Photo: Macskafaraok on Flickr
Hungary is at the centre of headlines today, after a poor bond auction and amid the highest bond yields since April 2009 in the wake of an EU and IMF-led bailout.Taken by surprise by all this interest in this small Eastern European country? Here’s what’s going on and why everyone cares:
- Hungary was bailed out back in 2008.
- But things are still going badly, and the country likely needs another bailout.
- Last week, Hungary passed a central bank law that could compromise the independence of its central bank.
- That made the EU and IMF furious, and caused them to step out of talks about a new bailout.
- Not to mention that Hungary’s leading Fidesz party is approving a constitution that arguably jeopardizes its citizens social and intellectual freedoms. They’re protesting.
- The Hungarian government is paying through the nose to borrow—when it can at all—because its bonds are trash.
- Not to mention that lots of it’s loans are in foreign currency, and the Hungarian forint is rapidly losing value. The government will have trouble paying off its debts when they mature.
- That’s bad news for Austrian banks, which have high exposure to Eastern Europe.
- That’s also making Austrian bond yields spike, ushering in a new phase of the sovereign debt crisis from the East.