Gorilla's Blog

A threat of a credit downgrade, a decline in the exchange rate, a tax on financial institutions: Hungary’s behaving exactly the way the IMF and EU hate!!!

“We’re going to continue a disciplined fiscal policy, which doesn’t equal the usual austerity policy that affects families and businesses,” the Economy Ministry said in an e- mailed response to questions from Bloomberg News.

Them’s fightin’ words!!!

All of these rescue packages in Eastern and Central Europe are about one thing: bailing out Western European banks who lent foolishly.

While waiting for the phony “stress test results” on these banks to be announced, the ECB’s sort of austerity-based fantasy promises to keep the world economy stagnating along for years to come.

Egad, Hungary’s decided to put its own people first before bailing out the foreign bankers!

Fortunately, Hungary is not part of the Euro, so it can survive by devaluation, and if necessary partial default.

That’s not what clowns like M. Trichet want to hear, because it might encourage weaker Euroland states to leave the Euro, or convince the Germans, the sole beneficiary of M. Trichet’s idiocy, to jump before their bankers are pushed.

Gorilla says: “Forint exchange may well win this Frankfurter eating contest!”

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!”

Hungary’s in a bad way, shock shock!

Sounds like Greece:

Previous governments “lied” and “manipulated the figures”, and of course no government does that to make things seem worse!

Default can’t be ruled out, and Hungary will be an interesting test case.

Not being in the Euro, creditors might actually have to take very large haircuts, while the prospects for economic recovery may improve with a declining currency boosting exports.

Gorilla says: “There’s a German glint in the eye of the forint!”