News / Europe

Hungary Condemns 'Junk Status' Credit Rating Downgrade

Hungarian Economy Minister Gyorgy Matolcsy looks on before his meeting with Hungarian economists in Budapest, November 25, 2011.
Hungarian Economy Minister Gyorgy Matolcsy looks on before his meeting with Hungarian economists in Budapest, November 25, 2011.

Hungary has condemned a decision by the Moody's Corporation to downgrade the country's credit rating to a non-investment "junk" status. Moody's decision was made after Hungary asked the International Monetary Fund and the European Union for possible financial aid as it suffers from the debt crisis in the 17-country eurozone, even though it does not use the euro currency.

Moody's, one of three international credit agencies, says uncertainty over the Hungarian government's ability to fulfill its debt reduction plans, and the country's vulnerability to external shocks, are among reasons for Thursday's downgrade.

It also notes that foreign investors hold over 60 percent of Hungary's bonds, of which two-thirds are in foreign currencies. A weaker Hungarian currency, the forint, makes it more expensive for Hungary to pay back these foreign-currency loans.

But the Hungarian Minister of State for National Economy, Zoltan Csefalvay, says that he views Moody's move to give Hungary's credit rating "junk" status as an unjustified financial attack on his nation.

"I am really surprised because if you look at the fundamentals of the Hungarian economy and the significant efforts we have made in the last one-and-half years, we reduced significantly the public debt. We reduced also the deficit. So this means that the Hungarian economy as a whole is in a very good shape," Csefalvay said.     

The minister adds that he realizes Hungary has to do more to, in his words "solve this problem" in the next few years.

Yet, analysts expected the downgrade. The head of research at Raiffeisen Bank, Zoltan Torok, has told VOA News that Hungary's junk status is only partly due to its exposure to the mounting debt crisis in the 17-nation eurozone.

He says there is also international concern about the right-of-center government's controversial fiscal policies.

They include nationalizing private pensions for some 14 billion dollars, a recently introduced "crisis tax" on predominantly foreign owned companies and a banking tax on financial institutions.

And, Torok says, especially international banks are forced by the government to potentially accept at least hundreds of millions of dollars in losses on foreign currency loans.  

"It made possible early repayment of ((for instance)) the Swiss franc mortgages at a preferential exchange rate. This means, that currently the Swiss franc-Hungarian forint exchange rate is about 250. And the government said that each bank has to make possible a repayment at a preferential rate of 180. And all these losses should be taken by the banks," Torok said.  

Eight banks have urged the EU's executive body, the European Commission, to intervene and Hungary's banks also asked the Constitutional Court to stop the debt-relief program. Hungarian authorities raided banks this week for allegedly undermining the loan arrangements.       

Moody's downgrade adds to the series of setbacks for banks and Hungary as a whole.

Hungary was in the 1990s the darling of foreign investments in the emerging countries of Central and Eastern Europe. But it later faced the region's highest debt, some 80 percent of gross domestic product at the end of 2010, and other economic turmoil.

Those troubles were partly due to heavy expenditures on cradle-to-grave social security, a lack of structural reforms, and the global financial crisis.    

In 2008 Hungary became the first European Union nation to receive a 25-billion-dollar rescue package from the International Monetary Fund, EU and World Bank.   

Recently elected Prime Minister Viktor Orban broke off talks with the IMF and EU on a new credit-line, saying Hungary would no longer accept what he called “diktats” from these institutions in future negotiations.  

Mr. Orban especially opposes austerity measures and other tough reforms often associated with IMF-led loans.

But with the Hungarian forint now the world's worst performing currency, and Europe in turmoil, the government again turned to the IMF and EU last week to receive precautionary financial assistance, admits Minister Csefalvay.

"I think Hungary is able to finance itself on the markets. But a safety net gives an additional security and additional safety. And ((in)) particular in this very, very turbulent time, the country needs this kind of safety net," Csefalvay said.

Moody's says the request for some kind of assistance from the International Monetary Fund and the European Union "illustrates the funding challenges" facing this nation of 10 million people.

Two other agencies, Fitch and Standard and Poor's, are also considering downgrading Hungary's credit rating, but still give the government some time.    

Hungary's plight also affects other nations in Central and Eastern Europe. After the announced Hungarian downgrade, weakening of national currencies were seen in Poland and the Czech Republic.

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs