Forint drops on concern Hungarian premier Gyurcsány may leave
When the Socialists lost their majority in 15 of 19 county assemblies, opposition leader Viktor Orbán and President László Sólyom both called yesterday for the premier to step down. Gyurcsány, who is raising taxes and axing subsidies to curb the European Union's largest budget deficit, today asked for a vote of confidence on October 6. „There's a real danger to the prime minister himself and to the austerity program,” said Paul McNamara, who helps manage almost $7 billion of global assets at Julius Baer Investment Management in London. „This poses severe threats to the forint.” Against the euro, the forint slid as much as 1.1% to 275.83 and was at 275.13 at 5:38 p.m. in Budapest, from 272.95 on September 29. The currency may drop to beyond 285 per euro this week should the market assume the premier's position is endangered, McNamara said. Gyurcsány, speaking at a press conference in Budapest, said the vote will decide on the austerity plan, which he pledged to continue. He said he has the support of coalition party leaders. The Socialists and Free Democrats have a 34-seat majority in the 386-member parliament. The Socialists are expected to give unanimous support to Gyurcsány when their lawmakers meet tomorrow, Ildikó Lendvai, head of the party's parliamentary group, said at a press conference in Budapest on Monday. Sunday's election results represent Gyurcsány's first defeat since he took over the Socialists in September 2004 and led them to a second consecutive victory in April. Street clashes and demands for Gyurcsány's resignation lasted two weeks before the elections. Fidesz, the biggest opposition party, called on the Socialists to hold a no-confidence vote against Gyurcsány within 72 hours and dismiss him from the post, Fidesz Chairman Orbán said at a press conference. The yield on Hungary's benchmark 6% bond due in October 2011 reached a three-month high, gaining 13 basis points to 8.26% at 5:40 p.m. in Budapest. The price, which moves inversely to the yield, declined by 0.49, or Ft 49 per Ft 10,000 ($46) face amount, to 90.99. (Bloomberg)
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