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

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the US are seeing gas prices dip below $3 a gallon More

Afghan Women's Soccer Team Building for the Future

A four-team female league was recently set up in Kabul; It will help identify players for the national team More

Video Koreas on Edge Amid Live-fire Drills

Pyongyang threatens nuclear test as joint US, S. Korean exercises show forces’ capabilities 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.
New Skateboard Defies Gravityi
X
November 21, 2014 5:07 AM
A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.

All About America

AppleAndroid