Here’s Hungary again, dancing the two-step with each foot going in the opposite direction:
Economics Minister Matolcsy: “A very fine-tuned action plan is needed, to reach the official deficit target and to put the economy on the growth track at the same time”.
Hard to promote economic growth in a world of low demand and rising unemployment by cutting back on government spending. Yet it is this fantasy that Euroland policymakers believe will keep the markets happy!
Fortunately for Hungary, they have a currency they can call their own, that currency can be devalued, and creditors can take a haircut.
Alas, there will also be a run on Hungarian banks and it’s unlikely Angela Merkel or Nicholas Sarkozy will be in the mood to be lender of last resort again.
So the talk for now will be of “waste, fraud, and abuse” and a trimming of the bureaucracy, leading to more unemployment, fewer tax revenues, and a greater likelihood of default.
Years of crippling deflation await, but eventually the forint will get back on its feet.
Gorilla says: “Goulash is one thing, but this here is something else!”
