The EU And IMF Watch In Horror As Everything Goes To Hell In Hungary
Dec. 30, 2011
Hungary just approved a new central bank law, to the dismay of the International Monetary Fund and European Union.
It’s the same law that caused the two international organizations to withdraw their support for Hungary’s bailout earlier this month.
The law changes the way Hungary’s central bank is managed, in a way the EU and IMF have argued will to compromise its independence from politics.
Hungary has been at the center of quiet economic angst in Eastern Europe, largely overshadowed by the sovereign debt crisis in southern Europe. Standard & Poor’s downgraded Hungarian government debt to junk last week and the government staged the latest in a series of failed bond auctions yesterday.
However, Austrian banks’ ties to the struggling country are the primary cause for concern in European economy. They have an estimated $226 billion in exposure to Eastern Europe, with €1.14 trillion ($1.6 trillion) of assets held in the region. Though the silent beneficiary of liquidity measures by the European Central Bank, yields on Austrian 10-year government bonds have risen to more than 2.93% this morning.