Excerpt:
The government reversed a policy of shunning IMF assistance after the forint fell to a record low this month against the euro and government bond yields soared. Prime Minister Viktor Orban said he doesn’t want conditions attached to any new credit line, a sign that Hungary isn’t prepared to step away from its “unorthodox’ policies that included forcing banks to swallow exchange-rate losses on foreign-currency mortgage loans.
‘‘Hungary’s attempts last week to voice readiness to cooperate with IMF was a ‘show,’ which was meant to prevent the rating agency action, yet it didn’t help, given Hungary’s unwillingness to compromise,” Aurelija Augulyte, a Copenhagen- based economist at Nordea Bank AB (NDA), said in an e-mail today. “Moody’s interpreted the Hungarian attempt to seek assistance from the IMF as a desperate move.”
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Orban’s steps included levying extraordinary taxes on the banking, energy, retail and telecommunication industries and forcing banks to swallow exchange-rate losses exceeding 40 percent on foreign-currency mortgages. Hungarian loan defaults are rising as borrowers struggle to repay foreign-currency mortgages, which account for more than two-thirds of housing loans, after a slump in the forint boosted repayments.
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