Hungary won’t be last to make bondholders pay
Prime Minister Orban has realized that bankruptcy isn’t such a bad option. It simply means the investors suffer some losses.
He is unlikely to be the last leader to reach that conclusion and that means there is a lot of pain ahead for the financial markets. Much of the debt that was built up in the last decade is, in reality, never going to be re-paid. The investors will have to take some losses, and the economy will have to suffer some austerity. A one-sided deal is not, in the medium term, going to be acceptable.
Hungary may be the first country to make that point, but it certainly won’t be the last.
Hungarian financial crisis would hit Austria hardest
'It's a situation we need to observe carefully,' says Ingrid Krenn-Ditz, a spokeswoman for Raiffeisen Bank International (RBI) in Vienna.
Aside from RBI, Erste Group, Volksbanken AG and Bank Austria, a subsidiary of UniCredit, have all lent large sums of money to Hungary.
The banks have been watching their eastern neighbour for months - it has already caused them massive losses over the past year.
Why Hungary's New Constitution Could Be Bad for Europe
And while it weakens Hungary's economy, the government's move could also imperil the country's membership in the E.U. Former U.S. Ambassador to Hungary Mark Palmer was quoted by the Hungarian newspaper Nepszabadsag as stating that "Hungary's ejection from the European Union is now no longer unthinkable." Former Prime Minister Gyurcsány sees Palmer's words as a shot across the bow. "It is a warning message to Hungary," he says. "'If you don't understand what democracy and western living means, you can't be part of this western club.' ... It would be a real historic defeat if we were excluded from the E.U. It would be a drama for Hungary beyond question."
Gyurcsány says Hungary is in no position to go it alone outside of the E.U. "The change of regime in 1989 was one of the most important achievements in Hungarian history," he says. "And part of that is membership in NATO and the E.U. I have no message for Hungarians other than the western way of life is the only way to make our lives better."
Who Can Save the Left in Hungary?
DK has shown a willingness to cooperate with other liberal and left-wing groups and is fronted by a mix of well-established politicians and energetic young figures.
The breakaway party emerged out of a long-standing tug of war among the Socialists, between those pulling in a nationalist direction and those, like Gyurcsány’s DK followers, promoting a neoliberal platform. But typically for a Hungarian political party, DK has so far focused more on opposing Fidesz than on articulating specific policy choices.
DK is also trying to modernize the left wing, drawing in youth support and first-time voters by tapping into online networks and forums.
Curtain comes down on liberal Hungary
There are hard times indeed for those in Hungary who like to think of themselves as enlightened, liberal, or even remotely left-wing. Yesterday, the concierge at the New Theatre stepped outside into the blustery cold of mid-morning Budapest. "We've only got 26 days left. Then it's all over for us," he explained ruefully. "We are – how do you say – under new management. It's happening all over Hungary and there's nothing we can do."
It is a sign of the times: in just over three weeks, Budapest's New Theatre will start a new season with more patriotic Hungarian plays very different from classics like Don Carlos.
Leading article: Hungary retreats from democracy
By slashing the independence of the judiciary, the central bank and the media, by gerrymandering constituencies and cementing loyalists in key positions for nine-year terms, Mr Orban is ushering in a new age of authoritarian control. His justification is that the socialists he dislodged from power in 2008 had brought the country to the brink of ruin. But inconveniently for Mr Orban, his own medicine is not making the patient better, and Hungary now faces a lively risk of going bankrupt. The hubris of a small, landlocked country, however brilliant and maverick, demanding to go its own wild way would be comical were it not so dangerous.
Hungary's 'Viktator' faces tide of protest at home and abroad
Viktor Orbán's increasingly authoritarian regime has brought thousands on to the streets in protest, with new political movements and even hunger strikes in progress
Viktor Orbán profile: a leader with a talent for dissent
The keen football player likes to be in control: he has built up his conservative-nationalist party, Fidesz, in his own image, handpicking MPs and allowing only a few ultra-loyalists into his inner circle, so few people think a backbench revolt is likely – unless the forint continues to nosedive. In which case all bets are off.
Hungary for junk?
Gosh, Hungary divides sentiment. (It has also, just as we went to pixels, been stripped of its last investment-grade rating by Fitch.)
Despite our saying not once but twice that Hungary isn’t running out of money in its current crisis, people seem to think that we think they are running out of cash to pay off their debt.
They’re not! It’s at heart a stubborn political crisis, and the whole point behind the government’s stubbornness in dealing with the EU and IMF involves their knowing that they have cash to last for awhile. (There might be a tragic contrast here with the Greek bailout by the way…)
Orbán acts to head off more protests
After the forint hit an all-time low against the euro this week, Mr Orbán was by Friday forced to drop his grudging approach to the IMF, insisting Hungary wanted a new agreement as soon as possible.
It may yet prove the first step in another reinvention by Mr Orbán – to head off the risk of further protests, or even a challenge from within his own party.
Orbán fails to address Hungary risks
Hungarian Prime Minister Viktor Orbán's conciliatory tone towards a potential IMF agreement is likely to provide only temporary respite to the troubled country and fails to address the fundamental problems that are still plaguing it, warn analysts.
Last Updated on Wednesday, 11 January 2012 10:37