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Hungary takes out 2.5 billion EUR loan

November 25th, 2020

An independent financial analyst agrees with the Prime Minister that Hungary can secure cheap loans and finance the country even without the EU reconstruction fund, which for the moment has been blocked by Hungary and Poland.

On Portfolio, Károly Beke wonders whether Hungary could secure cheaper loans through the  proposed EU reconstruction fund. Beke recalls that last week, Hungary sold 2.5 billion EUR worth of bonds at historically low rates (10 year 1,25 billion EUR bond with an annual interest rate of 0.5 per cent, and a 30-year 1.25 billion EUR one at 1.5 per cent yield), which the Prime Minister interpreted as proof that the Hungarian economy is stable and the country can get loans without the help of the EU. Beke agrees that the interest rates are due to the Hungarian economic achievements, but he believes that the same loans could be slightly cheaper if Hungary got them through the EU reconstruction fund – the money that may be blocked by Poland and Hungary unless there is an agreement on the controversial rule of law conditionality of EU funds (see e.g. BudaPost, November 19). Beke notes, however, that the Hungarian state will need new loans before state bonds mature in 2021, and therefore cannot wait in any case until even cheaper loans are available through the EU. Beke adds that the government might also prefer to pay a small premium on loans that are not conditional on the EU’s rule of law criteria.

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