Hungary the next Greece?

Scarab80

http://www.guardian.co.uk/world/2010/jun/04/euro-sinks-hungary-debt-crisis

Seems like the new government have found that the country is in a much worse state than expected, the previous socialist government had been cooking the books (sound familiar?).

“It’s clear that the economy is in a very grave situation,” Peter Szijjarto, spokesman for Prime Minister Viktor Orban, said today in Budapest. “I don’t think it’s an exaggeration at all to talk about a default.”

This from a country which is due to join the euro in 2014 and is in receipt of IMF funds. There could still be debt contagion issues into the eurozone area if they do default.

Combine this with worries about derivative holdings at Societe Generale and the euro has lost 300bp in two days and irish 10 year bonds are back over 5%. Investors don't want to touch anything to do with Europe at the moment, this at a time when we have 3 banks trying to raise capital in the markets.

Excepting Germany, it just seems to be one bad news story after another from Europe, given Europe is our biggest trading partner and trouble there affects our bond rates I'm starting to think that domestic problems are beginning to be overshadowed by the Europe problem.

RichardAnd

Don't like the sound of that at all but there is one huge difference between Hungary and Greece; Hungary are not in the Euro.

The reason Greece caused us so much hassle is because we are using the same currency but if the same happens in Hungary, they could be left on their own.

At least, that's how I understand it.

Scarab80

RichardAnd wrote: »

Don't like the sound of that at all but there is one huge difference between Hungary and Greece; Hungary are not in the Euro.

The reason Greece caused us so much hassle is because we are using the same currency but if the same happens in Hungary, they could be left on their own.

At least, that's how I understand it.

True it is a different situation, but unfortunately for us the markets are treating Europe as one these days, so a default in Hungary will affect the amount we pay on our borrowings.

It will be interesting to see who they owe money to though.
There is 25bn of joint EU / IMF loans, i think their total debt is about €100bn. If their bonds are held by European banks and institutional investors a default will have a real knock on effect in the Eurozone.

I would also hope that Europe make them operate for at least a decade within an ERM before considering them for single currency membership.

Permabear

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ei.sdraob

donegalfella wrote: »

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no no no

"the euro was launched at 1.18 so were all good" or something like that the argument goes

nothing to see move along

dunsandin

the imf will probably gou-lash a few quid at them:D

Valmont

Yikes. I'm opening a sterling account before I lose more in the exchange rate on my tuition fees (£) for this September. My only regret is that I didn't do this sooner.

Sand

Buy BOI and AIB shares lads. It's a winner.

rightwingdub

So how many countries will that be in Eastern Europe who will have to receive EU/IMF bailouts? Latvia, Lithuania, Romania who next

Hows Poland doing?

murphaph

donegalfella wrote: »

This post has been deleted.

This thing is becoming more and more political here in Germany. People are seriously asking "wtf did we abandon our Deutsche Mark for? To give all our savings to waster countries like Greece and Ireland?"

The public servants and dole recipients in Ireland and elsewhere in the PIIGS would be well advised to keep the head down and take whatever cuts are deemed appropriate, because if Europe is destabilised enough, German people WILL demand that Germany withdraws from the Euro (and with it removes ALL credibility from this currency) and returns to it's much loved DM. I transfer all income from Ireland to my German ac***** immediately as it is, just to make sure. I'd rather DMs than Euros if it comes to it.

murphaph

rightwingdub wrote: »

So how many countries will that be in Eastern Europe who will have to receive EU/IMF bailouts? Latvia, Lithuania, Romania who next

Hows Poland doing?

I think Poland is ok, they have always had quite a prudential attitude to lending there. It was never as easy to get credit as it was in Ireland etc. They can also devalue their currency I suppose, to boost exports. I think the Czech Republic is ok too.

It could be argued that these 2 countries have better fundamentals than Ireland actually.

irishh_bob

it was curtains for hungary the day our property bubble burst , in the sense that so much of thier economy relied on gullible irish buying appartments in budapest off the back of what they saw as neverending appreciation of thier own assetts in ireland , anyone who has ever been to hungary , knows the kind of dive it is , depressing , corrupt , hostile to foreigners ( even those with money ) lazy , unpleasant

silverharp

murphaph wrote: »

This thing is becoming more and more political here in Germany. People are seriously asking "wtf did we abandon our Deutsche Mark for? To give all our savings to waster countries like Greece and Ireland?"

