Friday, June 4, 2010

Hungary - Here we go again

Recent statements by the spokesman for Hungary’s new Prime Minister Viktor Orban, alluded to the country being in a “grave situation” because the previous government “manipulated” numbers and “lied” about the state of the economy.Peter Szijjarto stated that, "It's clear that the economy is in a very grave situation...I don't think it's an exaggeration at all" to talk about a default. Orban took office on May 29th. Nice start to the job. The former finance minister said that the country is "in no way near default."

The market did not wait to determine whether these comments were true or false. It was major sell on HUF. Credit lines and FX swaps are tighter.

The economic data is mixed. Growth has turned positive but is not very exciting at .1% for the first quarter. Business confidence and economic sentiment are still negative although better than earlier in the year.

The current account shows a surplus and the external financing capacity is positive. Hungary needed a 20 billion euro loan form the IMF in October 2008.

The ratings agency Moody's offered the comment that Hungary is not "the next Greece". Of course, the rating agencies have had a history of being behind the curve.

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