Eastern European Concerns To Rise, Hungary To Come Under Further Pressure

By Win Thin, Senior Currency Strategist, BBH Harvard Professor (and former IMF official) Kenneth Rogoff expects some Eastern European countries to face sovereign crises over next 2-3 years.  In a weekend interview, Rogoff predicted that not every country will be able to successfully consolidate their budgets, naming Ukraine, Romania, and Hungary as “potential wobblers.”  Due

Romania Feels Spain’s Austerity Through Remittances

As the property markets in Spain, Ireland, and Britain have dried up, a mass of Eastern European immigrants specialized in the building industry have found themselves without a stable source of income. The decline in remittances back to their home countries is similar to what we have seen in remittances to Mexico from the US.

The Shape of Bulgarian Things to Come

As the IMF say in their most recent staff report, the present economic crisis raises the question of whether potential output growth in Bulgaria in the years to come is going to be markedly lower than it was during the boom years. As the IMF point out, the current recession was preceded by an investment

Biting The Fiscal Bullet In Poland

There is a good deal of speculation in the press at the moment over the tricky issue of whether or not Poland will be able to comply with its agreed deficit-reduction deadline on the basis of the latest budget proposals announced by the government there.

Personally, I tend to agree with those analysts who feel the spending and revenue assumptions being made by the Polish government are rather unrealistic, and that they will this be unable to comply with the terms of the Excess Deficit Procedure as laid down for them by the European Commission: difficult territory this in the “post Greek crisis” world, but it would not be the end of the world were the slippage to be justified. Unfortunately, as I will argue below, I don’t think it is justified, indeed I think it is just the opposite of what sound economic management principles would prescribe in the Polish case, and seems to respond more to the impact of impending political pressures than to the precepts of good policymaking. So I do agree with the consensus here in feeling that Poland needs to do a lot more to reign in the deficit (which means unfortunately spending cuts, since I think raising taxes which will crimp growth and raise inflation is most undesirable at this point), although my reasons for arguing this are actually rather rather different from those that are normally advanced.

Croatia: On The Brink of What?

As Croatia enters the final stage of its EU membership talks, it is perhaps a fitting moment to review the other half of the picture, namely where the Croatian economy finds itself, and what the outlook might be for a continuing convergence with the requirements of Euro membership. Understandably, EU officials are fairly cautious about

Are Iceland’s Banks About To Go Bust Once Again?

It seems so if you read the latest from the Financial Times (hat tip Marshall Auerback): Iceland’s banking sector is facing a fresh wave of losses after a court ruling raised doubts over the legality of billions of dollars of loans. But here’s the thing. The Supreme Court outlawed loans tied to foreign exchange rates

Stat of the day: Hungary joins list of sovereigns with highest default probability

There is a lot more exposure to Italy, Ireland and Spain but we know that Thailand was the ultimate source of the Asian Crisis. These things have a way of metastasising – and we have already seen the strains in Spain and Greece. You could really argue that it was Hungary which was infected by a virulent strain of the Spanish Flu – and that contagion has already begun. I think people are concerned for good reason

Hungary Plunges

A combination of ill-thought out comments by the new Hungarian government coupled with a surge in the Swiss franc is seeing the forint drop like a rock and is seeing CDS on Hungary explode. Many Hungarian mortgages are denominated in Swiss francs and the sharp appreciation of the Swiss franc would likely have weighed on

Dollar and Yen Are Back In Vogue As Exuberance On Europe Wears Off

Highlights The US dollar and the yen are back in black today, as the markets are expressing doubts that the weekend EU/IMF plan will be successful in preventing eventual debt restructuring for Greece and the other peripherals.  While panic has been reduced, the negative euro sentiment remains in play.  The scandies were the worst performers

Slovakia first euro-zone nation to reject Greek aid package

The Slovaks have apparently balked at the Greek aid package hammered out in crisis this past weekend.  While they have not formally rejected the package, the Slovak Prime Minister has said he cannot grant Greece a loan before it fulfils its commitments.  The Austrians have also chimed in with words of doubt. Clearly, the Greek

Contagion Turns East

Well, I don’t know how many other people have noticed, but the Hungarian forint tanked today. This is the one I had been waiting for, and expecting. And precisely why did it tank? It tanked because Viktor Orban, Hungary’s premier-in-waiting, said in public what everyone following Hungary has been saying for weeks now: Hungary’s fiscal

Greek financial debacle threatens Swiss banks

There are a lot of interlocking threads in the Greek saga. One consistent theme that ties all of the different threads together is the fragility of complex systems. In our globalized and complex world of finance and banking, every major actor has  innumerable ties to other major actors such that devastating collapses in one entity