„Over the medium term, that is in the next year or two, risks are to the downside,” Kraemer, a managing director at Standard & Poor’s, said in an interview during a conference in Brussels organized by the European Primary Dealers Association. „The needed adjustment is so incredibly large that it will be difficult for the government.” Hungarian Prime Minister Ferenc Gyurcsány raised taxes and cut subsidies to slash the European Union’s widest budget deficit. The government will submit its 2007 budget draft to lawmakers next week.
Anti-government pressures, partly a result of the measures, turned into riots several times the past month. The European Union earlier this month endorsed Hungary’s Convergence Program, which details deficit-cutting plans through 2009. Gyurcsány aims to cut the budget shortfall to 3.2% of gross domestic product by then from an estimated 10.1% this year. The plan is „too ambitious,” Kraemer said, though should Hungary manage to fulfill its objectives, „the rating will be safe,” he said. The forint fell to 262.82 per euro by 1:50 a.m. in Budapest from 262.57 late on Tuesday.
Kraemer’s comments come a month after Moody’s Investors Service placed Hungary’s credit rating on review for a possible downgrade and Fitch Ratings cut its outlook to negative from stable because of concern that the government won’t be able to execute its program. Hungary’s largest opposition party, Fidesz, on October 23 demanded a national vote within five months to block key parts of the government’s measures and economic reforms. The governing coalition yesterday pledged to go through with the deficit-cutting plan. (Bloomberg)
