Moody's Downgrade Does Not Matter

Created: 14th December, 2010 12:36 | Last updated: 14th December, 2010 12:47	print	send

According to the report, the Moody's decision did not affect the money markets and it had very limited impact on the forint. Hungary's five-year Credit Default Swap (CDS), at 385 basis points at present, is far below the figure in the first quarter of 2009 and much lower than 640, which occurred during the peak of the global financial crisis.

The German newspaper cited Fritz Mostböck, the leading analyst of Erste Gropup in Vienna, who noted that the credit rating firms are becoming less credible. They always pull the emergency brake when the facts are obvious. It happened in the cases of Greece and Portugal, noted the analyst.

Wolfgang Ernst, analyst of Raiffaisen Zentralbank, also did not want to overrate the downgrading. If Viktor Orban starts the necessary structural reforms and the government manages to put public finances on a sustainable footing, the credit rating firms may not cut Hungary below the non-investment (junk) grade.

The Franfurter Allgemeine Zeitung published an interview with Zoltan Csefalvay entitled "Hungary does not need any more money from IMF." In the article, the state secretary defended the government's decision concerning the mandatory private pension funds and refused the accusation that Hungary violated the rules of a market economy. The private pension fund assets will be used to fill in budgetary holes and reduce public debt until 2012, said Zoltan Csefalvay.

According to the state secretary, Hungary will belong to the group of 5 EU-member countries, which fulfil the requirements of Maastricht criteria. The government's forecast for a 3% economic growth next year is achievable; moreover, it may turn out to be stronger than that.

Thanks to the new tax reform package, every income category will profit and no one will earn less than before. The state also profits by limiting tax avoidance.

"We don't need any help. Hungary has been able to finance its debt via money markets since August 2009. We used only two-thirds of the total 20 billion euro stand-by loan. We are going to pay back the money we borrowed." - responded Csefalvay about the suspended IMF talks with Hungary.