Hungary's forint, bonds fall on protests against PM
Wednesday, September 20, 2006, 13:19
Hungarian protesters gathered in front of the parliament for the third day, demanding the resignation of Prime Minister Ferenc Gyurcsány, who admitted lying in an election campaign. The premier said he won't resign and appealed for calm. Standard and Poor's said yeaterday a government collapse may delay budget cuts and affect the country's rating. „For us it's a very serious local crisis,” said Lars Christensen, man emerging markets strategist at Danske Bank A/S in Copenhagen. „We recommend selling the currency, and reducing exposure in the country.” Against the euro, the forint fell as much as 1.5% and traded at 272.83 4:22 p.m. in Budapest, from 270.71 late yesterday. Christensen expects the currency to reach 280 per euro in three months. The yield on Hungary's benchmark 6% bond due October 2011 advanced 8 basis points to 7.85%. The price, which moves inversely to its yield, fell 0.31 or Ft 31 per Ft 10,000 face amount, to 92.50. About 10,000 demonstrators yesterday hurled stones and bottles at a police cordon, following his admission that he misled voters about spending before April elections.
On a tape, leaked to several media outlets on September 17,
Gyurcsány later published the full text in his Internet diary. He was calling for the start of a cleansing process in Hungarian politics, he said. „The anti-government protests themselves, or a resulting change in the composition of the government, could weaken the resolve or effectiveness in pursuing reform and fiscal consolidation plans,” S&P said a statement, „which could eventually lead to the ratings being lowered.” Gyurcsány is seeking to cut the deficit from the equivalent of 10.1% of gross domestic product this year to 3.2% in 2009 as part of preparations for eventual adoption of the euro. The government has pledged to raise taxes, boost regulated energy and drug prices and cut government jobs to reduce the shortfall. (Bloomberg)