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Hungary's debt costs soar as doubts on aid rises

Hungary's failure to secure an international bailout has pushed the cost of insuring its debt against default above that of Ireland for the first time since September 2010.

The chart shows that credit-default swaps on Hungary rose to 720 basis points in London yesterday, compared with 709 for Ireland, according to CMA, which is owned by CME Group and compiles prices quoted by dealers in the privately negotiated market.

Hungary's default swaps surged to the highest on record yesterday and the forint weakened to an all-time low versus the euro after Citigroup said an International Monetary Fund deal is unlikely in the next six months and European Commission spokesman Olivier Bailly said the European Union has no plans to resume aid talks.

The EU and the IMF broke off discussions last month as Hungary moved to pass laws that threaten central bank independence in the EU's most indebted eastern member.

Hungary is "playing hardball with the IMF and the European Commission and the administration is very unpredictable, which the market doesn't really like," Timothy Ash, a London-based economist at Royal Bank of Scotland, said in an interview yesterday.

"The Irish have worked hard to work with the commission and the IMF."

The cost to insure Ireland's debt has dropped from a peak of more than 1,100 basis points reached in July.

The European Commission said last month that Ireland has made progress in containing its budget deficit and will receive €4.2bn in European funds in January as part of a rescue programme.

Irish Independent