HUNGARY’S GOVERNMENT says it is under “financial attack” after a major credit rating agency downgraded the country’s debt to “junk” status, further undermining Hungarian prime minister Viktor Orban’s claims to have put the nation on the road to recovery.
The downgrade further weakened Hungary’s forint currency and increased pressure on Mr Orban to secure emergency help from the International Monetary Fund. He scrapped talks with the IMF last year and rejected foreign involvement in shaping his unorthodox economic policy.
The populist centre-right government, dominated by Mr Orban’s Fidesz party, vowed to reclaim Hungary’s “economic sovereignty” when it took power in spring 2010. Since then, Mr Orban has slapped a special tax on mostly foreign-owned businesses, as well as nationalising pension funds and forcing banks to absorb losses on foreign-currency mortgages that Hungarians are struggling to repay as the forint weakens.
The government insists the economy of the EU’s most indebted eastern member is recovering. But Moody’s questioned Hungary’s growth prospects and its ability to meet fiscal targets and cut debt, especially with the forint sliding and borrowing costs rising.
Hungary – which secured a €20 billion bailout from the IMF and EU in 2008 – has been forced to scrap or scale back several recent bond auctions and yields have soared. “Since the decision by Moody’s has no basis in reality, the Hungarian government can only interpret this as being part of a financial attack against Hungary,” the economy ministry said.
“The forint’s weakening is not justified by either the performance of the Hungarian economy or the shape of the budget.”
The government says it is investigating the “speculative attacks” it claims are dragging down the forint – which has lost some 15 per cent of its value against the euro since June – and has blamed “contagion” from the euro zone.
Many economists say the government must take much of the blame, however, for failing to fulfil its promise to spur growth, spooking foreign investors and rejecting international help.
The government said this week it had requested possible “precautionary” IMF and EU assistance.