Hungary Asset Hoarding Will Deter Debt Cut, Bank of America Says

The Hungarian government’s plan to increase its holdings of “strategic” assets will hamper the drive to cut debt and to prevent a credit-rating downgrade to junk, according to Bank of America’s Merrill Lynch.

“Evidence is accumulating suggesting that the public debt- reduction plan will prove much less than forecast, leaving Hungary more exposed to external vulnerability and failing to safely anchor the sovereign credit rating in investment-grade territory,” Raffaella Tenconi, an economist at the U.S. bank in London, wrote in a report dated today. “The government’s rhetoric seemed to suggest that increasing the state’s strategic assets is not inconsistent with its plan to sharply cut public debt. Alas, we don’t believe that is feasible.”

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