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German Chancellor Angela Merkel and Hungary’s Prime Minister Viktor Orban speak in Berlin on Wednesday.

BUDAPEST—Hungary’s prime minister Thursday defied foreign critics of his fiscal policies, saying Budapest no longer needs help from the International Monetary Fund and won’t seek to extend an emergency financing agreement it signed in 2008.

“We want to regain Hungary’s lost economic sovereignty,” said Prime Minister Viktor Orbán in a speech to parliament. Unless that happens, he said, “the country cannot rise, there can be no economic growth.”

Mr. Orbán, a populist politician who pledged to take a firmer stance in negotiations with the IMF after he was elected in April, has grown increasingly tough in his public comments this week, after bailout-loan talks with the IMF and the European Union broke down over the weekend.

Some of his most recent remarks appear to contradict comments by aides that Hungary remains committed to pursuing a deal with the IMF and the EU, both of which walked out of negotiations saying that Budapest wasn’t doing enough to achieve lasting cuts in spending and shore up its finances.

The failure of the talks means that Hungary can’t draw on the remaining funds in the €20 billion ($25.54 billion) rescue package it received from the IMF, the EU and World Bank at the start of the global financial crisis.

At a news conference earlier Thursday, Mr. Orbán thanked the IMF for its help in 2008, when the loans it offered saved Hungary from default after it was unable to raise funds in credit markets during the global financial crisis.

But he said Hungary doesn’t intend to continue talks with the IMF on the current standby loan. He said Hungary will repay the loan by the end of 2012, something that could strain Budapest’s finances. In the future, he said, the government will negotiate only with the EU.

As part of its membership in the EU, Hungary has agreed over time to meet certain targets for its government spending.

IMF spokeswoman Caroline Atkinson said at a news briefing in Washington Thursday that the IMF, for its part, remains “engaged with the Hungarian authorities and we are ready to resume specific negotiations and return there at any time.”

Mr. Orbán’s move to walk away from the safety net provided by the international loan agreement is a reversal of earlier statements by his government that it would seek a new standby deal with the IMF for next year, after the current agreement expires in October.

“It’s a big blow to the credibility of this government,” said Bartosz Pawlowski, a strategist at BNP Paribas in London. “The risk premium on Hungary has increased.”

The Hungarian currency, the forint, strengthened, however, on Thursday. After plunging 3% against the euro Monday in response to news of the weekend breakdown of talks with the IMF and EU, the forint steadied and then began to regain lost ground.

On Monday, Hungary’s central bank said it would buy forint to defend the value of the currency, using development assistance from the European Union. It wasn’t clear how much that was contributing to the rally.

Still, Mr. Pawlowski said that without IMF backing, investors could be wary of Hungarian debt and other forint-denominated assets. The markets have looked at the IMF deal as a form of insurance that government spending would remain in check. “Hungary is saying it doesn’t want to consolidate its public finances any more. They feel they’ve done enough already,” said Mr. Pawlowski. “That’s not what you want to be saying at this point,” with global investors intensely focused on government debt.  from:cnn