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Moody's: no imminent rating action on Hungary

No imminent rating action is planned on Hungary, Moody's Investors Service said on Tuesday. Reacting to widespread market talk about a possible sovereign downgrade, Jonathan Schiffer, Vice President for sovereign ratings, told Econews that "these are just rumours ... we haven't had any discussions concerning this". He said the June package that the Ministry of Finance has put out "has some weaknesses ... it can be a short-term fix, but it's not a good long-term solution and it should be supplemented". "To the best of my knowledge, the ministry has already suggested certain measures in terms of structural reforms on the expenditure side, but I don't think they have actually begun to implement these changes and I suspect that they will not begin until after the local elections". So, "our position is that we're waiting to see what happens in the local elections and, then, what happens after the local elections", Schiffer said. Pressed specifically about any possible rating plans on Hungary, Schiffer said that there is no imminent rating action on Hungary in the pipeline. Moody's rates Hungary at A1, three notches above Standard and Poor's and Fitch Ratings which have downgraded Hungary to BBB+. Asked about the reasons for this substantial gap, Schiffer said the answer is "that our methodologies are different". Hungary's foreign currency rating was raised from A3 to A1, its local currency rating, shortly before it joined the EU in May 2004, a move that effectively integrated foreign and local currency ratings which Moody's applied at the time to all of the eight Eastern European accession countries. Schiffer said the EU accession signified that the Hungarian economy, not just in a formal sense but in a real sense, was being more and more integrated with European economies. He said Moody's still thinks that Hungary's euro-zone accession will eventually happen, although "a bit slower than everybody thought at the beginning". (Econews)