Europe in crisis – Hungary
The BBC is reporting that Moody’s has downgraded Hungary to junk status. The reasons given by Moody’s are the following:
1. high levels of debt;
2. weak prospects;
3. uncertainty as to whether the government can achieve its goals.
Hungary is the latest country to suffer from a downgrade. This is not good news because what it means that there are extra pressures because of higher interest rates required for any new investment bonds.
The Hungarian government obviously disagrees with Moody’s and on top of that Standard and Poors have taken an opposite approach, leaving Hungry to communicate with the IMF and the EU.
Since I know very little about what is happening in Hungary I cannot comment too much on the situation at present. However, I am noticing a particular trend relating to the European Union. It seems that the Eurozone is getting closer and closer to collapse with each of these downgradings.
What I do not know about Hungary are things like :
1. the welfare state
2. the level of investment in wasteful “green” projects
3. the level of unemployment
4. the rate of inflation
The only thing that I picked up from the article is that Moody’s considers the Hungarian economy to be weak and therefore they should be downgraded.