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Greek virus may infect Hungary

November 3rd, 2011

If the Greek crisis escalates, the Hungarian economy will suffer badly – warns a liberal conservative blogger. The government, he believes, should retreat from its unorthodox policies in order to prevent an economic meltdown

Hungary’s unorthodox economic policies are in the deepest of crises. As the events of the past days have clearly shown, the government will soon have to admit their failure,” Véleményvezér writes.

The news of the Greek referendum on the bailout scheme caused panic in the Hungarian stock market, and the exchange rate of the Hungarian Forint has plummeted. International analysts suggest that Hungary would be among the most affected countries if the Greek crisis escalates.

The liberal conservative blogger contends that the unorthodox policies of the Orbán government put the financial stability of Hungary at risk. By turning down the loans offered by the IMF and de facto nationalizing the compulsory private pension funds (see BudaPost, September 11), the government weakened the international standing of the Hungarian economy. Fidesz wanted to strengthen its image among its voters by advocating independence and self-sufficiency, but the strategy backfired, and now Hungary has become even more vulnerable, Véleményvezér believes.

To make things worse, leading government politicians have sent a clear message, that they would welcome a weaker Forint, once the mortgages denominated in foreign currencies are converted to Forint loans (see BudaPost September 10). Véleményvezér doubts if a weaker Hungarian currency would boost exports and thereby accelerate growth.

As a result of its unorthodox economic policies, Hungary has to pay the highest credit default swap (CDS) on loans after Greece, which shows that international investors seriously consider the possibility of a Hungarian default, Véleményvezér remarks.

“The government has failed to realise that it is gambling with Hungary’s financial stability.” Véleményvezér contends, without outlining, however, what the government should do instead of going down its unorthodox economic path.

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