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interestrateripoff

Hungary Risks Markets' Goodwill With Imf/eu Failure

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http://www.guardian.co.uk/business/feedarticle/9178525

* Forint seen easing, yields rising on Monday

* Hungary will need to reach deal with lenders-analysts

* Cbank to hold rate meeting on Mon, seen wary of market

By Krisztina Than

BUDAPEST, July 18 (Reuters) - Hungary faces a fall in its currency and a surge in financing costs due to a failure to agree with lenders on its economic plans and it will need to reach a deal to retain the trust of investors.

Talks with the International Monetary Fund (IMF) and the EU ended prematurely on Saturday without a conclusion of the country's programme review, which means Hungary will not have access to remaining funds in its 20 billion euro ($26 billion) loan secured in 2008 until a deal is reached.

This is a risky path for a country which has a poor budget track record and which runs central Europe's highest public debt at about 80 percent of gross domestic product, analysts said.

Although Hungary does not face an immediate pressure on state finances as its 2010 financing seems to be secure thanks to unused loans and cash reserves, it needs the lenders' safety cushion as an external anchor of credibility.

A lack of agreement on the current programme also excludes the possibility of a new precautionary deal for 2011 and 2012, which the country needs as a safety net, analysts said.

This will likely force the new centre-right government, which took office in May after winning April parliamentary elections, to come to an agreement with the IMF and EU, but the timing of this is uncertain, they said.

"This is fairly bad news and a mistake from the government ... the market impact will be negative with a likely over 1 percent or possibly bigger currency fall and a jump in yields," said Zoltan Torok, analyst at Raiffeisen.

"I'm sure there will be an agreement, as they (the cabinet) simply will be forced to do it, but I don't know when and the later it comes the worse."

Hungary, which had to resort to a rescue loan from the IMF/EU in October 2008 to avert meltdown, has since stabilised its finances but its heavy reliance on foreign funding makes the country vulnerable to negative shifts in market sentiment.

This showed in early June when the government made confusing comments comparing its fiscal problems with the Greek debt crisis, which led to sharp market falls and seriously damaged the government's policy credibility.

Then the cabinet committed to this year's budget deficit target of 3.8 percent of gross domestic product (GDP) in an attempt of damage control to reassure investors.

But lenders said on Saturday further steps were needed to achieve the deficit targets this year and in 2011, and the government needs to work out durable measures and spending cuts to reduce the deficit and ensure sustainability.

Still I'm sure it's all contained.

Hungary isn't really a problem and the experts are on the case....

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7897459/Markets-braced-for-turmoil-after-IMF-and-EU-withdraw-17bn-Hungary-financing-deal.html

European equity and credit markets are braced for a volatile day of trading after the International Monetary Fund (IMF) and the European Union dramatically withdrew a €20bn (£17bn) financing deal for Hungary over the weekend.

The move, which was described by economists as “very rare”, means that Hungary will not have access to standby funds that were secured as part of a 2008 loan deal. The credit line was suspended on Saturday after the European Commission voiced concerns over the newly-elected Hungarian government’s budget plans.

The stark move by the IMF and EU will reignite fears in global stock and money markets about the state of Europe’s sovereign debt. It could also derail the fragile confidence that has been returning to markets after moves to resolve the economic crisis in Eastern Europe.

Hungary’s woes come amid fears of a broader bear market developing as investors adjust to signs of a global slowdown led by the US and China. The weekend’s events will only add to market jitters.

Economists have argued that the return of confidence to Europe is partly based on the assumption that the IMF and the EU will automatically step in as sugar daddies to save failing economies. The suspension of the review of Hungary’s credit line at the weekend will send out an international warning and shows such views to be naïve, observers said last night.

Peter Attard Montalto, economist at Nomura Securities, described the IMF and EU’s action as “a very rare event”.

“Countries usually go out of their way to satisfy these missions,” he said.

Hungary has Europe’s highest public debt at 80pc of GDP.

Will today prove interesting or has this been priced in?

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Will IRR keep answering his own posts if nobody else bothers?

Probably! ;)

I seem to have quite a pleasant conversation with myself.

Perhaps I should just start even more threads rather than trying to keep relevant stories together? :)

Edited by interestrateripoff

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I seem to have quite a pleasant conversation with myself.

Perhaps I should just start even more threads rather than trying to keep relevant stories together? :)

I know what you mean.....If you want an intelligent conversation, have it with yourself!

It is when you start arguing with yourself that you need to really worry :ph34r:

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You bypassed it and went to the final stage..........multiple daily postings on HPC! :lol:

It reaches the terminal stage when you add to a thread, started by another poster, and highlight a story that the other poster has already highlighted in another separate thread...............

http://www.housepricecrash.co.uk/forum/index.php?showtopic=147469

At this point those nice men in white coats should come and take you away...

