Arab Today, arab today stricken hungary wants quick imf deal
Last Updated : GMT 08:53:10
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Stricken Hungary wants quick IMF deal

Arab Today, arab today

Arab Today, arab today Stricken Hungary wants quick IMF deal

London - AFP

The Hungarian minister handling stalled bailout talks with the IMF said Thursday he wanted a deal \"as soon as possible\", as Hungary\'s currency touched a new record low and borrowing costs soared. \"It is the firm intention of the government to reach a deal with the IMF as soon as possible,\" Tamas Fellegi, who is due to meet International Monetary Fund officials in Washington on January 11, told journalists. \"The government is aware of the gravity of the situation and of what is at stake in talks with the IMF,\" he added. IMF and European Union officials broke off negotiations last month about a possible credit line of 15-20 billion euros ($20-25 billion) because of worries about the independence of the central bank under a disputed new constitution. The constitution also removes vital checks and balances on the power of Prime Minister Viktor Orban, increases his government\'s influence on the judiciary and skews the voting system in his favour, critics at home and abroad say. Orban, whose government with a two-thirds majority in parliament denies wanting to reduce the independence of the central bank, has dubbed the IMF talks \"important but not essential\". Hungarian Economy Minister Gyorgy Matolcsy told European Central Bank head Mario Draghi -- another critic -- in a letter seen by AFP on Thursday that the legislation was \"fully compatible\" with EU law. But pressure on the ex-communist EU member state to reach a deal is growing, with the local currency slumping to new lows while the cost of insuring against default soared to new highs. The forint on Thursday slipped further to 324 forints to the euro, and failed to recover substantially later in the day, ending the trading day at 319.71 forints to the single currency, compared with Wednesday\'s 320.27 closing level. Illustrating investor concern, Hungary was forced to pay a yield of 9.96 percent in an auction of one-year treasury bills in an auction on Thursday, up sharply from 7.91 percent at a similar sale on December 22. The lack of investor demand also prompted the state debt management agency AKK to reduce the volume of the bonds on offer to 35 billion forints (109 million euros, $140 million) from a hoped-for 45 billion forints. The risk is seen as so acute that both Standard & Poor\'s and Moody\'s credit agencies have \"junk\" ratings on Hungarian debt. On the secondary market, yields on 10-year bonds ended the day at 10.7 percent, up from Wednesday\'s 10.6 percent. The main stock index lost 2.11 percent. \"Markets are increasingly pricing in the failure of the negotiations with the IMF,\" Commerzbank analyst Lutz Karpowitz said in a research note. \"Even if the government continues to sound optimistic the differences between Budapest and the international community now seem impossible to overcome.\" Societe Generale economist Benoit Anne was equally gloomy: \"The fundamentals have deteriorated in a major way in Hungary, and we do not believe that the authorities will manage to secure an IMF programme any time soon.\" \"The EU is extremely concerned about the latest political developments and the potential EU response will -- no doubt -- be harmful to investor confidence.\" European Commission spokesman Olivier Bailly told a news conference in Brussels Thursday that central bank independence was enshrined in EU law, and that it was vital not just for Hungary but for the whole 27-nation bloc. \"Through this European system the central banks work together, exchange information, exchange money and ensure financial stability for all the EU,\" Bailly said. \"If one member is perceived as not being fully independent this would create a problem for the whole EU.... That is why we need full assurance that the Hungarian central bank is fully independent.\" Official figures released Thursday showed banks having to swallow 540 million euros in losses because of a government scheme allowing holders of mortgages in foreign currencies to repay early and at artificial exchange rates.

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