Don't try to do without IMF, Fitch tells Hungary
LONDON (Reuters) - Fitch Ratings warned Hungary on Wednesday not to go without International Monetary Fund support after months of wrangling which has failed to resolve the future of talks on a financing deal.
Pressed on the issue, the head of Fitch's Emerging Europe sovereigns unit did not say whether Fitch would cut Hungary's 'BB+' sovereign rating if the indebted central European country failed to secure a financing backstop.
But he did say the negative outlook on the rating - which signals a cut is possible - would remain in the event the talks collapse.
"Recently there has been some talk of Hungary going it alone, that would bother us. They do have weaknesses, there is a lot of market volatility and they wouldn't be well-placed to deal with that," Paul Rawkins told a conference in London.
Asked if Fitch would cut, he later added: "It would certainly mean that the outlook would remain negative. The concern would not just be the concern about repaying IMF money, it's also EU money."
Prime Minister Viktor Orban, whose government first signaled its plan to secure a multi-billion euro loan from the IMF and European Union nearly a year ago, said on Tuesday Hungary may still go it alone next year.
He said the issue of whether "junk-rated" Hungary, which needs a safety net to curb borrowing costs and rebuild market confidence hurt by years of unorthodox policies, would strike an IMF deal would be decided by the first quarter of 2013.
While Orban continues to talk tough for his domestic audience, Hungary did move one step closer to an agreement last week by abandoning a planned tax on its central bank and announcing 397 billion forints worth of new budget cuts for 2013.
Central Europe's most indebted nation must pay back the equivalent of about 3.6 billion euros to the IMF alone next year from a previous rescue package that pulled the country back from the brink of bankruptcy in 2008 when the global crisis began. Continued...