Hungary Hungry for Economic Stability

Posted on Jun 4, 2010

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Hungary’s Prime Minister Viktor Orbán was sworn into office last week.

A new kind of specter is haunting Europe: debt. Hungary’s new prime minister is reported to have said that there is only a slim chance that his country will evade a Greek-style debt crisis, a comment that sent domestic markets into a tizzy and saw the Hungarian currency drop more than 2 percent.

Although the country’s central bank was quick to assure investors that Hungary’s budget was sustainable, fears are rising that Hungary could become the next nation to be hit by the European debt crisis. —JCL

Reuters:

Hungary’s markets tumbled on Friday on confusing comments from the new government on the state of public finances, prompting the central bank to rush to reassure investors the country’s budget was sustainable.

Markets were spooked by comments from the prime minister’s spokesman that he supported the view his country had only a slim chance of avoiding a Greek-style debt crisis, although he said his government would act swiftly to avoid the Greek path.

The forint plunged over 2 percent versus the euro to a new one-year low at one point, while five-year credit default swaps (CDS) jumped, as investors were shocked by the government’s comments and urged clarity on its plans.

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