Hungary’s government denied a newspaper report on Saturday that it plans to shed over 10,000 public sector employees before the end of the year. The finance ministry said it had no plans for large scale layoffs and described as malicious the report in national daily Magyar Nemzet, which cited confidential finance ministry documents.

"No document was prepared by the finance ministry which calls for headcount reduction either this year or next year and we are not calculating with a lower headcount," Finance Ministry State Secretary Tamas Katona told state news agency MTI. The paper said around 7,000 workers will be laid off, 1,700 will be sent into early retirement and an unspecified number of contractors, classified as employees, will also be laid off. This would push the total over 10,000, it said.

Around 800,000 workers, or about 30 per cent of Hungary’s workforce are employed by the public sector. Financial market analysts as well as the central bank have repeatedly said Hungary must reduce the size of its government to curb budget spending and improve the economy’s competitiveness. Hungary has overshot its budget deficit target for the past three years and analysts expect it to miss the 2005 target.