Budapest -  on Friday said that he did not expect to be able so save his crumbling coalition but that a minority government would still stick to plans to cut the budget deficit.

"The most likely outcome is a one-party government," Gyurcsany told a press conference.

Hungary's junior coalition party, the Alliance of Free Democrats, on Monday said it would leave the coalition on April 30 after Gyurcsany announced he was backing off from further healthcare reform.

The Free Democrats, and many analysts, took this as a sign that the senior Hungarian Socialist Party is bowing to its unpopularity and will effectively end all further plans for economic reforms aimed at cutting the budget deficit and eventually adopting the euro.

Gyurcsany said that public opposition to the reforms - most recently expressed in a sweeping referendum defeat on fees for medical treatment and education - meant that the pace of change would slow.

However, he pledged to stick to the euro convergence plan that the government submitted to the European Commission, which foresees the deficit reaching 3.2 per cent of gross domestic product (GDP) in 2009.

The government in 2006 introduced a series of measures - including tax hikes and cuts to fuel and medicine subsidies - that reduced the deficit from 9.2 per cent of GDP in
2006 to 5.5 per cent in 2007.

However, the measures sent inflation skyrocketing to a high of 9 per cent last March and almost stalled the economy.

The Socialists are now as low as 15 per cent in the polls as a result of the reforms and Gyurcsany's September 2006 admission that he lied about the state of the economy.

Many observers are worried that further structural reforms to healthcare, education and pensions - which they say are needed to keep the deficit low on a sustainable basis
- are now in danger as the government attempts to claw back its popularity before the 2010 general elections.

The Socialists hold 190 seats, four seats short of a majority, and would require support from their former ally or the other, more hostile, opposition parties to pass new legislation. (dpa)