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Hungary with junk credit rating and the IMF asking to “surrender”.

Hungarian Prime Minister Viktor Orban

Last but not least, Fitch has become the third ratings agency to cut Hungary’s credit rating to junk status, after a disastrous sale of Hungarian public 10 year bonds last week, were the Hungarian state agreed to pay near 8% in yield.

The agency argued about “unorthodox policies of the Hungarian government” for its decision to cut the country´s rating from BBB- to BB+.

Hungary’s centre-right government has been accused of two things:  a) undermining the central bank’s independence and imposing losses on the country’s foreign-owned banks and b) attempt to restrict civil liberties and the approval of a Constitution that is under scrutiny of the European Union.

The country is attempting to resolve a stand-off with the International Monetary Fund over a new loan facility. It is of public knowledge that the IMF will act in Europe as a sort of firefighters that go into action when all other financial measures have failed, from the EU side.

Hungary is very dependent on credit from abroad, especially credit provided by eurozone banks. According to the latest figures from the Bank for International Settlements (which are always several months out of date by time of publication) European banks have provided $120bn of credit to Hungary’s public sector and private sector, out of total international lending to Hungary of around $140bn. To put that into context, overseas lending to Hungary represents around 100% of GDP. READ MORE HERE