Edited by Hip to be bear

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"Economists have argued that the return of confidence to Europe is partly based on the assumption that the IMF and the EU will automatically step in as sugar daddies to save failing economies. The suspension of the review of Hungary’s credit line at the weekend will send out an international warning and shows such views to be naïve, observers said last night."

Very significant news IMO. It has probably brought to an end any thoughts that the EU are going to escape another credit crisis and a US led double dip.

Two things though--stock markets have not reacted that negatively and the Euro is stable. Deer caught in the headlights perhaps?

Europe Last Trade Change Related Information

^AEX AEX (Netherlands) 322.18 9:06am -1.81 (-0.56%) Chart, Components, more...

^ATX ATX (Austria) 2,292.57 8:51am -33.42 (-1.44%) Chart, more...

^BFX BEL-20 (Belgium) 2,434.87 9:06am -7.88 (-0.32%) Chart, Components, more...

^FCHI CAC 40 (France) 3,496.62 9:06am -3.54 (-0.10%) Chart, Components, more...

^GDAXI DAX (Germany) 6,040.45 8:51am 0.18 (+0.00%) Chart, Components, more...

^FTSE FTSE 100 (United Kingdom) 5,139.99 8:51am -18.86 (-0.37%) Chart, Components, more...

^IETP ISEQ20 (Ireland) 457.37 8:51am -3.06 (-0.66%) Chart, more...

^SMSI Madrid General (Spain) 1,107.53 27 Apr -24.59 (-2.17%) Chart, Components, more...

OMXC20.CO OMX Copenhagen 20 (Denmark) 405.86 9:06am -3.47 (-0.85%) Chart, Components, more...

^OMXSPI OMX Stockholm 30 (Sweden) 320.36 9:06am -1.10 (-0.34%) Chart, Components, more...

^PSI20 PSI 20 (Portugal) 7,062.84 9:06am -74.27 (-1.04%) Chart, more...

FTSEMIB.MI S&P Mib (Italy) 20,001.60 9:06am -159.42 (-0.79%) Chart, Components, more...

^SSMI Swiss Market (Switzerland) 6,159.45 8:51am -24.92 (-0.40%) Chart, Components, more...

^OSEAX Total Share (Norway) 394.40 8:51am -1.54 (-0.39%)

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The main point here is that Hungary said they have cut enough spending over the past 2 years since the IMF/EU went in and now they want to cut the deficit by taxing the banks.

The EU and the IMF said shock horror you want to tax our banker mates, no way. Leave the bankers their bonuses and cut spending, make the people suffer not the banks.

Kinda tells you a lot really.

Edited by ralphmalph

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"Economists have argued that the return of confidence to Europe is partly based on the assumption that the IMF and the EU will automatically step in as sugar daddies to save failing economies. The suspension of the review of Hungary’s credit line at the weekend will send out an international warning and shows such views to be naïve, observers said last night."

Very significant news IMO. It has probably brought to an end any thoughts that the EU are going to escape another credit crisis and a US led double dip.

Two things though--stock markets have not reacted that negatively and the Euro is stable. Deer caught in the headlights perhaps?

The Euro is stable is an understatement, in fact it has had a big rally since the low of a month ago and even today so far it's up again:

http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-usd.en.html

They are already complainig that the euro is too strong again:

http://www.bloomberg.com/news/2010-07-19/euro-strength-undermining-exports-as-spain-sweats-biggest-rally-in-a-year.html

I placed a trade selling euros for dollars minutes ago, I can't see it go up much further.

--

Edited by wise_eagle

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http://www.nytimes.com/2010/07/20/business/global/20forint.html?_r=1&ref=business

Facing growing public anger over years of budget cuts, Hungary’s conservative government insisted Monday that it would not impose further austerity measures despite pressure from its international creditors.

The defiant stance, coming months ahead of important local elections, illustrates the fatigue — and resistance — that a continued push for fiscal rectitude in the wake of the sovereign debt crisis risks engendering across Europe.

Markets in Budapest reacted negatively Monday after the International Monetary Fund and European Union officials suspended a budgetary review in Budapest over the weekend. The Hungarian forint fell as much as 2.8 percent against the euro, yields on Hungarian debt jumped, and the main stock index was down more than 2 percent.

But the Economy Minister Gyorgy Matolcsy told public television M1 that Hungary has been tightening its belt for years to bring down a deficit that peaked in 2006, under the previous Socialist government, at 9 percent of gross domestic product — three times the E.U. limit.

“We inherited this from the previous governments and we would like to do away with the unfortunate consequences of these steps,” he said. “We have told our partners that further austerity steps are out of the question.”

The suspension of the I.M.F.-E.U. review, which was to conclude this week, means that Hungary will not have access for now to the remaining 5.5 billion euros, or $7 billion, in its 20 billion euro bailout package.

Analysts said that that Hungary’s financial system was not in danger — the government still has about 3.5 billion euros from the 2008 credit line in hand, and a further 1.4 billion euros at the central bank.

Tick tock.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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