What happens when government spokespeople start saying things like this:
June 4 (Bloomberg) — Hungary’s economy is in a “grave situation” because the previous government “manipulated” figures and “lied” about the state of the economy, said Peter Szijjarto, spokesman for Prime Minister Viktor Orban. The forint fell for a second day, dropping as much as 1.8 percent.
“It’s clear that the economy is in a very grave situation,” Szijjarto said. “We need a clean slate to formulate our economic action plan, and the fact-finding committee will provide just that.”
“It’s no exaggeration” to talk about a default, Szijjarto said today.
What happens? Stuff like this happens:
Still, we’ve seen this kind of forint-funniness before. Plus, plenty of people think there’s more than a little political posturing taking place here. The below, for instance, is from BNP Paribas’ currency team:
“The euro is back under pressure and increasing concerns regarding Hungary are unlikely to help, suggesting that debt and deficit problems in Europe are extending beyond the eurozone. The vice Chairman of the ruling Fidesz party suggested that Hungary has a slim chance to avoid a Greek situation, while the European Commission warns Hungary that it has to cut it’s budget deficit faster. However, the comments from Hungary must be viewed as domestically politically motivated and hence are unlikely to have a sustained impact. But, EURUSD is already heading back towards the lows at 1.2110. A break below here will trigger a decline towards the 1.1645 area over the medium term.”
EURUSD is currently at $1.207 — more than a four-year low. Helped in part, by yet more government speech-acts:
RTRS-FRENCH PM – I ONLY SEE GOOD NEWS IN PARITY BETWEEN EURO AND DOLLAR
RTRS-EURO FALLS MORE THAN HALF A U.S. CENT AFTER FRENCH PM COMMENTS
Forget Club Med, Hungary might be next – FT Alphaville
Emerging Europe outlook: still bleak – FT Alphaville (2009)
Hungary NOT the next Iceland, apparently – FT Alphaville (2008)
The next domino to fall in eastern Europe? Not Hungary – FT Alphaville (2008)