Hungary Resists the Markets and the IMF

[C. Flower]

Hungary is being told to "get with the programme" and cut wages and services. This is what the Market and the IMF wants. Political pressures at home are getting in the way.

http://www.irishtimes.com/newspaper/breaking/2010/0719/breaking39.html

Hungary's deficit is almost as big, as a percentage, as ours.





Hungary's markets sold off today after the government rebuffed lenders' calls for tougher austerity measures, bringing weekend talks on further aid to a premature end and rattling investor confidence.
Analysts said the new centre-right government, which has spooked investors before when officials compared Hungary's problems with those of Greece, could be playing for time by seeking to put off unpopular announcements about cuts until after municipal elections on October 3rd.

But a surge in borrowing costs and weakness in the forint currency, which plunged over 2.5 per cent versus the euro early today, may well push the Fidesz government to reach a deal sooner.

"Fidesz is scoring domestic political points in its battle with the IMF and EU," Eurasia Group analysts said. "In response, the EU is sending a clear message that Europe is in a "new era" (post-Greece) of fiscal austerity, and that Hungary needs to get with the programme. This is a recipe for ongoing tensions and market concerns."

Hungarian government bond yields rose 20-30 basis points after the breakdown of the talks, which were intended to review the financing deal Hungary struck in 2008 with the International Monetary Fund and European Union.

Without a deal, Hungary, which runs central Europe's highest public debt at about 80 per cent of gross domestic product (GDP), will not be able to use remaining funds in its €20 billion loan secured in 2008.

[C. Flower]

Time we had a thread on Hungary. To kick it off - which European banks are most exposed to Hungary's very shaky system.

http://ftalphaville.ft.com/blog/2010/06/08/254376/whos-exposed-to-hungary-ii/

[morticia]

Yes. I remember reading on the weekend that Viktor Orban was playing a complex game of chicken with the IMF; refusing to back down on legal changes they made to make the central bank more answerable to Orban's government, which the Troika/IMF/whoever is in charge of ye Hungarian bailout claims are against EU/international/IMF rules, I think. The IMF, in turn, is threatening to cut off funds, without which Hungary can last 3-6 months, it was speculated.

The unstable dominos are breeding.....we really are probably the least of anyone's concerns these days.

[ang]

EU threatens sanctions over Hungary deficit:-

http://www.google.com/hostednews/ap/article/ALeqM5gwWKXgfM--sPXGtAQX0SDgnalmAQ?docId=d1c003601b974a579db9420df 69436c5

[Holly]

The European Commission claims Hungary has taken "no effective action" to limit its deficit. Yet it is asking for a low interest credit line from the EU and the IMF. This is a non-starter.
More worrying is that the Hungarians under the Communists had a disregard for basic freedoms and their new constitution smacks of the old mentality. The EU and other international institutions are concerned for the independence of Hungarian judges, the central bank and the data protection agency. Some civil rights organizations and the European Parliament have warned that the former Soviet-bloc country risks slipping back into authoritarianism under Prime Minister Victor Orban.

[Captain Con O'Sullivan]

The answer to the question about which banks are, erm, most 'influential' in Hungarian affairs I suspect will be our old friend Unicredito.

The Board arrives for a meeting;

http://2.bp.blogspot.com/_Tn3huAudp2U/TJRGo_nA3fI/AAAAAAAAJmA/M8gsBWgwEcM/s400/morehats.gif

[unspecific]

The punishment for putting your democratically-elected hands on the central bank strangulation and default.

[morticia]

...European Parliament have warned that the former Soviet-bloc country risks slipping back into authoritarianism under Prime Minister Victor Orban.

While this may be a fine example of the pot calling the kettle black, they may nevertheless have a point.. the Observer/Guardian has nicknamed Orban the Viktator and is reporting on domestic unrest.

www.guardian.co.uk/world/2012/jan/06/hungary-viktor-orban-faces-protest

[fluffybiscuits]

First Greece now Hungary, the world is showing its dissatisfaction...

[Andrew49]

The Hungarian central bank is currently holding over 36 billion euros, which the government would dearly like to get its mitts on to meet its foreign-currency obligations. Alternatively, it could do a Weimar and print more and more forints to meet the ever-rising cost of buying the foreign currency it needs to meet its debt obligations. So far the central bank has steadfastly refused to give the government the keys to the vaults or allow access to the printing presses. So it's not surprising, is it, that part of the legislation that the Hungarian government has railroaded through parliament is a measure that would allow it effectively to take control of the central. bank. Source (http://www.coppolacomment.blogspot.com/)

Apparently Hungary is now going into dangerous territory by breaking rules - even if breaking these rules is done to:
to save its economy from collapse ..... The European Commission says: Hungary must conform to the legislative and economic norms of the European Union even against the wishes of its elected government.

[C. Flower]

The Hungarian central bank is currently holding over 36 billion euros, which the government would dearly like to get its mitts on to meet its foreign-currency obligations. Alternatively, it could do a Weimar and print more and more forints to meet the ever-rising cost of buying the foreign currency it needs to meet its debt obligations. So far the central bank has steadfastly refused to give the government the keys to the vaults or allow access to the printing presses. So it's not surprising, is it, that part of the legislation that the Hungarian government has railroaded through parliament is a measure that would allow it effectively to take control of the central. bank. Source (http://www.coppolacomment.blogspot.com/)

Apparently Hungary is now going into dangerous territory by breaking rules - even if breaking these rules is done to:

It's a good blog post.

http://coppolacomment.blogspot.com/2012/01/trouble-with-hungary.html

Hungary is in the classic IMF trap of debt coupled with austerity, that condemns states to long drawn out/indefinite poverty.

