The collapse of Hungary's talks with the International Monetary Fund and the EU is a chilly reminder that sovereign debt crises do not end with a rescue package and a click of the fingers. As austerity drags on for year after year, democracies react.Hungary IMF talks suspended, Finantial Times, 18/07/2010:
We told the IMF/EU that further austerity was out of the question," said Hungary's economic minister Gyorgy Matolcsy, offering no hint that the Fidesz government is willing to back down despite yesterday's surge in Hungarian default costs by 51 basis points.
The Fidesz movement – an amalgam of libertarians and nationalists (...) – won a crushing victory in April on a campaign of defiance against both Brussels and the IMF. It has been spoiling for a fight ever since.
Lars Christensen, of Danske Bank, said events in Budapest are a warning of what may happen in the Baltics later this year, and then in Greece and other parts of EMU-periphery forced to undergo wage cuts and harsh fiscal tightening.
"It is incredible how long Hungary has been struggling to get over its imbalances. It first began austerity measures in 2006, but four years later is still not out of the crisis and there is massive discontent. The Greek problem is even bigger by any measure, whether budget deficit, current account or public debt," he said.
Hungarian assets could come under selling pressure on Monday after the International Monetary Fund and European Union postponed the conclusion of a budgetary review in Budapest, insisting that the government must rethink its proposals.Já agora, o que poderemos dizer do estado da "esquerda" europeia, quando é um governo da direita mais conservadora o único a desafiar a bíblia da austeridade a todo o custo?
Although Hungary is not in urgent need of IMF financing, the failure of the negotiations could unsettle investors who are uneasy about the country’s debt levels.
The talks had been expected to conclude early this week but were dogged from the outset by reports of serious disagreements between the IMF and ministers
The government had indicated before the talks that it would like to agree another precautionary IMF-EU facility for 2011 and 2012. However, this was not discussed because of the outstanding budgetary issues.
Analysts speculated that the government, which holds a two-thirds parliamentary majority following a landslide election victory in April, wants to delay unpopular spending and revenue decisions until after key regional elections in October.
Nevertheless, Peter Attard Montalto at Nomura described the breakdown of talks as a “very rare event … countries usually go out of their way to satisfy these missions.”