The public servants and dole recipients in Ireland and elsewhere in the PIIGS would be well advised to keep the head down and take whatever cuts are deemed appropriate, because if Europe is destabilised enough, German people WILL demand that Germany withdraws from the Euro (and with it removes ALL credibility from this currency) and returns to it's much loved DM. I transfer all income from Ireland to my German ac***** immediately as it is, just to make sure. I'd rather DMs than Euros if it comes to it.

Its a complicated one , on the one hand euro or no euro the German banks and pension funds have squandered alot of the savings by "investing" in Eastern Europe and Greece etc. But the Germans are right to be peed off now and they will hopeflly hold their government to account.

Sounds like history rhyming, its worth reading up on the collapse of the Austrian bank Creditanstalt in the early 30's

DJDC

This thing is becoming more and more political here in Germany. People are seriously asking "wtf did we abandon our Deutsche Mark for? To give all our savings to waster countries like Greece and Ireland?"

The public servants and dole recipients in Ireland and elsewhere in the PIIGS would be well advised to keep the head down and take whatever cuts are deemed appropriate, because if Europe is destabilised enough, German people WILL demand that Germany withdraws from the Euro (and with it removes ALL credibility from this currency) and returns to it's much loved DM. I transfer all income from Ireland to my German ac***** immediately as it is, just to make sure. I'd rather DMs than Euros if it comes to it.

The german economy was one of the biggest beneficaries of the euro being the largest exporter in the region by far. They also managed to export wage and price inflation due to their massive control over the ECB interest rate policy, setting it at much lower rates than was sustainable for import reliant smaller countries like Ireland and Portugal. Therefore, I agree somewhat with Barroso with these choice words:

http://www.faz.net/s/Rub3ADB8A210E754E748F42960CC7349BDF/Doc~E354D2E7C85BF415E8597258389432106~ATpl~Ecommon~Scontent.html

"Germany was until now a big winner from the euro. I find that more politicians in Germany should make that clear."

Referring to the German trade surplus of €134 billion, the commission president asked: "Does the German public know that nearly 86 percent of these 134 billion, i.e., 115 billion, comes from trade in the EU?"

I agree with the general hypothesis that the PIIGS broke all the rules around budget restraints but then maybe the whole euro concept was broken from the beginning and thats something the Germans should have realised.

oppenheimer1

ei.sdraob wrote: »

no no no

"the euro was launched at 1.18 so were all good" or something like that the argument goes

nothing to see move along

Well during the strong rise of the Euro post 2007, there were a few commentators saying the rise wasn't linked to the strength of the currency but more to due with the weakness of the dollar. Mind they also said it was likely the euro would break the $2 mark as well. The crystal ball was having an off day it seems.

murphaph

DJDC wrote: »

The german economy was one of the biggest beneficaries of the euro being the largest exporter in the region by far. They also managed to export wage and price inflation due to their massive control over the ECB interest rate policy, setting it at much lower rates than was sustainable for import reliant smaller countries like Ireland and Portugal. Therefore, I agree somewhat with Barroso with these choice words:

http://www.faz.net/s/Rub3ADB8A210E754E748F42960CC7349BDF/Doc~E354D2E7C85BF415E8597258389432106~ATpl~Ecommon~Scontent.html



I agree with the general hypothesis that the PIIGS broke all the rules around budget restraints but then maybe the whole euro concept was broken from the beginning and thats something the Germans should have realised.

I agree broadly with what you say here, but the German public could never have believed that sovereign governments would go so far as to cook the books to gain admission. They just assumed (being Germans) that everyone would abide by the rules, like in Germany. Sadly this didn't exactly pan out as planned.

This won't stop the German public from pushing for an exit from the Euro and a return to something stable though.

ardmacha

The German public need to realise that everyone has responsibilities in a currency union. Rather than just giving money to the rest they should have a virtual revaluation and pay themselves a wage increase, driving inflation in Germany to 4-5% and reducing the trade surplus. This would allow the Irelands of this world to trade their way out of their problems without having to have massive negative rates for prices and wages. This would benefit Germans by improving their standard of living.