They have to break EU law to break out of that trap.

[C. Flower]

Very big protests against austerity and constitutional change in Hungary -

http://www.youtube.com/watch?feature=player_detailpage&v=R3zy5t2ddLQ#t=51s

[Holly]

The new Hungarian Constitution gives authority to the governing party to disregard their parliament in formulating legislation. It is similar to the way the Irish Cabinet is guaranteed that all their bills are passed by government backbenchers' rubber stamping.

[C. Flower]

Hungary has asked for an IMF / EU programme.

http://uk.reuters.com/article/2012/02/04/uk-hungary-imf-idUKTRE8130B320120204

[ang]

Update.......


EC will adopt a proposal tomorrow to suspend cohesion funds for 1 year after #Hungary failed to curb its fiscal deficit: European official

[C. Flower]

http://www.businessweek.com/news/2012-03-13/hungary-s-inflation-accelerates-to-eu-s-fastest-pressuring-central-bank

Let the blood-letting begin.

By qualified majority Hungary has been docked nearly half a billion cohesion funds today,
as a penalty for failing to meet fiscal targets.

http://www.europolitics.info/economy-monetary-affairs/ministers-stand-by-hungary-deficit-sanctions-art328806-50.html


Under the EU’s most recent overhaul of economic governance rules, eurozone countries face fines for flouting deficit targets, while non-eurozone countries face a suspension of EU aid from the Cohesion Fund. “I do not accept the claim that non-euro area member states would face stronger sanctions than euro area member states,” Rehn said. “That’s not the case - for euro area member states if there is a financial sanction it is indeed triggered immediately as a fine and that money is lost and there is a hole in the national budget, while for non-euro area member states it is a rather long delay regarding the commitments of Structural Funds, which come from the EU budget.”

Hungary was told that it needs to cut spending by “at least 0.5% of GDP” to bring its deficit down to 2.5% of GDP this year, after forecasts showed it will hit 2.8%. The figure is still below the EU’s 3% of GDP limit. It will need to take extra measures in 2013 after the Commission predicted the deficit will rise to 3.7% of GDP next year after one-off austerity measures are phased out.

The new Right Government in Hungary had introduced a flat tax policy that gave tax benefits to the rich. It has not in any way helped Hungary meet budget targets. Thousands demonstrated against the government three days ago. Inflation is the highest in Europe.

http://www.reuters.com/article/2012/03/10/us-hungary-protest-idUSBRE8290ES20120310

[fluffybiscuits]

http://www.businessweek.com/news/2012-03-13/hungary-s-inflation-accelerates-to-eu-s-fastest-pressuring-central-bank

Let the blood-letting begin.

By qualified majority Hungary has been docked nearly half a billion cohesion funds today,
as a penalty for failing to meet fiscal targets.

http://www.europolitics.info/economy-monetary-affairs/ministers-stand-by-hungary-deficit-sanctions-art328806-50.html



The new Right Government in Hungary had introduced a flat tax policy that gave tax benefits to the rich. It has not in any way helped Hungary meet budget targets. Thousands demonstrated against the government three days ago. Inflation is the highest in Europe.

http://www.reuters.com/article/2012/03/10/us-hungary-protest-idUSBRE8290ES20120310


I was in Budapes two weeks ago and had a chat with some of the locals there in a bar called Semple. They informed me that while the cost of living for us coming from the Eurozone is cheap, the people in Hungary are finding it tough. Wages are on average about €100 per week or thereabouts and any further tax hikes will just make the situation a lot worse.

[Dr. FIVE]

Hungarian Prime Minister Viktor Orban on Thursday rejected International Monetary Fund and European Union conditions in return for financial assistance and said his government would work out a set of alternative proposals of its own.

http://www.reuters.com/article/2012/09/06/hungary-imf-idUSB3E8G902C20120906

How long will they last

[C. Flower]

The President of Hungary has unfriended the IMF on facebook. And thrown out Monsanto.

Why so little reportage in Ireland :D ?

http://www.businessinsider.com/hungary-is-in-trouble-after-throwing-out-monsanto-and-the-imf-2012-9

Hungarian prime minister unfriends IMF on Facebook (http://www.google.com/hostednews/ap/article/ALeqM5g_lJXDs45LFvGV_eZcvU4Crl9gug?docId=ed481a327 7564d338f56131fb505871b)
Hungary's prime minister has long had a testy relationship with the International Monetary Fund — and on Thursday he used Facebook (http://www.businessinsider.com/blackboard/facebook) to unfriend the agency and reject its allegedly tough loan conditions.
Prime Minister Viktor Orban said in a video message on his official Facebook page that Hungary could not accept pension cuts, the elimination of a bank tax, fewer public employees and other conditions in exchange for an IMF loan that other officials have said could be about €15 billion ($18.9 billion). The IMF's list of conditions, Orban said, " contains everything that is not in Hungary's interests."
Orban's announcement took the markets by surprise, in part because just a day earlier he had said loan negotiations with the IMF and the European Union were going according to schedule and both sides were willing to reach an agreement. [..]
In late 2008, under a Socialist government, Hungary became the first EU country to receive an IMF-led bailout. The Orban government, however, decided not to renew the loan agreement in 2010 so it could implement its economic policies without IMF control. But the increasing weakness of the forint, the Hungarian currency, and investors' growing loss of trust in the country's economy made the government abruptly change its mind late last year, when it again sought IMF help.

[Dr. FIVE]

I've just poked the IMF on facebook

[Dr. FIVE]

Seems about right


https://pbs.twimg.com/media/A2YWHVWCIAAh4lP.png