Economy
Hungary not pressed for funds yet, but IMF deal is necessary - analysts
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They believe the safety net to be provided by the international lenders and their control would boost investor confidence and that is what the country needs right now, as Tamás Fellegi, head of Hungary’s negotiating team, indicated in his presentation.Sovereignty will inevitably be hurt
One of the issues addressed in the panel discussion was raised by Fellegi, namely that Hungary will give in to the IMF/EU only in questions that do not lead to a decrease in the country’s sovereignty and that are not in conflict with its interests.
Lubin said the situation Hungary is currently in predestines the country to lose some of its sovereignty. He noted, though that he understands the rhetoric of the cabinet, which partly serves the objective of hindering the advance by the far-right Jobbik party.
Hard to invest in such an environment
Because Hungary has been constantly in the news, investors who have exposure on the Hungarian market woke up every day with a clamp in their stomach listening to these reports, added the CIO of Pioneer Pekao Investment. Such an environment is naturally a drag on willingness to invest in Hungary, he said.
Playing the Turkish card seen most likely
Before the second panel discussion at Portfolio.hu’s ‘The forint, the Crisis and Public Debt’ conference we have sought the audience’s opinion on a controversial issue. An increasing number of analysts have been claiming recently that the government is stalling and only wants to buy time but has no real intention to seal a credit deal with the IMF/EU, i.e. it is playing the ‘Turkish card’.
The question was when Hungary could seal the deal. The three choices were:
1.) within a few months, but there will be some noise;
2.) Hungary is playing the ‘Turkish card’ but the deal will be sealed eventually;
3.) There will be no bailout agreement at all.
About 80% of the 100-strong audience voted for the 2nd outcome; 15% expects the first scenario and 5% projects the 3rd is more likely.
No logical explanation why Hungary should not draw from the credit facility
Lubin says Hungary can choose to go down either of the following paths: 1.) it will secure a credit facility, but thanks to a favourable market environment no funds will be drawn from it; 2.) a deal is sealed and the cabinet pursues disciplined economic policy but the external environment turns for the worse therefore public debt cannot be financed from the market and funds will need to be drawn.
A member of the audience asked why the government would not want to draw funds from the facility even during favourable market conditions, considering that the IMF/EU funds would be a lot cheaper than market-based funding. Bódis said “there is no logical argument" against drawing from the credit line, adding that “the only explanation should be sought in domestic politics."
Pasquale Diana provided another argument against tapping the IMF/EU facility, namely that the government has invested a great deal of political capital into emphasising the precautionary nature of the credit facility and that it will draw on it only in case of emergency.
From left to right: Pasquale Diana, Executive Director and CEE Economist at Morgan Stanley; Péter Bódis, Chief Investment Officer and Vice President at Pioneer Pekao Investment and David Lubin, Managing Director and Head of Emerging Markets Economics at Citigroup at Portfolio.hu's 'The Forint, the Crisis and Public Debt' conference in Budapest on 8 March, 2012.
