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Hungary grabs world spotlight with IMF negotiations

Hungary is in the spotlight of the international financial media after the IMF and the EU suspended negotiations over the €20 billion loan package which was agreed in late 2008.

The Financial Times reports that the suspension came after the IMF told Hungary that 2011 deficit target should be lower than 3%.

“The rebuke to Hungary represents a warning to governments across Europe” said the Wall Street Journal. The paper cited Timoty Ash from the Royal Bank of Scotland saying that the strategy of the IMF is “potentially dangerous”.

According to the Bloomberg Businessweek the suspension in the talks is a blow to Viktor Orbán's efforts to rebuild investor confidence. “This is definitely negative for bonds and negative for the currency, both in speculative terms and in real flows,” Peter Attard Montalto, an economist with Nomura international Plc in London, said to Bloomberg Businessweek. “For an IMF statement, it’s pretty damning. This supranational cushion behind Hungary is actually far softer than people realize.