Hungary gets the bailout blues
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Hungary's currency, the forint, has plunged after talks between Budapest, the EU and the International Monetary Fund ground to a halt at the weekend but recently-elected Prime Minister Viktor Orban remains defiant, accusing the international organisations of meddling in Hungary's internal affairs.
The weekend's talks were intended to pave the way for the next installment of a €20 billion euro bailout from the IMF. The original deal was agreed in 2008 at the start of the global financial crisis, on condition that Hungary rein in its budget deficit.
The row centres around the way the new government plans to keep the promises made by its predecessor. The IMF and EU believe the only way the deficit can be cut to below 3.8 percent of GDP is through severe austerity measures.
But Prime Minister Orban has other ideas. He says the Hungarian public has had enough of belt-tightening and instead he wants to raise more revenue by taxing the banks. The EU is strongly against this idea, which it says may generate cash in the short-term, but at the expense of long-term growth and economic stability.
Yesterday Economy Minister Gyorgy Matolcsy indicated that talks with the IMF will restart in September. According to him, the negotiations "did not break down but they have been suspended".
The forint nosedived at the news, but that seems not to have swayed PM Orban. Speaking today he stuck to his guns. "We will keep our international obligations, but it is our business how we will do that," he insisted.
