Hungary is among those eastern European countries hit hardest by the financial crisis.

It was saved last November from defaulting on its state debt by a 20-billion-euro (27-billion-dollar) lifeline from international financial institutions.

Gyurcsany said he would inform parliament of his decision on Monday, and that he would ask for a vote of no-confidence against himself.

If it passes, parliament can name his successor without early elections.

“I was wrong about our strengths and opportunities and in an important moment I failed to speak clearly,” Gyurcsany added. “As a result, my credibility has been tainted significantly.”

Gyurcsany nevertheless insisted that reforms of the education, health care and social security systems must be continued.

The party congress, which reelected Gyurcsany as chairman, agreed to meet again on April 5 to open the designation procedure for a new candidate as prime minister, according to MTI.

As head of a Socialist government which has not held a majority in parliament for the past year, Gyurcsany did not name any possible successor.

He said that the new premier should be found through consensus talks with other parties.

The main opposition party Fidesz, leading the socialists in recent polls by a large margin, rejects talks for a new prime minister in favour of early elections, according to Tibor Navracsics, head of the Fidesz parliamentary group.

For its part, the Socialist Party is considering alternative scenarios which could also involve the endorsement of a non-socialist candidate, the head of its parliamentary group, Ildiko Lendvai, told Hungarian public radio MR1.

Gyurcsany, who became the head of government in 2004, is the first prime minister to have been re-elected in national polls since the end of communism in 1989.

His credibility was seriously damaged a few months after the 2006 general election when he admitted to lying about the economy to win the vote — his expletive-laden speech at a closed socialist meeting being leaked by internal opponents.

In the wake of rallies demanding his resignation and violent street protests in Budapest which left more than 200 people injured, Gyurcsany called a vote of confidence by the then-Socialist-Liberal coalition, receiving the backing he needed to carry on.

The second Gyurcsany government pushed austerity measures through parliament, leading to a sharp fall in the budget deficit from 9.2 percent of gross domestic product in 2006 to 3.3 percent in 2008.

“We cannot see any change. What is the change in your policy? Did you remove the sanctions? Did you stop supporting the Zionist regime? Tell us what you have changed. We can’t see change even in the words of the new American president. Change only in words is not enough. Change must be real,” Khamenei said.

“The American leaders and others must know that they can’t deceive our nation or scare it.”

Khamenei accused Washington of having had a “hostile” attitude towards Tehran since the Islamic revolution toppled the US-backed shah in 1979.

“They supported all the terrorist and opponent groups” against Iran, he said.

“We can see the American hand behind these groups. Unfortunately, this support is still continuing,” he said, adding that US-backed groups were aiding rebels fighting Iranian security forces along the Iran-Pakistan border.

“The new American government wants to negotiate. They say to forget the past and are extending their hand. But if it is an iron hand in a velvet glove, it won’t have a good meaning,” he said.

Highlighting the three-decades old animosity, Khamenei said Iran would not forget American support to Saddam Hussein during the 1980-88 war between Iran and Iraq or the shooting down of an Iranian passenger plane in 1988 by a US warship that killed all 290 passengers on board.

“In all these years, they carried out hostile propaganda against our country, especially in the past eight years,” the powerful cleric said, referring to the tenure of George W. Bush.

Bush had refused to talk to Iran following the launch by the Islamic republic of a controversial nuclear programme. He also lumped Iran as part of an “axis of evil” along with Saddam Hussein’s Iraq and North Korea.

Iranian leaders regularly refer to the US as the “Great Satan.”

In an historic online video message marking the Iranian New Year Nowruz on Friday, Obama urged an end to decades of animosity and offered “honest” engagement with the Islamic republic.

In a decisive break with Bush, Obama called Nowruz celebrations a time of “new beginnings” and said Iran could take its “rightful place” in the world if it renounced terror and embraced peace.

But Khamenei said that Obama, in his message, had accused Iran of supporting terrorism.

“He congratulated Iranians for the new year, but in the same speech he accused Iranians of supporting terrorism and looking for nuclear weapons,” he said.

“We don’t know who is taking decisions in the United States.. is it the president, or the Congress, or somebody else? But we are acting logically and not emotionally.”

Khamenei also warned that if Washington does not make changes in its policy towards Tehran, it will be more disadvantageous to it than to Iran.

“You put sanctions on our country for 30 years but it benefited us and we became stronger. We actually thank the Americans for that,” he said as the crowd chanted “Death to America! Death to Israel! Khamenei is the leader!”

Iranian officials have boasted that the sanctions encouraged them to develop local technologies, including space science that saw Tehran launching its first home-built satellite into orbit last month.

Should Geithner offer his resignation, Obama joked that he would say: “Sorry buddy, you’ve still got the job,” according to interview excerpts released Saturday.

In his weekly radio and video address, Obama said his administration was scouring every corner of the budget to produce two trillion dollars in deficit reductions over the next decade.

“In total, our budget would bring discretionary spending for domestic programs as a share of the economy to its lowest level in nearly half a century,” he said.

“And we will continue making these tough choices in the months and years ahead so that as our economy recovers, we do what we must to bring this deficit down.”

The comments came as Congress was poised to launch debate next week on the 3.55-trillion-dollar multiyear budget unveiled by Obama’s administration last month.

But the nonpartisan Congressional Budget Office (CBO) forecast Friday the deficit could hit 1.845 trillion dollars this year under the Obama proposal, quadrupling the 2008 record shortfall.

The CBO said its latest budget deficit estimate for fiscal 2009, which ends on September 30, would amount to 13.1 percent of the country’s total economic output.

Since its early January estimate of a 1.2-trillion-dollar gap, the CBO said the enactment of the 787-billion-dollar stimulus plan, other measures to revive the economy and additional factors had hiked deficit projections for 2009 and 2010 by over 400 billion dollars.

Republicans immediately seized on the report to blast Obama’s economic policies. “It’s worse than even the most pessimistic predictions for this budget,” said Senate Republican Leader Mitch McConnell.

But Obama moved swiftly to rebut his critics, arguing that his economic proposals offered a long-term solution to US structural problems and not “a wish list of priorities that I picked out of thin air.

“They are a central part of a comprehensive strategy to grow this economy by attacking the very problems that have dragged it down for too long: the high cost of health care and our dependence on foreign oil; our education deficit and our fiscal deficit,” the president noted.

Obama told CBS he acknowledged public frustration with continued economic woes, despite his administration’s ambitious plans to revive the battered US economy.

“It’s going to take a little bit more time than we would like to make sure that we get this plan just right. Of course, then we’d still be subject to criticism,” he said.

“What’s taken so long? You’ve been in office a whole 40 days and you haven’t solved the greatest financial crisis since the Great Depression,” he quipped.

In his weekly address, the president repeated his calls for expanding green energy development and improving access to quality healthcare and education.

Obama urged lawmakers not to shy away from the magnitude of problems they were facing, saying that Americans were watching them and waiting for them to lead.

“Let’s show them that we are equal to the task before us, and let’s pass a budget that puts this nation on the road to lasting prosperity,” he said.

Republicans on Friday pushed back against Obama’s massive package that teams tax cuts and heavy spending.