Hungary’s financial situation has been steadily worsening, and after its Thursday bond auction failed to raise as much money as it had hoped, it now says it wants a fast deal with the European Union and the International Monetary Fund. However, it is doubtful that it will get one, since its governmental policies–which threaten the independence of its central bank–have come under criticism.
Bloomberg reported that at its auction, Hungary only managed to sell 35 billion forint ($140 million) of one-year bills, 10 billion forint less than it had hoped. The forint dropped in value as the debt yields rose, at one point hitting 11.2% on its 5- and 10-year bonds. Investors are wary of the government’s unorthodox methods of dealing with its economic crisis, particularly a new law that challenges the independence of the country’s central bank.
However, the poor showing has apparently made an impression on the government, and Tamas Fellegi, the minister assigned to reopen talks with the EU and IMF, said that the country needs to reach an agreement as quickly as possible. In a Reuters report he was quoted saying that the government is ready to seek a new bailout agreement “as soon as possible,” and to that end was willing to consider any lending proposals, even to accept them if they are in the country’s interest.
He added, “We are ready to negotiate without preconditions, and we are ready to discuss everything at the negotiating table.” He also said that Hungary would accept a precautionary standby agreement from the IMF, but not draw on available funds unless market conditions made such an action necessary.
Timothy Ash at Royal Bank of Scotland was quoted saying, “On the IMF front, Fellegi’s comments are aimed at providing reassurance, but I think the market will adopt a seeing-is-believing approach, given that market trust in this administration is now at rock-bottom levels. They will want to see the ink and fine detail on any IMF agreement, and expect the IMF/EC to negotiate hard with the Hungarian side.”