Hungarian Prime Minister Viktor Orban abandoned all previous objections to a bailout from the International Monetary Fund, indicating his government was open to “any kind” of credit line to prop up financing.
“As far a we’re concerned, there’re no preconditions during negotiations, all issues that the involved parties deem necessary can be debated,” Orban said in an interview with state news service MTI today. Tamas Fellegi, the country’s chief negotiator in aid talks, has a mandate to accept “any kind” of credit line that strengthens the country’s market financing, Orban said.
The IMF and the European Union broke off talks last month on Hungary’s bid for a bailout after Orban refused to withdraw new central bank regulation the institutions said may undermine monetary-policy independence. The forint fell to a record against the euro as investors speculated an IMF accord may be delayed.
Fellegi is authorized to indicate that Hungary is ready to implement the program agreed during negotiations as “it’s only natural” that the IMF will want to see such economic policy that “guarantees” the lender “will get its money back,” Orban said.
The IMF will only continue bailout talks with Hungary when the government is willing to accept a Stand-by Arrangement “with agreed conditionality,” Christoph Rosenberg, the lender’s mission chief to Hungary said on Dec. 28.
The forint fell to a record low of 324.24 per euro on Jan. 5 and the yield on the benchmark 10-year government bond to 10.1 percent by the end of the week after rising to as high as 11.34 percent on Jan. 5, according to generic prices compiled by Bloomberg. The currency ended the week at 314.35 per euro.
“We want to raise the money necessary for running the country from the markets,” Orban said. “However, we want to send a clear message that Hungary disposes over the necessary resources at a time when available funding is becoming more scarce or even in the event of a significant protraction of the euro crisis.”
Hungary lost the investment grade on its foreign-currency debt at Standard & Poor’s, Fitch Ratings and Moody’s Investors Service in the past six weeks. The cost of insuring Hungarian bonds using credit-default swaps fell to 698 basis points by the end of the day on Friday, according to data provider CMA, which is owned by CME Group Inc. (CME)
‘No Legal Problems’
Orban rejected last month a request from European Commission President Manuel Barroso to withdraw the central bank bill and a law on financial stability.
The central bank law contains “no legal problems” and related criticism has been of political and not professional nature, Orban said. The government is ready to accept all recommendations on the central bank and financial stability bills if those are “worthy of consideration” as “maintaining or changing our earlier point of view is not an issue of prestige for us,” Orban said.
When asked if the government is sticking to raising the number of vice presidents and Monetary Council members despite European Central Bank objections, Orban said nobody has so far “proved” that the bill curbs monetary policy autonomy.
The government doesn’t plan to merge the central bank with the financial market supervisory authority during the term of current central bank Governor Andras Simor, Orban said.
The government will consult with the central bank on a daily basis and will work together to ensure economic stability, Orban said last week. The central bank, in a statement, said it will use “available tools” to ensure economic stability.
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