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

Philippines, Muslim Rebels Try to Salvage Peace Pact

Peace process faces major setback after botched military operation to find terrorists results in bloody gunbattle between government forces, Moro Islamic Liberation Front fighters More

Republicans Expect Long, Expensive Presidential Battle

Political strategist says eventual winner will be one who can put together strongest coalition of various conservative groups that make up Republican Party More

Video New Wheelchair Is Easier to Use, Increases Mobility

Engineers have come up with a lever-operated design that makes use of easily accessible bicycle technology 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.
Film Tells Story of Musicians in Mali Threatened by Jihadistsi
X
Greg Flakus
March 30, 2015 6:48 PM
At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video Film Tells Story of Musicians in Mali Threatened by Jihadists

At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video With Coalition Airstrikes, Iraq Entering 'Last Page' of IS Battle

American warplanes joined Iraq's battle against the so-called 'Islamic State' in northern Iraq late Wednesday, as Iraqi ground troops launched a massive assault on Tikrit. Analysts say the offensive could take the coalition a step further towards Mosul, the largest city held by Islamic State forces. Others say it could also deepen already-dangerous sectarian tensions in the region. VOA's Heather Murdock has more from Cairo.
Video

Video Philippines Wants Tourists Spending Money at New Casinos

Tourism is a multi-billion dollar industry in the Philippines. Close to five million foreign visitors traveled there last year, perhaps lured by the country’s tropical beaches. But Jason Strother reports from Manila that the country hopes to entice more travelers to stay indoors and spend money inside new casinos.
Video

Video Civilian Casualties Push Men to Join Rebels in Ukraine

The continued fighting in eastern Ukraine and the shelling of civilian neighborhoods seem to be pushing more men to join the separatist fighters. Many of the new recruits are residents of Ukraine made bitter by new grievances, as well as old. VOA's Patrick Wells reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Hi-tech Motorbike Helmet's Goal: Improve Road Safety

In cities with heavily congested traffic, people can get around much faster on a motorcycle than in a car. But a rider who is not sure of his route may have to stop to look at the map or consult a GPS. A Russian start-up company is working to make navigation easier for motorcyclists. Designers at Moscow-based LiveMap are developing a smart helmet with a built-in navigation system, head-mounted display and voice recognition. Zlatica Hoke has more.
Video

Video DOJ: Illinois National Guard Soldier Tried to Join ISIS

U.S. federal law enforcement agents arrested two suburban Chicago men accused of trying to join ISIS overseas, while also plotting attacks in the United States. As VOA’s Kane Farabaugh reports from the Midwest state of Illinois, one of those arrested is a soldier of the Illinois National Guard.
Video

Video New Wheelchair Is Easier to Use, Increases Mobility

Traditional push-rim wheelchairs create a lot of stress for arm, shoulder and neck muscles and joints. A redesigned chair, based on readily available bicycle technology, radically increases mobility while reducing the physical effort. VOA’s George Putic reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.

VOA Blogs

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More