Hungary's deficit talk rattles financial markets
Jun 4, 1:54 PM (ET)
BUDAPEST, Hungary (AP) - Hungary's currency, bonds and stock market reeled Friday as the new government tried to reassure investors that it was not about to slide into a Greek-type crisis despite official comments that the economy was in serious trouble.
Fears that the economic peril could spread weighed heavily on the euro. The currency dropped below $1.20 for the first time in more than four years, falling to as little as $1.1994 in late European trading before edging back up to $1.2006. That was its lowest level since March 2006.
On Thursday, Lajos Kosa, deputy chairman of the governing Fidesz party, said Hungary was facing a Greece-like financial meltdown. And former Fidesz finance minister Mihaly Varga said the deficit could reach 7-7.5 percent of GDP, about twice as much as planned for 2010 by the previous government.
The new government was sworn in Saturday and its talk about a massively revised budget gap was eerily similar to the situation in Greece. There, the 2009 deficit went from a planned 3.7 of GDP to 13.6 percent of GDP by year's end and led to the financial crisis, which saw Greece get a euro110 million ($134.95 million) rescue package from the European Union and the International Monetary Fund to save it from bankruptcy.
International markets reacted quickly to the parallels drawn between Hungary and Greece, evidence that concerns about budget deficits in Europe continued to worry the markets.