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Kai Ryssdal: European markets had a troubled day today. It wasn’t just stocks, either. Currency traders got in on the selling. The euro dropped to a four-year low against the dollar. There were two immediate reasons: fears about the Hungarian economy, of all places, and worries over the health of the French giant bank Societe General.
From the European Desk in London, Marketplace’s Stephen Beard reports.
Stephen Beard: The trouble began in Hungary. A leading member of the new government there made a speech about the country’s public finances — in language he may now regret.
Here’s analyst Krisztian Szabados, speaking from Budapest.
KRISZTIAN SZABADOS: He used words that a politician cannot say in any circumstances. He said that Hungary is facing state bankruptcy.
Szabados says this allegation is unfounded and politically motivated. He claims the new government — which has only been in power for a week — is simply trying to wriggle out of its election promise to cut taxes.
SZABADOS:And they have to explain it somehow. And they chose the worst tactics: They said the country’s in trouble.
If this was a ploy, it misfired. The Hungarian currency has plummeted, making it a lot more difficult for the government to borrow on international markets.
Chris Hughes is with the financial website Breaking Views.
CHRIS HUGHES: It’s a very bizarre comment from the government because it’s like committing economic suicide. It’s really going to worry the markets. And it has worried the markets.
European bank shares fell. French bank Societe General shed almost 8 percent. Investors are aware the bank has lent heavily to eastern Europe.
HUGHES: Where you have a specific problem to do with an eastern European country, like Hungary, investors are going to latch on to banks which might be heavily exposed to that.
Societe General refused to comment. The Hungarian government is now trying to calm investor fears. Judging by today, European markets seem headed for a long hot summer dominated by worries about debt and default.
In London this is Stephen Beard for Marketplace.
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