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Hungary weighing new measures to curb budget deficit: report

BUDAPEST (Reuters) - Hungary's Economy Ministry has presented the government with a 1 trillion forint ($4.5 billion) menu of tax rise options and spending cuts to reduce next year's budget deficit and avert the loss of European Union funds, news website origo.hu reported.

Central Europe's most indebted nation must keep its deficit below 3 percent of economic output in 2013 as the alternative, which would cost it access to some EU development funds, could strike a further blow to its recession-hit economy.

Hungary's government has made repeated and often controversial attempts to rein in its chronic fiscal shortfall. Now seeking a new International Monetary Fund loan to shore up its finances, it is due to unveil its latest package on Friday.

The Economy Ministry could not immediately comment on the Thursday report, which said the government could decide on the final composition of the package by selecting from the menu of measures laid out by the ministry.

Citing sources close to the government, origo.hu said measures could include delaying a further cut in personal income tax planned for next year, or a further rise in Hungary's main value added tax rate that at 27 percent is already the EU's highest.

Hungary needs to plug an up to 600 billion forint hole in the 2013 budget, origo.hu said, as a result of lower economic growth and costs of a social tax reduction program the government hopes will save jobs ahead of a 2014 election.

Further items on the list include an extension of Europe's highest financial sector tax, one of Prime Minister Viktor Orban's signature unorthodox fiscal measures, at its current rate next year despite earlier pledges that it would be halved.

Bringing some central bank operations under a new tax on financial transactions to be launched next year could also curb the extent of cuts required elsewhere even though this specific budget item has been criticized by Hungary's potential lenders.

Origo.hu said the size of the required adjustment could be reduced if Hungary manages to negotiate an increase in next year's budget deficit target to 2.7-2.8 percent of economic output from 2.2 percent targeted in the draft 2013 budget.

(Reporting by Gergely Szakacs; Editing by Ruth Pitchford)

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