Is Orban backing down?

Hungary’s prime minister Viktor Orban seems to be softening his stance on his government’s latest idea for how to control the economy (sic), but it’s not at all clear this will be enough to calm markets in the near-term.

Markets welcomed the shift which allowed Hungarian assets to regain some of the strength lost during the earlier days of the week but this didn’t stop Fitch Ratings from completing Hungary’s hattrick of junk-rankings at major rating firms.

Mr. Orban met in the morning with central bank governor Andras Simor, Economy Minister Gyorgy Matolcsy, Tamas Fellegi, Hungary’s lead negotiator in talks with the International Monetary Fund and the European Union, and chief of staff Mihaly Varga, to discuss economic issues and the country’s bid to secure financial backing from the EU/IMF duo.

Besides the accord of Messrs. Orban and Simor that Hungary’s best interests are best supported by a quick agreement with the EU/IMF, it also marks an attempt at reconciliation between the sides, after a series of open rows, most importantly about the country’s new central bank law. The regulation — criticized internationally as an infringement on the central bank’s institutional independence — appears to be the most hotly contested issue and may prevent Hungary from receiving the support it seeks.

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