Hungary says economy in grave state
Here is a good short article that discusses the Hungary debt crisis.
There are two other articles worth reading. This one: Sovereign Credit-Default Swaps Surge on Hungarian Debt Crisis - http://www.businessweek.com/news/2010-06-04/sovereign-credit-default-swaps-surge-on-hungarian-debt-crisis.html and this one: Hungary Vows to Avert Greece-Like Crisis - http://online.wsj.com/article/SB10001424052748704764404575286283092092988.html?mod=WSJ_hpp_MIDDLETopStories
The second one is amusing due to this line:
In credit markets, the cost of insuring Hungarian sovereign debt against default rose to its highest level since July 2009. Hungary's five-year credit-swap spreads—a key measure of credit risk—stood at 0.43 percentage point. That is over one percentage point wider on the day and 1.8 points on the week.
"You simply cannot talk like this in these markets," said Timothy Ash, head of emerging market research at Royal Bank of Scotland.
Economists were also left confused by apparent conflicting signals from the new center-right Fidesz government, which has said it plans to give a state-of-the-budget statement over the weekend.
What is amusing is that we are nearing the crux of a major sovereign debt crisis. And all of the problems that were simply papered over with debt are showing how weak those 'solutions' were. The whole sovereign debt situation is based solely on confidence. That is not a good way for any economic or monetary system to be run. Massive credit and leverage expansion is what got us into this mess, and it sure as he** is not going to get us out of it. Only a return to a production based economy and a move away from top-heavy consumer spending based on credit will. And one way or another, that is exactly what is going to happen eventually.
Hungary says economy in grave state
June 04, 2010
Hungary's markets and forint currency fell sharply on Friday after the prime minister's spokesman appeared to back the view that his country had a slim chance of avoiding a Greek-style debt crisis.
Earlier on Friday the new government said it would soon announce an action plan to tackle the economy's problems, after it publishes the figures about the "true" state of the 2010 budget this coming weekend or early next week.
Nervous markets and investors were deeply confused by the government's plans and comments and urged clarity on plans.
Ruling Fidesz party vice chairman Lajos Kosa was cited as saying by news website napi.hu on Thursday that the new government had found public finances in a much worse shape than previously expected and there was a slim chance of avoiding a Greek-style scenario.
When asked about those comments, Prime Minister Viktor Orban's spokesman Peter Szijjarto told a news conference:
"It was (former Socialist) Prime Minister Ferenc Gyurcsany who spoke about a default. Moreover, he proudly said that Hungary was close to default, he said that a year and a half ago...and then he was proud that he could only save Hungary from default by taking the IMF loan."
"From this aspect I do not think this (Kosa's comments) are exaggerated at all."
Szijjarto also told the news conference that the previous
Socialist government falsified economic data.
"In Hungary the previous government falsified data. In Greece, they also falsified data. In Greece the moment of truth has arrived. Hungary is still before that," Szijjarto added.
"This is exactly what we want to avoid, and this government is ready to avoid the path that Greece took. After realizing what reality is, we will not hesitate to act," he said.
Szijjarto said the austerity measures and tax hikes complicating the tax system which the Socialist administration tried in the past had failed.
He said tax cuts would not be delayed even in the face of a higher budget deficit.
It was not clear how that could square with bringing the deficit under control.