PRIME MINISTER Viktor Orban has warned that Hungary faces severe economic difficulties and must fight to avoid a “Greek-style” financial meltdown, as problems in the euro zone jeopardise his risky plans for the country’s recovery.
Mr Orban told a gathering of Hungarian ambassadors that the country was lagging behind its central European neighbours in terms of economic health and competitiveness, amid fears that weaker than expected growth could force more cutbacks and scupper plans for tax reductions.
“Hungary has drifted into a seriously dangerous situation over the past three months. The euro crisis ... poses extraordinary, immediate threats to Hungary,” Mr Orban said. “If I want to be frank with you ... what is at stake is the issue of Hungarian sovereignty,” he added, suggesting that Budapest might have to seek more foreign aid unless the situation improves.
Hungary received a €20 billion emergency loan from the International Monetary Fund and the European Union in 2008, when the financial crisis paralysed Budapest’s ability to raise money by issuing debt. Mr Orban froze talks with the fund last year after rejecting its prescribed reforms. Instead of austerity and severe cutbacks, he sought to plug budget gaps by imposing special taxes on banks and other sectors of the economy and bringing private pension funds under state control.
Hungary has successfully issued bonds to raise cash in recent months, but growing jitters in financial markets have raised doubts about future bond auctions and economic growth is on the wane, putting pressure on domestic consumption that is already shackled by large household debt.
“Hungary cannot go down the Greek path,” Mr Orban said. “There are participants on the money market whose interest is to keep a certain country on the verge of default. Hungary will fight against this to maintain economic decision-making ability.”