Hungarian gov’t remarks spark new fears

Could someone tell us what the cunning scheme was behind these carefully considered words?

“It’s clear that the economy is in a very grave situation,” Peter Szijjarto, spokesman for Prime Minister Viktor Orban, said today in Budapest. “I don’t think it’s an exaggeration at all to talk about a default.

We’re guessing that rather than provoking general fear about the state of Europe’s economy, it’s all about piling blame on the old government so that when the new government announces a new round of austerity, it can say it had no choice

Whatever the intention, here’s the result of the government’s communication strategy:

The forint fell 2.1 percent to 287.58 per euro as of 2:03 p.m. in Budapest. The currency dropped 2.5 percent yesterday after Lajos Kosa, a deputy chairman of Orban’s Fidesz party, said Hungary had a “very slim” chance to avoid a Greece-like situation. The benchmark BUX stock index fell 3.5 percent, and credit-default swaps on Hungarian government debt rose 69 basis points to 391.5, according to CMA DataVision…

“Investors are losing their patience,” Gyorgy Barta, a Budapest-based economist at Intesa Sanpaolo SpA, said in a phone interview. “This is part of a communications strategy that wants to tell voters one thing and the markets another. It’s getting too complicated, and the government now needs to come clean and present a convincing plan of fiscal consolidation.”

And don’t even get us started about the reaction beyond Hungary’s borders. Here, here, here, and here. Way to go. And here’s a picture of what the comments did to the forint:

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