SOUND FAMILIAR? HUNGARY has requested financial assistance from the International Monetary Fund (IMF) and the European Union (EU) on the first anniversary of Ireland’s own bailout request.
Amid a growing crisis in the eurozone, Hungary – which is in the EU but not in the euro – has asked for a “new type of co-operation” with the IMF as its total debt rose to 82 per cent of its output, BBC News reports.
In a statement, IMF managing director Christine Lagarde confirmed the request and said that the IMF’s team in Budapest will return to Washington DC to discuss the matter with the Fund’s executive board.
“The [Hungarian] authorities have sent a similar request to the European Commission and indicated that they plan to treat as precautionary any IMF and EC support that could be made available,” Lagarde said in a statement.
Hungary’s debt burden is one of the highest in Eastern Europe, while its high dependence on foreign financing makes it one of the most vulnerable in the region.
Its currency, the forint, has weakened against the euro and the dollar.
The country received a $25.1 billion IMF-led bailout in 2008, during the previous Socialist-led government. Current Prime Minister Viktor Orban, whose centre-right Fidesz party secured a two-thirds majority in the 2010 elections, decided not to renew a stand by loan agreement last year.
As recently as last Monday, Economy Minister Gyorgy Matolcsy said that “this three-letter institution is opposed to every single one of our steps,” repeating the government view that its “unorthodox” economic policies are not compatible with the IMF’s usual recommendations.
Orban and Matolcsy have often said they preferred not to have a deal with the IMF — even though the market consensus was that such a “safety net” would boost investor confidence — because the lender would impose austerity measures which the government is unwilling to implement.
In a bid to control its debt the government has looked to raise taxes on the banking, telecommunications, energy and other sectors, and has nationalised some billions of euro of assets formerly managed by private pension funds to help it achieve its strict budget deficit targets.
- additional reporting from AP
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