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UPDATE 2-Hungary PM sets out stall for 2014 vote

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(Globalpost/GlobalPost)

* To help "everyone" get rid of foreign currency debts -PM

* Will keep budget gap below 3 pct/GDP, despite EU fcast -Orban

* Hungary issued dollar bond earlier this month, first since 2011

* PM Orban draws battle lines with opposition Socialists (Adds more comments, details, background)

By Krisztina Than and Marton Dunai

BUDAPEST, Feb 22 (Reuters) - Hungary's Prime Minister Viktor Orban set out his stall for elections in 2014 on Friday, pledging to get the economy back on track, make Hungary financially independent and help households clear their foreign currency debts.

With a successful dollar bond sale earlier this month, the country's first international issue since 2011, Orban has already demonstrated his ability to secure financing after the International Monetary Fund refused it a credit line after long months of talks.

Hungary has been helped in its battle for financial independence by investors' global hunt for riskier high-yielding assets such as Hungary's junk-rated bonds.

Orban, who has clashed with the European Union over policies that included big windfall taxes on banks and selected business sectors, drew the battle lines with the opposition Socialists, who have been narrowing the gap on his centre-right Fidesz party in opinion polls since the last election in 2010.

"They are figures from the past. We know them well, and we know what they are preparing for ... They would lift the tax on banks and would tax the people instead again," Orban said.

Orban said the recession-hit economy would start picking up this year.

He said Hungary reduced its debt last year and would keep its budget deficit below 3 percent of economic output this year, contrary to EU projections for a rise.

"Our master plan is that we will end the country's external financial dependence. We will end Hungary's energy dependence and we will ... help everyone get rid of their foreign currency debts," said Orban, setting out goals for the next 20 years.

From about 2005, banks aggressively marketed loans to Hungarians in foreign currencies, particularly Swiss francs, which has caused increasing hardship as the forint depreciated.

Orban said the government would take further measures to cut energy costs and help lower-income families this year.

IT'S THE ECONOMY

Though the leftist opposition is still fragmented, Orban needs to make inroads into the 4 million undecided voters - as much as half of the country's electorate - to secure re-election.

One sign that Fidesz is switching into election gear was a government-imposed 10 percent cut in energy prices from January and 20 percent more flagged by 2014.

Measures to boost the economy could involve unconventional monetary policy to boost bank lending after a leadership change at the central bank in March when Orban will pick a new governor to replace Andras Simor, who has maintained his independence from the government.

Independence is likely to be a casualty of Orban's next choice, widely seen to be his Economy Minister Gyorgy Matolcsy, a prospect that has weighed on the forint. Short-term bond yields, however, have plunged to record lows in past weeks as the central bank is pushing ahead with an easing cycle.

WIGGLE ROOM

The government is also hoping that its efforts to cut the budget deficit could prompt the EU to end the excessive budget deficit procedure against the country later this year, after repeated budget overshoots between 2004 and 2010.

This could increase Orban's fiscal wiggle room ahead of elections.

Brussels said on Friday that Hungary's deficit, projected at 3.4 percent, would exceed the bloc's 3 percent ceiling this year and next year but the government has pledged to take measures to bring it below 3 percent.

"Hungary is among the promising half dozen countries that may receive abrogation from the EDP in the course of this spring," EU Economic and Monetary Affairs Commissioner Olli Rehn told a press briefing.

The EU believes Hungary's economy will stagnate this year, contrary to government forecasts for growth of 0.9 percent, which would make lowering the deficit more challenging. (Additional reporting by Sandor Peto; Editing by Will Waterman)

http://www.globalpost.com/dispatch/news/thomson-reuters/130222/update-1-hungary-pm-pledges-low-deficit-sets-stage-election