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EU "standoff" and IMF talks delay "negative" for Hungary, says Moody's

The continuing standoff between Hungary and the EC, now in its third month, is delaying negotiations on "a much-needed support package" from the International Monetary Fund (IMF) and the EU, which is credit negative for Hungary, Moody's Investors Service said on Monday.

In its Weekly Credit Outlook report released to investors in London, Moody's said that although the EC has not explicitly indicated whether future financial support is contingent on compliance with all or some of the outstanding issues, Hungary’s continuing differences with the EU on these issues delays the negotiation of the IMF/EU financial support package.

"We estimate Hungary's gross borrowing needs for 2012 at 16% of GDP (€15 billion), which is the highest in Central and Eastern Europe".

The absence of a support program would make external borrowing "challenging", and the increasing cost of borrowing and fragile investor confidence underscore the necessity of an external support program for Hungary, Moody's said.