Monday

16th May 2022

Hungary reaches out for ‘precautionary’ EU-IMF rescue

The European Union and the International Monetary Fund have confirmed that Hungary has approached them seeking “precautionary” assistance as its borrowing costs climb.

The bloc and the Washington-based lender on Monday acknowledged that they had received a request from Budapest for help, although no details or projections of the required funds were revealed.

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The move is a sharp U-turn on the part of Prime Minister Victor Orban conservative and staunchly nationalistic government.

The country entered into a €20 billion IMF bail-out programme in 2008 in the middle of the early stages of the global economic crisis under the previous, centre-left administration.

But upon arriving in office, Orban broke off talks with the fund on a possible extension of the rescue, saying the measures the country had taken would allow it to return to the markets to raise the cash that was needed.

The European Commission has been guardedly critical of the Orban administration’s fiscal strategy, which has involved levies on certain sectors of the economy and the nationalisation of private pensions.

Brussels argues that the one-off moves may make the books appear to balance for a short period of time, but do not provide the grounds for long-term fiscal sustainability.

Orban for his party has been loth to embrace the recipe for growth recommended by Brussels and the IMF, which involves cuts to public spending, as he knows it would hit his electoral base.

Despite Budapest’s latest move, the government remains convinced that it can negotiate a deal with the EU and the IMF that “instead of austerity measures, will aid Hungary's economic growth,” according to a statement from the Hungarian economy ministry.

In recent weeks, the forint has drooped. While a lower currency can boost exports, it pushes the cost of externally-owed debt every higher.

Commentators are also expecting a downgrade in the country’s credit rating to ‘junk’ status by one of the main credit rating agencies. Hungary’s current rating sits at one notch above junk.

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Orbán prepares to change Hungary's government system

Viktor Orbán, Hungary's newly elected prime minister, is preparing to overhaul the political system. The composition of his cabinet reflects the appetite for change: more power to the prime minister to take strategic decisions, less need for him to get involved in the messy business of daily politics.

EU slams Hungary for power-grab on central bank

The European Central Bank has lashed out at the Hungarian government over plans to seize control of its central bank, the latest in a series of power-grabs by the ruling party.

Hungarian leader accused of 'dictatorship' over new constitution

Tens of thousands of Hungarians have held a protest against a right-wing overhaul of the country's constitution, with former dissidents accusing PM Orban of "dictatorship" and an ex-US ambassador saying the country could be kicked out of the EU.

Brussels warns Hungary on constitutional reform

The EU commission has warned Hungary to change parts of its constitution or face legal action amid fears that Prime Minister Orban is undermining the independence of key parts of the state.

IMF unlikely to play major role in eurozone rescue

Hopes that the IMF will ride in on a white horse to save Europe are likely to be dashed, as key players on its board believe that the eurozone has enough resources to solve the crisis itself.

Lagarde signals summer interest rate hike

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