Hungary’s new government pledged to keep its finances under control on Monday after remarks by top officials that the country faces a Greece-like crisis hit European stocks, the euro and investor confidence.
The “government is working on an action plan that will ensure two things — to keep the budget deficit (for 2010) at 3.8 per cent (of Gross Domestic Product) and to stimulate the economy at the same time,” Economics Minister Gyorgy Matolcsi said.
Secretary of State Mihaly Varga last week said that the public deficit would be 7.5 per cent instead, plunging already nervous European markets into despair as investors feared Hungary could join Greece in a debt-crisis spiral.
Lajos Kosa, vice president of the ruling centre-right Fidesz party, then said Hungary’s situation was “very critical, the state is comparable to that of Greece ... the bankruptcy of the state is close.”
Analysts in western Europe said that the switch of focus to Hungary at the end of last week had served to aggravate underlying concern about the size of sovereign debt in many eurozone countries, as well as in non-eurozone Hungary.
World stocks fell and the euro hit four-year lows against the dollar as investors reacted to the new debt worries.