(Repeats story published late on Monday)
By Krisztina Than and Jana Mlcochova
BUDAPEST/PRAGUE, Feb 16 (Reuters) - Hungary and the Czech
Republic announced new stimulus measures to fight the economic
crisis on Monday while nearby Romania said it would soon decide
if it needed an International Monetary Fund rescue.
A collapse in western European demand for cars, flat-screen
TVs and other goods has kicked the legs from under ex-communist
Central Europe's export-heavy economies and forced governments
to slash growth forecasts and rework budgets.
In a possible indication of worse to come, investors also
extended a six-month selloff of emerging European assets,
driving the Hungarian forint to an all time low against the euro
and the Polish zloty to its lowest rate since EU entry in 2004.
The tax-cuts and budget reshuffling announced by Prague and
Budapest highlighted the dilemma faced by most governments.
They feel a need to raise spending but are either loathe to
blow out budget deficits after years of trying to rein them in
or simply will struggle to find adequate financing for stimulus.
The Czech government agreed to more than double the size of
economic stimulus measures to 73 billion crowns ($3.3 billion)
in revenue and spending or 1.9 percent of gross domestic
product.
Prime Minister Mirek Topolanek said the plan assumed the
economy would shrink by 1 percent or more this year, a darker
scenario than the 0.3 percent retreat forecast by the central
bank or the finance ministry's promise of 1.4 percent growth.
"The main tasks we have set in an effort to eliminate
impacts from an economic crisis include maintaining employment,
and keeping public finances stable," Topolanek said.
In Hungary, Prime Minister Ferenc Gyurcsany unveiled
measures including a rise in the main value-added tax rate to
create room to cut taxes on labour and boost the economy
[].
The steps, which also include some painful cutbacks in tax
exemptions for families and pensions, could allow the country to
aim for euro adoption between 2012 and 2014, he said in an
interview.
"We're going to cut back on state spending in 2009 and the
next two years," Gyurcsany said. "The tax reshuffle will be
neutral for the budget in 2009 and slightly benefit taxpayers."
ROCK, HARD PLACE
Markets in the region continued a fast slide on Monday, with
the Hungarian forint <EURHUF=> falling 2 percent to 303.18 per
euro, after touching an all-time low of 304.75.
The Czech crown <EURCZK=> dropped 1.8 percent to 29.115 per
euro and the Polish zloty <EURPLN=> weakened 3.3 percent to 4.79
per euro, hitting its lowest since 2004 European Union entry.
Analysts said much of the Czech and Hungarian steps were
re-allotting cash from one part of government expenditure to
another, not actual infusions of funds into economies that have
watched their main engines, industrial production, plummet by
double digits since late last year.
Lombard Street Research economist Maya Bhandari said given
that, plus large external financing needs and -- in the case of
Hungary and Poland -- banking sectors tied up by the global
credit crunch, the packages may not aid growth much.
"I don't think it will do the trick," she said.
Topolanek said the budget changes would push the Czech
fiscal gap significantly above 3 percent of GDP -- the ceiling
required for euro zone entry -- but Hungary is handcuffed on the
budget side by a $25.1 billion IMF bailout deal and Gyurcsany
said his deficit would not top that figure.
With richer Western countries flooding international debt
markets with new bond issues to pay for their own giant stimulus
packages, other emerging markets are also finding it hard to
raise debt cheaply.
Romania made clear it was considering a potential IMF
bailout, saying it would make a decision this month.
"In two weeks we will have an answer whether to ask for IMF
help and how," Prime Minister Emil Boc told a financial seminar.
The scarcity of funding in the region could add to the list
of countries needing bailouts that already includes Hungary,
Iceland, Ukraine, Latvia and Serbia, analysts said.
"The financing is the key to all of this... If the costs are
too high then they'll have to depend on the IMF," said Timothy
Ash, Head of CEEMEA research at RBS.
Also on Monday, Poland's central bank warned against joining
the pre-euro ERM-2 mechanism too fast, casting doubt on the
government's 2012 euro adoption target [].
(Writing by Michael Winfrey; editing by Patrick Graham)
