Hungary not playing "Turkish game" with IMF talks

Sun Nov 27, 2011 11:02am EST
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By Marton Dunai

BUDAPEST (Reuters) - Hungary hopes that credit rating agencies Fitch and S&P will wait for the results of its talks with the International Monetary Fund (IMF) and the European Union (EU) before taking any rating action, a top government official said on Sunday.

The country, whose economy is seen among the most vulnerable in central Europe, returned to the IMF for help after more than a year without a financing backstop, only to see its debt downgraded to "junk" by Moody's this week, triggering a market selloff.

The right-of-center government, which called the downgrade part of a speculative attack against the country, performed a dramatic about-face and agreed on Friday to mend ties with the EU, the IMF and the country's banks to stabilize the economy.

Hungary expects to conclude the talks on a precautionary arrangement by late January or early February, to draw what it called a safety net around its currency and bond markets amid the turmoil in the euro zone.

"We are not playing the Turkish game," Economy Ministry State Secretary Zoltan Csefalvay told Reuters in an interview, referring to the stop-go game which helped Turkey retain market confidence some years ago.

Hungary is also on the brink of non-investment grade credit status at both Fitch and Standard & Poor's, both of which attach a negative outlook to their ratings.

"I hope that the two agencies will wait for the negotiation (with the IMF) and what the outcome will be and how this safety net will help Hungary in this turbulent time," Csefalvay said.

He said the spike in government bond yields, which rose above 9 percent across the curve on Friday, was temporary and said he was confident the yields would recede.   Continued...