Possible scenarios still range from quick IMF deal to no deal, says City

In its CEEMEA Macro Monitor report released to investors in London, Morgan Stanley sketched out three scenarios with "subjective" probabilities attached.

In the best, "bull case" scenario that carries a "subjective probability" of 25% Hungary "gets the all-clear" from international lenders and formal negotiations on a new IMF/EU financing package can start "very soon", and Hungary could see a package announced by mid-year.

In Morgan Stanley's "base case" scenario, with a "subjective probability" of 40%, there remain "sticking points", but progress has been made. In this case, Hungary has not cleared 100% of the issues but has done just enough to at least start the official talks.

It is possible that a few changes may be required to the MNB Act or to the judiciary, which would further postpone the official start of negotiations. The official talks could therefore begin "some time in May/June" and the assistance package eventually gets announced by July-August.

The worst, or "bear case" scenario – "subjective probability": 35% - could see the EC sending two of the outstanding issues to the European Court of Justice, resulting in the talks breaking down, and the deal getting delayed "indefinitely". Also, the ECB could issue a negative opinion of the proposed MNB changes, which would cause a further delay, rendering formal negotiations unlikely to start.

Also, under this scenario, if risk appetite is sufficiently benign, there is a risk of Hungary pulling out of the talks entirely on the grounds that it can fund itself on the market even without a safety net.