Entries RSS Feed Share Send to Facebook Tweet This Accessible version

Is Hungary gambling with the IMF talks?

March 23rd, 2012

A conservative critic of the right-wing government fears that Hungary’s rulers think they can get away without an IMF credit line agreement.

“The Hungarian government deduces from the short term international financial euphoria that it is worth trying to gamble again,” Véleményvezér complains.

Mr Tamás Fellegi, the Cabinet Minister in charge of  the credit line talks with the International Monetary Fund told the press in Washington last week that progress had been made at his meetings with IMF officials on the need to focus the talks on economic issues. Before the IMF can engage in actual negotiations on the credit line, it needs a green light from the European Commission, which is giving the Hungarian government a hard time with its constitutional and political objections, on top of the excessive deficit procedure, recently stepped up against Hungary. Now Irina Ivaschenko, the IMF representative in Budapest has commented that no progress has been made whatsoever on the prerequisites for the negotiations. Reacting to rumours questioning Hungary’s intention to conclude a credit line agreement with the IMF (see BudaPost, November 24, 2011), Mr Fellegi also told newsmen that Hungary “had no intention of playing the Turkish card” . (A decade ago, Turkey conducted prolonged talks with the IMF to reassure the markets, thereby lowering the interest burden on her sovereign debt, and when market conditions improved, Ankara announced that it needed no help from the Fund after all.)

Véleményvezér believes, however, that the government is not a hundred per cent resolved to press ahead with the IMF talks. Each time it detects some improvement in the international financial atmosphere, it is tempted to believe that all in all, the IMF standby credit is not that vital. But, the conservative blogger remarks, today’s increasing international money supply is not due to improving fundamentals. It is the issuing banks, including the European Central Bank that have generated liquidity in the banks which buy bonds and shares, instead of crediting new investment. That does not mean that Greece will not go bankrupt or that Italy and Spain can avoid a major financial crisis. Véleményvezér also believes that forthcoming elections in France, Germany and the United States might jeopardize the delicate market balance. As he sees it, the Hungarian government seems to think that the momentary calm is here to stay. As proof he quotes a statement by Professor László Csaba, an economist who is believed to be an advisor to the government, who said market conditions will remain favourable and Hungary might eventually not need the IMF credit. Véleményvezér warns that “the government risks being trapped by its own desires.”

Tags: , , ,