Monday, December 6, 2010

Serious: Beyond the PIIGS; Moody's Downgrades Hungray... lowest Investment grade category Baa3 From Baa1.

"Today's downgrade is primarily driven by the Hungarian government's gradual but significant loss of financial strength, as the government's strategy largely relies on temporary measures rather than sustainable fiscal consolidation policies," says Dietmar Hornung, a Moody's Vice President -- Senior Credit Officer and lead analyst for Hungary. "As a consequence, the country's structural budget deficit is set to deteriorate."

Moody's also said:
Today's rating action also reflects Hungary's high external vulnerability as the absence of more permanent fiscal consolidation poses heightened risks to medium- to long-term fiscal sustainability. In addition, the government, banking system and private sector each carry substantial external debt. Hungary's levels of external debt are high relative to those of its rated peers, especially non-European ones. The government also depends on purchases of its debt issuance by non-resident investors, implying that the maintenance of confidence among foreign investors is vital.

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