Moody's recorto de la deuda de Hungria a basura despues de que tuvo que ir a pedir ayuda al IMF.
Hungary Cut to Junk at Moody’s After IMF Plea
By Zoltan Simon - Nov 24, 2011 5:59 PM ET .
Hungary lost its investment-grade rating at Moody’s Investors Service after 15 years as the Cabinet seeks International Monetary Fund help to boost confidence in the European Union’s most-indebted eastern member.
The foreign- and local-currency bond ratings were cut one step to Ba1, the highest junk-level score, from Baa3, the company said today in a statement. Moody’s, which awarded Hungary its investment grade in 1996, assigned a negative outlook. The country is rated the lowest investment grade at Standard & Poor’s and Fitch Ratings.
The government has scrapped two debt sales and reduced the size of another eight auctions in the last three months as the euro region’s debt crisis deepened. Prime Minister Viktor Orban’s Cabinet on Nov. 17 asked for IMF “insurance” that doesn’t entail a loan and doesn’t impose conditions.
“The first driver of today’s downgrade is the uncertainty surrounding the Hungarian government’s ability to meet its targets on fiscal consolidation and public sector debt reduction,” Moody’s said in its statement. “Hungary’s recent requests for assistance from the IMF and the EU illustrate the funding challenges facing the country.”
The forint is the world’s worst-performing currency against the euro over the past six months with a 14 percent drop, and plunged to a record-low 317.92 per euro on Nov. 14. It traded at 313.82 at 7:39 a.m. Tokyo time.
The central bank on Nov. 15 warned it may need to raise interest rates to support the currency.
First EU Bailout
Investors are shunning riskier countries’ bonds as Italy, which has a bigger debt load than Spain, Greece, Ireland and Portugal combined, struggles to ward off contagion from a debt crisis that started in Greece more than two years ago and threatens to infect weaker economies.
Hungary was the first EU member to obtain an IMF-led bailout in 2008 and had the highest government debt level among the bloc’s eastern members last year at 81 percent of gross domestic product.
Since winning elections last year, Orban had rejected obtaining IMF help, saying he wanted more freedom to pursue “unorthodox” policies aimed at cutting Hungary’s debt level, while trying to meet a campaign pledge to end years of austerity measures. Asking the IMF for help would be “a sign of weakness,” Economy Minister Gyorgy Matolcsy told Heti Valasz in its Oct. 27 issue.
Orban’s Measures
Orban’s steps included raising revenue by effectively nationalizing $14 billion of assets held by private-pension funds, levying extraordinary taxes on the banking, energy, retail and telecommunication industries and forcing banks to swallow exchange-rate losses on foreign-currency mortgages. The steps were aimed partly to plug budget holes resulting from a cut in personal income and corporate tax rates.
The Constitutional Court was stripped of its right to rule in most economic issues. An independent Fiscal Council was dismantled and a new one set up dominated by Orban’s allies.
“We want insurance and we don’t want to tie our hands,” in reference to a “new type” of IMF agreement Hungary is seeking, Orban said this week on MR1 radio. “No one can limit Hungary’s economic sovereignty, that’s the basic tenet of the government’s philosophy.”
The government is also carrying out spending cuts, including drug subsidies, and increasing taxes to meet budget goals. The Cabinet announced plans to cut outlays by as much as $4 billion a year by 2013. The government also plans to raise taxes next year, including the value-added tax and excises.
Debt, Deficit
Orban has argued that his “unorthodox” policies are needed to lower debt and reduce the budget deficit to 2.5 percent of gross domestic product next year, below the EU’s 3 percent limit. The Cabinet forecasts 1.5 percent growth next year, which it may cut later this year if Germany, Hungary’s biggest export market, pares its forecast.
Hungary’s economy may expand 0.5 percent in 2012 as the government’s tax and spending measures will probably slow growth, the European Commission, the EU’s executive arm, said on Nov. 10. The debt level may drop to 75.9 percent of GDP this year because of one-off revenue from nationalized pension assets before rising to 76.5 percent next year, partly as a result of a weakening forint, the commission said.
To contact the reporter on this story: Zoltan Simon in Budapest at
zsimon@bloomberg.net To contact the editor responsible for this story: Balazs P