Hungarian President asks Socialists to form govt

BUDAPEST, May 16 (Reuters) Hungarian President Laszlo Solyom today asked Ferenc Gyurcsany, whose Socialist party and liberal allies were re-elected in April, to form the new government.

Solyom made the request at the new parliament's first session after elections in which the Socialists and its partner, the Alliance of Free Democrats, boosted their majority by 12 seats to 210 places in the 386-member parliament.

''I want to lead the government of reforms,'' said Gyurcsany, whose party became the first to win two consecutive terms in office since communism's collapse in 1989.

Gyurcsany, who is prime minister-elect until his government officially takes office on June 14, said he expected to present the government's programme in two weeks. He has pledged reforms to tackle Hungary's bloated budget deficit.

Hungary's budget deficit is the biggest in the 25-member European Union relative to size of the economy at 6.1 per cent of gross domestic product. The deficit must be cut to 3 per cent for Hungary to join the euro and avoid a potential financial crisis.

Government sources have said that budget cuts worth 300 billion to 350 billion forints were needed to put this year's budget back on track and the government was considering measures to increase taxes and cut spending.

Still in talks, the coalition parties have not disclosed full details of their programme, but Gyurcsany today pledged sweeping changes to streamline public administration and to reform healthcare and the welfare system.

He also reaffirmed Hungary's commitment to meet the European Union's Maastricht criteria by 2008 in order to introduce the euro in 2010. Economists expect Hungary to adopt the euro much later after budget deficit overshoots in the past four years.

REUTERS SY PM0016