Hungary continued to receive plenty of attention in the international media today. Still, reactions have calmed down as it became apparent that there is no immediate threat of sovereign default. Most coverage sees the government's unwillingness to deal as preparation for the local elections in October.
The Financial Times reported that Hungary had sold HUF 35 billion of three month treasury bills while the target was HUF 45 billion, banking stock across the region were “initially unsettled” by this fact. The yield climbed to 5.47% the highest since March 2, from 5.28%.
European countries outside of the euro zone were affected after scared investors also pushed down the currencies of Hungary’s neighbors such as the Polish zloty and the Czech corona. According to the Warsaw Business Journal, the local stock market rose again on Tuesday morning after investors has begun to worry less about Hungary's ongoing economic woes.
The Wall Street Journal quoted Robert Beange, a senior emerging-markets strategist at the Royal Bank of Canada in London, who thinks that “the markets really want a deal between the IMF, EU and Hungary”. After the crisis in Greece, markets have focused on governments' commitment to strengthening their finances and reining in spending.”
Bloomberg reported from a press conference in Vienna where Hungary’s Economy Minister György Matolcsy said Hungary is seeking a new “precautionary” loan agreement from next year as the current program expires in October. Economic experts in Hungary believe that there won’t be any agreement with the IMF and the EU until October but after that Hungary will not have any other choice.
This year’s October is a key month in the Hungarian economy: local government elections are scheduled for October, and Fidesz will likely to lose votes if they reach a deal with the IMF. Bloomberg cited Esther Law, an emerging markets strategist at Societe Generale SA in London “From the funding perspective, they are in a fairly comfortable situation at least until October, when the loan runs out and they didn’t really draw on it.
Reuters also saw the government's reluctance to give in as a sign of campaigning for local elections. "The government has shown surprisingly little sensitivity to markets since winning a landslide victory in a parliamentary vote in April and analysts say it is unlikely to back down on issues of disagreement with the international lenders to avoid losing face – and votes," the news agency reported. (BBJ)