Hungary hints at toning down policy to push EU/IMF 'safety net' through
HUNGARY'S government said yesterday that it might moderate some widely criticised policies to please international lenders and reach a deal to prevent its currency and bonds from going into meltdown.
Since sweeping to power in 2010, Viktor Orban's conservative Fidesz party has tightened its grip on the media and the top constitutional court, taken over private pension funds and dismantled an independent budget oversight body.
It has also fallen out with the IMF and EU over a law curbing the independence of the central bank, jeopardising aid talks and frightening investors who say a bailout is necessary to stop markets freezing up.
Top Hungarian officials acknowledged yesterday that a deal was urgently needed and signalled they were open to concessions on some policies, but said they would go it alone if no deal was reached.
State secretary Gyula Plesch-inger, another member of the negotiating team, said Hungary aimed to reach an agreement on a credit line with the IMF and the EU to act as a safety net.
"As we have announced to the markets that we intend to sign an agreement with the EU and the IMF, if we could not reach a deal that would be a bad message to markets," she said.
The comments came after Hungary cancelled a bond swap auction because borrowing costs were too expensive.
The forint currency has plummeted to new lows and the price of insuring Hungarian debt has soared since the ruling party won backing for the law curbing central bank independence last week.
Talks on a multi-billion dollar aid deal collapsed last month in a row over the central bank legislation. EU officials had repeatedly told the government to withdraw the law.
Officials will visit Washington for talks with the IMF next week and then go to Brussels. They are also planning trips to Germany and France to make sure the discussions go smoothly.
The officials said Hungary would still manage to finance itself on financial markets if an agreement was not reached.
But Hungary, which faces a possible recession, must roll over nearly €5bn worth of external debt this year on top of forint maturities as it begins repaying an IMF/EU loan that saved it from financial collapse in 2008.