Thread: EU Threatens Hungary Over Austerity Refusal

EU threatens Hungary over refusal to implement austerity policies and 'authoritarian' new constitution

• Constitution asserts political control over central bank
• Rights groups warn of slide towards authoritarianism
• EU demands austerity measures before new bailout
• European Commission threatens legal action

By Damien Gayle

Last updated at 9:49 AM on 12th January 2012
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Defiant: Hungarian Prime Minister Viktor Orban is headed for a clash with the EU and the IMF

The European Union has stepped up pressure on Hungary over the country's refusal to implement austerity policies and threatened legal action over its new constitution.
The warnings escalated the standoff between Budapest and the EU, as Hungary negotiates fresh financial aid from Europe and the International Monetary Fund.
Over the past months, the country's credit rating has been cut to junk by all three major rating agencies, unemployment is 10.6 percent and the country may be facing a recession.
But bailout negotiations broke down after Budapest refused to cut public spending and implemented a new constitution reasserting political control over its central bank.
The EU fears the new constitution hurts the independence of the country's judges, its central bank and its data protection agency.
Some civil rights groups and the European Parliament have warned that the former Soviet-bloc nation of 10million, which led the fight against communism with its 1956 revolution, risks losing its democratic footing.
EU Economic Affairs Commissioner Olli Rehn today also blasted Hungary's fiscal policies - which rely on unorthodox one-time measures instead of fiscal austerity.

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Hungary ran a surplus in 2011 and its deficit is expected to remain below the 3 percent of economic output allowed under EU rules.
But Mr Rehn said that had Budapest not nationalised private pension funds to buffer state coffers, its deficit would have been 6 per cent of Gross Domestic Product last year.
He warned the EU could withhold valuable development funds if the Hungarian government continues to resist taking new cost-cutting measures.

Criticism: EU Economic Affairs Commissioner Olli Rehn today blasted Hungary's fiscal policies and called for the country to implement austerity measures

A spokesman for the European Commission, Pia Ahrenkilde Hansen, said the Commission, which is analysing whether Hungary's new laws violate the EU treaty, remained concerned and would not shy away from using all its powers to fight any violations.
'A legally stable environment, based on the rule of law, including respect for media freedom, democratic principles and fundamental rights, is also the best guarantee for citizens' trust and confidence of partners and investors'

Pia Ahrenkilde Hansen, European Commission spokesman

'A legally stable environment, based on the rule of law, including respect for media freedom, democratic principles and fundamental rights, is also the best guarantee for citizens' trust and confidence of partners and investors,' she said.
'This is particularly vital in times of economic crisis.'
In a statement, the Hungarian government said it was 'committed to universal European values' and was 'ready for negotiations and to find solutions' with the Commission about any of its concerns.

The new constitution came into force just weeks after Hungarian Prime Minister Viktor Orban's government requested financial aid from the EU and the IMF.
The two institutions broke off preliminary talks on the rescue package in December, after voicing fears that the new laws compromised the independence of Hungary's central bank.
EU treaties demand that central banks remain independent. Discussions between Hungary and the IMF resumed Wednesday in Washington.

The Hungarian Parliament, by the Danube, Budapest: Hungary's lawmakers have angered the EU by reasserting political control over the country's central bank

Hungary's deficit has been criticised by the EU since the central European nation joined the 27-member bloc in 2004.
But its economy has been staggering since 2008, when the global credit crunch forced Hungary to accept an IMF bailout of €20billion (£16.5billion).
The European Commission said Hungary has taken 'no effective action' to limit its deficit, making the country's finances unsustainable in the long run.
The Hungarian currency, the forint, hit a record above 324 per euro last week.
On Wednesday, the forint was trading at 312 to the euro, while the interest rate for Hungary's 10-year forint bond was near 9.5 per cent, an unsustainable burden.
Three EU nations - Greece, Portugal and Ireland - had to seek international bailouts after their interest rates rose above 7 per cent.

EU threatens Hungary over refusal to implement austerity policies and 'authoritarian' new constitution | Mail Online

DO WHAT WE WANT OR YOU'RE OUT! EU GIVES HUNGARY SHARP ULTIMATUM




Hungarian Prime Minister Viktor Orban has come under pressure from the EU

Thursday January 12,2012
By Emily Fox for express.co.uk

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HUNGARY was given a sharp reminder of its position within the EU last night after the European Commission gave the country its final ultimatum.

The EU has threatened to withdraw any essential IMF aid to Hungary if it does not agree to change key methods in how the country is run.

Hungary is currently facing the threat of legal action from the EU over its finances.

The unprecedented warning by the European Commission, the E.U.’s executive arm, came in response to the passage of a new constitution and a number of laws at the end of last year by the Hungarian PM Viktor Orban.

The PM removed checks and balances on the government in areas like central banking, the judiciary and the media and has also failed to act to control the country's deficit.

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The EU Commission position shows that there will be no negotiations whatsoever with Hungary Analyst Attila Juhasz at think tank Political Capital

Olli Rehn, the E.U. commissioner for economic and monetary affairs, warned that Hungary faced the possible suspension of valuable E.U. development assistance unless it did more to control its budget deficit.

IMF Chief Christine Lagarde is set to meet with Hungarian minister Tamas Fellegi with a mandate for the country to accept stricter funding deals than Budapest originally wanted.

Analyst Attila Juhasz at think tank Political Capital said: "The EU Commission position shows that there will be no negotiations whatsoever about any kind of (financial) support as long as the Hungarian government fails to meet these requirements.

Express.co.uk - Home of the Daily and Sunday Express | World News :: Do what we want or you're out! EU gives Hungary sharp ultimatum

Hedge funds blamed as Greek debt deal falters

Ben Chu
Thursday 12 January 2012

Confidence in financial markets lurched downwards yesterday as hedge funds held up a crucial deal to restructure Greece's €350bn (£290bn) debt pile.

The euro fell to a 16-month low against the dollar after signs that the agreement, designed to put the country's public finances on a sustainable path, might be derailed.

European leaders reached an agreement last October with the Institute of International Finance (IFF), the global banking lobby group, that Greek bondholders should suffer a "voluntary" 50 per cent haircut, on the value of their investments.

While large European banks have agreed to the deal, several hedge funds are believed to be holding out in the belief that the European Union and the International Monetary Fund will have no choice but to pay them off in full if they refuse to play ball.

The IIF said yesterday it hoped the deal would be concluded in a matter of days, and its managing director, Charles Dallara, flew to Athens to finalise the agreement. But the IIF confirmed that no offer has yet been made to bondholders.

"Hedge funds and other investors will need to see what the final detail is before deciding," a spokesman said.

European leaders have also been increasing the pressure on bondholders this week. The German Chancellor, Angela Merkel, said on Monday that the next tranche of EU/IMF bailout funds Greece needs to avoid a default in March will not be paid unless the restructuring deal is completed first.

Nicholas Spiro of Spiro Sovereign Strategy warned that hedge funds frustrating the deal could end up getting burned as the next haircut is likely to be more than 50 per cent.

"If hedge funds insist on driving an even harder bargain, they could lose even more in the end," he said.

Hedge funds blamed as Greek debt deal falters - Business News - Business - The Independent