Are you sure?

Hungary, EU shift towards compromise?

Prime Minister Viktor Orbán reiterated that Hungary will not back down from introducing a special tax on the finance sector and showed he is unimpressed by the criticism targeted at his government for the collapse of talks with the International Monetary Fund over the weekend.

Speaking to the press on an official visit to Germany, Orbán clearly pointed out that any revisions Hungary has to make regarding its economic plans, it has to coordinate with the EU and not with the IMF. He also stressed that Hungary will meet its deficit commitments, but it considered the how its own business.

Although German Chancellor Angela Merkel strongly hinted her disapproval of Hungary’s handling of the IMF matter, the term “compromise” was also uttered repeatedly during the day.

European Internal Market Commissioner Michel Barnier said that the EU and Hungary will be able to hammer out a “strict compromise” that will clear the air.

“We will continue to work (with Hungary). We expect this constructive spirit of cooperation from Hungary in order to find strict but at the same time effective compromises on issues outstanding.” Barnier will be meeting Orbán on Thursday.

Orbán’s deputy chairman of the governing Fidesz party Lajos Kósa also expressed Hungary’s willingness to meet the IMF and EU half way, but also stressed there is no option for a complete surrender.

Kósa noted that the IMF was prescribing a deficit target that is smaller than any EU member state for Hungary, a country in one of the most difficult positions in the EU. “The IMF has to watch out not to lose touch with reality,” he said.

Opinions on the motives behind Orbán’s perceived obstinacy against implementing further austerity and giving the IMF guarantees on deficit goals have become diversified since.

Reuters’ coverage of the affair mostly reflects the general opinion, namely that the government is just playing a tactic so as to postpone any news of stringency until after local elections are held in October.

A Financial Times blog on the other hand attributes the end of the forint’s plight to markets “forgiving” Orbán and instead taking his side, since Hungary is an unwilling casualty of the rigor sparked by the bigger problems of the eurozone.

However, the blog entry’s author is also quick to point out that the sympathy which can be derived from latest market developments may just as quickly evaporate. (BBJ)