They should just give each German €1000 in a voucher that can only be spent in one of the PIIGS.

silverharp

ardmacha wrote: »

The German public need to realise that everyone has responsibilities in a currency union. Rather than just giving money to the rest they should have a virtual revaluation and pay themselves a wage increase, driving inflation in Germany to 4-5% and reducing the trade surplus. This would allow the Irelands of this world to trade their way out of their problems without having to have massive negative rates for prices and wages. This would benefit Germans by improving their standard of living.

They should just give each German €1000 in a voucher that can only be spent in one of the PIIGS.

riiight, so you are saying that Germany should make themselves less competitive compared to American, Asian countries and even other EU countries. And who is this "they" , what mechanism exactly could force companies to give pay rises or force companies and the self employed to put up their prices?

Godge

So Hungary may default, that would trigger a devaluation of their currency. Would cause a problem for those with Hungarian apartments.

Which other European countries would follow??

I would hate to have a holiday property somewhere like Croatia, Bulgaria or Macedonia especially if the mortgage is denominated in Euros. How many Irish are caught like that?

johnmcdnl

You'd have though the Hungarian's would have learned after 1946 when the pengő underwent hyperinflation... Looks like it's not just in this country that we ignore the failings of previous generations rather than learning from them

ardmacha

ardmacha wrote: »

The German public need to realise that everyone has responsibilities in a currency union. Rather than just giving money to the rest they should have a virtual revaluation and pay themselves a wage increase, driving inflation in Germany to 4-5% and reducing the trade surplus. This would allow the Irelands of this world to trade their way out of their problems without having to have massive negative rates for prices and wages. This would benefit Germans by improving their standard of living.

They should just give each German €1000 in a voucher that can only be spent in one of the PIIGS.

Possibly the most shocking thing I have ever seen. Why don't they just rename the country 'Ireland II' while they're at it.


How about the PIIGS just sort out their finances and leave the Germans alone?? Seriously, expecting GERMANY to sort out our problems to it's own detriment............

dan_d

My understanding of these things isn't great....so can anyone answer a question for me? If Hungary is meant to join the Euro in 2014, and now their Government is saying there's a possibility their figures were "fiddled" with to make them appear better.....I know the EU sets certain criteria for countries to meet before joining the Euro, so who's keeping an eye on countries like Hungary to prevent them from doing something like this? Are we just trusting that what they're telling us, about how they are meeting criterion, is correct?? Seeing that Germany is a major player in the EU, I'd be surprised that all they're doing is taking Hungarian figures at face value, and investigating further??

murphaph

Up until the current crisis I think Germany did just take sovereign states at face value. The Germans have been lied to and tricked by at least the Greeks, possibly more. The rest have just displayed and incredible lack of fiscal discipline, something the Germans are unacustomed to tbh. From the bottom up, Germans are fiscally prudent people: why do you think the major discount food retailers all call Germany home? Germans look at the price of EVERYTHING before buying.

oppenheimer1

Valmont wrote: »

Yikes. I'm opening a sterling account before I lose more in the exchange rate on my tuition fees (£) for this September. My only regret is that I didn't do this sooner.

Dollars, or Swiss francs would be better. Euro and Sterling are falling together.

The_Thing

The Germans have been lied to and tricked by at least the Greeks, possibly more.

As the saying goes: "Fool me once, shame on you; fool me twice, shame on me."

I have absolutely no sympathy whatsoever for the Germans, the French, et al.
They had no problems strong-arming Ireland twice into holding second referendums when the votes of the first in both Nice and Lisbon didn't go the way they wanted it. Fcuk them.

dan_d

I don't really have sympathy for Germany necessarily. But this kind of thing affects all European countries, not just Germany. Surely if it comes out that Hungary has falsified numbers, it should cast serious doubts on allowing them to enter the euro. The greeks haven't just lied to Germany, they've also lied to all of us......what happened there had (and still has) the potential to undo any good work that's been done in Ireland in the last few months..
I'm guessing we're back to the whole issue of regulation again...