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Hungary in danger of triggering financial crisis, FT says

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No country within Europe is more vulnerable than Hungary to global financial volatility, London-based Financial Times said on Monday.

The FT said Hungary runs massive twin deficits, each close to 10% of GDP, and its instability could prove to be contagious. “The main problem in central and south-eastern Europe is twin deficits. We cannot yet speak of a 'central European financial crisis'. But there is a real possibility that such a crisis might occur within the next 12 months,” the paper said.
Noting the emphasis placed by Prime Minister Ferenc Gyurcsany on tax hikes to reign in the budget deficit, the FT warned, "A policy based so heavily on tax increases could hurt economic growth and may in turn put additional strains on public finances". The article also highlighted the vulnerability of Hungarian borrowers and banks on the back of increased household borrowing in foreign currencies.

 

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