Sunday, 8 January 2012

Memos from Member States

Hungary: Junk, junk, junk

Following the lead of Moody’s and Standard & Poor’s, Fitch has this week become the third ratings agency to cut Hungary's credit rating to junk status, BB+. The downgrade comes following widespread accusations that the Hungarian government is undermining the central bank's autonomy.

A standby facility with the IMF was recently sought by the Hungarian government, but talks broke down over a new law that will increase the government's control of the central bank's governing board.

The country is plagued by the large amount of foreign-currency mortgages, particularly those denominated in Swiss francs, that were taken out by home-buyers over recent years. Hungarians that were initially attracted by the cheap interest rates, now face unfeasible debt repayments as the Hungarian forint loses value.

Austria: Snowed in

Unexpected levels of snowfall of up to 1.2 metres and high winds have caused chaos on roads and railways in areas of Austria. 

The authorities have warned of an extremely high risk of avalanches, prompting the Austrian army to put several helicopters on high alert.

Nearly 2,000 homes have been without power, and on Friday, around 15,000 tourists and locals were snowed in at ski resorts on the Arlberg mountain. More heavy snow is predicted over the next few days.

Greece: Euro-exit becomes more likely

Greece’s government has this week warned that the country may have to exit the euro zone if it fails to secure its second EU-IMF bail-out. The announcement came amid new protests led by doctors and pharmacists against planned spending cuts, with hospitals taking emergency cases only until Thursday.

The latest €130 billion bail-out for Greece was agreed by EU leaders in October, on the proviso that Athens makes further public spending cuts, takes tough action against tax evasion, and privatises some services and state-owned companies.

Although the Greek parliament has already adopted a series of austerity measures, evaluation by the EU, the IMF, and the ECB due later this month is likely to demand more.

By Sonia Jordan