Hungary on debt: We’re not Greece

by Nick Thorpe

After claiming it was close to defaulting on its debt payments, the Hungarian government has turned around and said any comparisons to the massive Greek debt are misguided, and the country will soon announce how it will balance its budget.

The new Hungarian government insists that the previous leadership stepped down with plenty of skeletons left in the closet, but now the new administration has tripped over the bones. In comments apparently meant purely for domestic consumption, the prime minister’s spokesman horrified markets last week by comparing Hungary to Greece. Within minutes, the Hungarian currency fell dramatically and borrowing costs skyrocketed.

Ministers who actually are in charge of economic policy have been struggling to repair the damage, and London-based economist Michael Hughes says words have wings. “The lesson for the Hungarian government to learn is that comments made for a domestic audience in this day and age do travel very quickly.”

Even before Greece became a global economic concern, Hungary had received a $25 billion rescue package from the international community to cope with its recession. Some of that money still has not been used, and talks begin this week for additional funds. The weekend panic has had one positive effect: the government has been forced to prepare its plans to fix the economy.