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Hungary parties fail to pick new PM International

Sunday, March 29, 2009

BUDAPEST (Reuters) - Hungary's Socialists and liberal Free Democrats failed once again to agree on a new prime minister on Sunday but promised to continue negotiations on Monday, Free Democrat Chairman Gabor Fodor said.

"We have made it clear that we're ready to keep on talking as long as there is hope for a solution because this is in the best interest of Hungary," Fodor told reporters. "But clearly there's a point beyond which we can't go."

"We'll continue talks tomorrow and after that," Fodor said.

The Socialists, who rule in a minority and need the Free Democrats to secure a majority, proposed Economy Minister Gordon Bajnai late on Saturday to replace Ferenc Gyurcsany.

The Free Democrats have already rejected at least three of the Socialists' proposals for prime minister while all three candidates it proposed withdrew.

Hungarian politics has been in turmoil since the deeply unpopular Gyurcsany unexpectedly announced on March 21 that he would step down in early April.

Fodor said failure would mean early elections, which would impair the government's ability to tackle the country's worst economic crisis in nearly two decades.

Hungary, whose economy is seen declining by 4.5 percent this year, needed a $25.1 billion IMF-led rescue package late last year to avoid collapse but analysts say further fiscal tightening is necessary.

The Free Democrat votes are the last hope of the Socialists, who are a handful of parliamentary seats short of a majority because all other parliamentary parties, as well as President Laszlo Solyom, have urged them to dissolve parliament and call an election.

Analysts said both the Socialists and the Free Democrats are desperate to avoid an early election because if a vote were held now, the center-right Fidesz would score a decisive win over the weakened Socialists while the Free Democrats would struggle to reach the 5 percent threshold needed to re-enter parliament.

(Reporting by Balazs Koranyi; editing by Myra MacDonald)

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