* Tax cuts must be offset, structural reforms needed
* Sustainability, stability needed for euro adoption
* Cbanks need wider tools to prevent hot money inflows (Adds comments, detail)
BUDAPEST, May 7 (Reuters) - Hungary must continue to get its finances in order and should aim to adopt the euro as soon as possible, the central bank chief said, adding that its introduction should be based on sound economic fundamentals.
"...It would be definitely important to make progress in eliminating the Hungarian economy's competitive disadvantages... and within this it's essential that fiscal consolidation must continue," central bank Governor Andras Simor wrote in an article published on news portal Index.hu on Friday.
Simor said experiences from managing the financial crisis in Hungary have made euro adoption even more desirable, but the latest European developments have shown the currency is not some kind of "miraculous remedy".
"The advantages stemming from euro adoption can be utilised -- as it has been proved by Greek events -- only if it is also fully supported by disciplined economic policy," he said.
He also said the fulfilment of euro adoption criteria will likely be judged much more strictly in the future and a credible euro target date can be set only based on stable fundamentals.
"Therefore, Hungary's euro adoption strategy must focus on sustainability and ensuring economic stability."
In a new Reuters poll on Thursday Poland, Bulgaria, Romania and Hungary were still seen adopting the euro in 2015 but forecasters scaled back their median forecast for the Czech Republic's euro accession by a year to 2016.
"Our vulnerability due to the high external debt and public debt can prevail for a longer period, and the risk assessment of the country can worsen due to factors beyond our influence. This risk can be reduced only if economic policy continuously proves its commitment to stability," Simor added.
Simor, who has come under attack for his private investments from the centre-right Fidesz party since it won elections last month, also said any tax cuts should be offset on the spending side and urged structural reforms.
"Further tax reductions while also maintaining budget balance can be achieved only by decreasing redistribution by the state," he said. Fidesz wants to cut taxes starting this year.
WIDER SET OF TOOLS
He said the crisis has shown that central banks need a wider set of tools to be able to stem hot money inflows and prevent credit booms, as interest rate policy often does not work effectively enough in these cases.
"Considering the whole process which generates overheating, the most appropriate point to intervene and the best tool must be found, which can range from restricting capital flows to more active intervention in the fx market to limiting banks' risk taking."
He said tighter regulation of financial institutions was a key to policy to prevent credit booms.
Simor reiterated that inflation was expected to fall below the bank's 3 percent target in 2011.
"The task of the central bank ... is to help the economy's recovery by easing monetary conditions during a recession, but not allow a price-wage inflation spiral... reemerge as growth starts again." (Reporting by Krisztina Than; Editing by Jan Dahinten)