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Hungary may join ERM II next year

Hungary may be able to join the ERM II exchange rate mechanism as soon as next year and beat its regional peers to the eurozone, a major London-based banking group said on Tuesday.

In its note titled “Top EEMEA Predictions for the Decade Ahead,” Bank of America-Merrill Lynch admitted that “it may seem a bit frivolous to be making 10 year predictions, but these predictions fully reflect our long term secular views on EEMEA.”

Among the highlights of the report, BoA-ML says that after the 2009 crisis, eurozone accession again looks much more attractive. “Surprisingly, Hungary may be first and could join ERM II as soon as 2011 and the eurozone in 2014 ... the Czech Republic, Poland and finally Romania follow with a lag after they have brought their fiscal house in order.”

“Most investors we meet are surprised by the scale of fiscal recovery Hungary has achieved to date,” it added.

In an earlier note released in London last week, Bank of America-Merrill Lynch said that Hungary has seen a “massive” underlying fiscal improvement over the past few years and its fiscal position is now among the strongest in the world.

Other City-based analysts maintain more downbeat views about Hungary's potential euro adoption outlook.

In a note recently published in London, HSBC said that Hungarian officials may decide to enter the ERM II mechanism only after exiting the EU's excessive deficit procedure successfully, even though this is not a prerequisite. This suggests 2012-13 as a potential date for ERM II entry, paving the way for euro adoption in 2014-15 at the earliest, HSBC said. (MTI-ECONEWS)