public), within 72 hours an economic action plan must be
put on the table," Prime Minister Viktor Orban's spokesman Peter
Szijjarto told TV2 television.
"It cannot be about...an adjustment, about patching up (the
economy)...measures aimed at improving the financial situation
must be linked with deep structural changes," Orban told the
same television channel over the phone from Brussels.
He did not give details on the plans.
His spokesman reiterated the budget was in a "much worse"
state than what the previous government put down in the budget
law and "skeletons were continuously falling out of the closet".
The central bank has said the deficit could be 4.5 percent
of GDP or 4.3 percent if the government freezes remaining budget
reserves. Analysts see a deficit of 5 percent <HUDEF1> but some
government officials have pointed to a figure above 7 percent.
NOT OUR FAULT
The European Commission on Thursday urged Hungary to cut its
budget deficit faster, while government officials in Hungary
reiterated the 2010 fiscal gap may reach almost twice the target
agreed with the country's lenders including the EU.
The new centre-right government, which wants to boost
growth, has repeatedly warned in the past few weeks that the
2010 deficit could be much higher than the agreed target of 3.8
percent of GDP, blaming "fiscal skeletons" left by the previous
Socialist administration.
"The leaders of the EU said that the real situation of the
country must be revealed, so we are still ahead of the moment of
truth," Szijjarto told TV2 television on Friday.
He also said EU leaders asked Hungary not to go down the
path which Greece took, which revealed the true figures of its
budget but did not take any countermeasures for months.
The government's action plan would include short-term
measures to improve the balance and at the same time long-term
measures to improve competitiveness, including structural
reforms and tax cuts, Szijjarto said.
It was not clear how that could square with bringing the
deficit under control.
"In the current uneasy global environment, market players do
not simply frown on fiscal loosening but actually bite.
Therefore, it is a logical sequence to first help sustain a
balanced fiscal consolidation path and only carry out major tax
easing afterwards," said Gyorgy Barta, economist at CIB Bank.
(Reporting by Krisztina Than; editing by Patrick Graham)
