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Dresdner envisions possible coalition split in Hungary

Experts of Dresdner Kleinwort’s London investment house have recently visited Hungary and had talks with government and central bank officials.

They found that the governing coalition is still committed to reforms but their cooperation is worse than Dresdner Kleinwort’s expected, writes emerging analyst Raffaella Tenconi. Though the break-up of the coalition is unlikely, the risk of a serious change in the governing coalition has increased. Any serious alterations, whether the split or a Socialist takeover of the Health Ministry, would do tremendously harm to the forint, writes Tenconi.

Junior governing party SzDSz’s chairman, János Kóka might risk leaving the coalition in an attempt to enhance personal support within the party and to improve the liberal’s approval ratings. Dresdner finds it unlikely that the government should modify the trading band of the forint, or cancel it in 2008. The mid-value of the band might be shifted in 2008, as soon as the signs of the budget consolidation are more conspicuous and the cooperation of the coalition is better. However, this is less probable than a month ago. (Gazdasági Rádió)