Hungary For More?

[morganist]

Quote from LEAPup:

It's certainly news worthy. Wonder why this isn't making headlines?

I think they are trying to conceal the extent of the debt across the european union in the fear it could create economic collapse. I am doing a worksheet with the debt figures and the analysis. Does anyone want a copy, I have to warn you it is disturbing.

 

[LEAPup]

Yes, please post it, or pm it if you can.

 

[LEAPup]

Btw, how disturbing is this going to be? Will I need a xanax?

 

[orange_trad]

Hm. Interesting article. Let's see Hungary in a little bit of a perspective, shall we:
- 13th month salaries and pensions canceled (this was the Hungarian form of paying year-end bonuses in the public sector)
- age of pension increased from 62 to 65
- VAT increased from 20 to 25%
- government expenses frozen up to 1.5% of GDP (from education to health care)

All in 2010.

So, what is the current debate about? One thing: bank-tax. Hungary will be the first to effect it, in Europe's most profitable banking sector. Essentially the gov. says that it will not introduce more austerity measures (the IMF wants Hungary to close down schools, hospitals, public-transport), instead of a bank-tax. (Hungary's banks also received bail-outs in 2009.)

A cute little detail: the IMF not only opposed the bank-tax, but also the cutting of the salary of the National Bank, which is currently twice that of the Fed's chair's salary. Is the IMF in effect the bankers' union?

Now, if you wish to discuss Poland, the Czech Republic or even Slovakia, I'll be glad to point out how these countries are much more resilient and thus healthy than the 'blue chip' countries of the UK, France, or the US.

 

[Martinghoul]

Not sure about what exactly is happening in Hungary, but orange is absolutely correct re the other EE sovs.

Since we all like to think the mkt knows how to price sovereign risk, I leave you with the attached chart for now. Speaks for itself...

I'll try to dig up other stuff later.

 

[atticus]

Excluding Sovereign risk... how is any of this good for growth? 25% VAT? It's closed-form; as you increase overhead you decrease output.

 

[orange_trad]

Quote from atticus:

Excluding Sovereign risk... how is any of this good for growth? 25% VAT? It's closed-form; as you increase overhead you decrease output.

Exactly. All those points were prescribed by the IMF* and blindly instituted by the previous (socialist) gov., greatly contributing to the current state of the Hun. econ. The current gov. (in office since June) says no more austerity, we will concentrate on growth from now on. We'll see how they fare.

*We've seen in LatAm that the IMF has only one recipe: austerity, raising taxes, austerity, selling assets (utilities, hospitals, schools, transportation, mines, etc., but especially expensive real estates), austerity. If it doesn't work, change the government and start some serious austerity...

 

[Tsing Tao]

HUF has been remarkably resilient despite the supposed woes of the country.

 

[Martinghoul]

Quote from orange_trad:
Exactly. All those points were prescribed by the IMF* and blindly instituted by the previous (socialist) gov., greatly contributing to the current state of the Hun. econ. The current gov. (in office since June) says no more austerity, we will concentrate on growth from now on. We'll see how they fare.

*We've seen in LatAm that the IMF has only one recipe: austerity, raising taxes, austerity, selling assets (utilities, hospitals, schools, transportation, mines, etc., but especially expensive real estates), austerity. If it doesn't work, change the government and start some serious austerity...

Arguably, the IMF recipe has worked in the past. Not in LatAm, but in other places, for sure. Secondly, it's not just the IMF, but the EU that's pushed for these things in Hungary. Finally, none of measures are good for growth, apart from the fact that they instill some confidence in the mkt. Which means the govt and domestic corporates might still be able to borrow in the capital mkts at reasonable rates.

 

[orange_trad]

Hm. Interesting.

Keep in mind that if one is fat, there are two ways to loose weight: 1/ chop off your left arm, 2/ start eating right and exercise more. The first is the IMF recipe since it's immediate and by the numbers it brings results, the second is what should be done.

BTW Martinghoul, can you name where the IMF was a 'success'? LatAm, CEE & Russia, Korea, etc. sure as hell are an example of how disruptive this for-profit organization is...