PM's victory in confidence vote is a market positive, but fiscal risks persist

Elections

The confidence vote won by Prime Minister Ferenc Gyurcsány in Parliament by a comfortable margin will support Hungarian assets, but risks of the austerity package being watered down in the wake of a steep slump in public support for the coalition still persist, London-based emerging markets analysts said on Friday. Dwyfor Evans, Vice President for emerging markets strategy at Bank of America, told Econews the outcome had an instant beneficial impact on the forint as €/Ft fell by Ft 1 to Ft 272.50 in the immediate aftermath of the confidence vote. "Even though we certainly believed that a prime ministerial victory in the confidence vote is already priced in, we seem to underestimate the fact that the market now sees this as quite a positive (factor) to the whole austerity program". "Had he lost the confidence vote - not that this was in any way a realistic option - that would have put the entire austerity program up in the air again", he said. The market is now "beginning to believe" that this government is now going try and tackle the fiscal deficit problem, Evans said. (Bloomberg, Magyar Hírlap)

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