Budapest  - In a week where the Hungarian parliament adopted his new government's pension reforms and tax changes, Prime Minister Gordon Bajnai pledged Friday to stick to his reform programme despite public resistance and constant attacks from the opposition.

"Over the next year this government will implement much more significant changes than any government with a four year mandate has done in the past twelve years," Bajnai said.

On Monday parliament passed legislation to increase value added tax from 20 to 25 per cent while cutting employer-side payroll taxes, along with controversial pension reforms that abolish a "thirteenth month" annual bonus and raise the retirement age.

Bajnai, who is not a member of a political party, was invited to form a new government a month ago after the former Socialist prime minister Ferenc Gyurcsany stepped down in the face of growing unpopularity and a worsening economic crisis.

Although the centre-right opposition party Fidesz has long been riding high in opinion polls and looks set to trounce the Socialists in the European Parliament elections on June 7, Bajnai was adamant that he intends to see out his one-year mandate before the next scheduled general election.

"This is a crisis management government, not a caretaker government," he told the press.

Next week parliament will vote on reducing social spending in some areas such as family allowances, moves which the prime minister repeatedly acknowledged would be "very painful" for many.

The government will also produce this month a second package of tax change proposals, to be introduced in 2010, which Bajnai said he wants to see passed as soon as possible to give those affected time to prepare.

The proposals include a large raise in the threshold for the lower bracket of personal income tax, currently 18 per cent. Bajnai says this would mean only the top ten per cent of Hungarian wage earners would have to pay a higher rate.

However, many of the planned steps are set to be met with widespread public resistance.

The government plans to introduce a property tax, to be levied on all homes valued at over 30 million forints (141,000 dollars), and drastic cuts to public sector pay.

"The thirteenth month salary in the public sector will have to go," Bajnai said.

Fidesz, which opinion polls and recent by elections suggest will easily win the general election next year, has already pledged to reverse some of the austerity measures in the Bajnai package.

Vulnerable after years of overspending, Hungary last October became the first European Union country to require a bail out from the IMF as the financial and economic crises hit the Central and Eastern European region.

Bajnai said that the 25 billion dollars in loans from the IMF, the EU and the World Bank are enough to keep the country ticking over until next March.

The loans came with strict conditions about financial housekeeping, and EU and IMF delegates are currently in Budapest to assess Hungary's progress so far.

If the economic environment remains bad, Hungary could approach the EU and the IMF for further loans, "but it is too early to say," Bajnai said.

Whoever forms the next government, Bajnai believes they will have no choice but to continue his government's cost cutting policies "if they don't want to bankrupt the country within a few years."

"I don't think any elected government would risk that," Bajnai said.(pda)