Government’s euro introduction announcement was just a trick?

Although Mihály Varga has just announced the possible introduction of the euro in Hungary, in reality, the country’ s economy is not prepared for it. The CEO of GKI Economic Research Co believes Mihály Varga’s announcement only serves the purpose of confusing less sophisticated investors. 

Hungary insisted on keeping the HUF

According to László Molnár, Hungary is much further from the introduction of the euro than at any time in the last ten years. When Hungary had the greatest chance to enter ERM 2 and consider introducing the euro (between 2013 and 2017), the government insisted on keeping the HUF, writes 24.hu. They said that keeping the HUF is the guarantee of an independent economic policy.

Hungary is far from introducing the euro

Now that the economic crisis has reached Hungary, this is also not the right time to introduce the euro. In addition, if a member state is ready to introduce the common European currency, it first has to meet various convergence criteria. Among other criteria are the public budget deficit, inflation and the public debt in proportion to GDP. – reports Pénzcentrum. However, Hungary is having difficulties in these areas.

László Molnár lists the following problems:

  • the national debt nominally doubled compared to 2010 reaching a record level
  • unprecedented deficits appeared in the budget
  • Hungarian inflation data are among the worst in the EU
  • interest rate is also far above the EU average interest rate

Trick: announcing the introduction of the euro can have a strengthening effect on the HUF

The CEO of GKI Economic Research Co believes that Hungary’s external financing is in such a bad situation that announcing a possible introduction of the euro can have a strengthening effect on the HUF. It can be beneficial if the investors get confused by the fact that the government is considering the introduction of the euro. In fact, Mihály Varga, Minister of Finance might be able to deceive those less sophisticated investors who have less than 1 percent of Hungary in their portfolios and who are considering whether to buy HUF-denominated government bonds. Personally, the minister would probably not refrain from introducing the euro, but this is far from the official position of both the government and the Hungarian National Bank.

Potential investors must believe that the HUF exchange rate will strengthen

Due to the high deficit of the current account and the foreign trade balance, extra funds are urgently needed. However, since the state does not want to issue foreign currency bonds, the only solution left is to attract investors to the HUF government bond market. Although the interest rate on HUF government bonds is above 10 percent, the volatility of the HUF is 18 percent within a year, which will take away the interest rate. Therefore, potential investors must believe that the HUF exchange rate will strengthen.

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Read alsoHungary’s central bank extraordinary deicision revealed, forint strengthening – UPDATED

Source: 24.hu, Pénczentrum

6 Comments

  1. The Hungarian Economy is presently a Cataclysmic MESS.
    What the immediate future holds, is of grave concern for us in Hungary.
    The Orban led Government, is in a PARALIZED position with the state of the Economy under their Control.
    They as the Government of Hungary decided on the course direction of the Hungarian Economy, over the past decade.
    The Orban Government is FULLY accountable for the “worsening” Mess – of the Hungarian Economy.
    We know Funding received from the European Union, which is now in somewhat of a “permanent” hold position, the highly questionable use/distribution of funds received by this Orban led Government, to a large degree has contributed to the MESS that our Economy is in.
    The consideration of a currency change in Hungary could only be effective, after it went to the citizens of Hungary being asked under a Referendum process, did they want a currency change.
    This can’t HAPPEN – under a Fidesz led Political Party under the Leadership of Victor Orban.
    Proposals in relation to currency change – must be “bought on” by a change of Government in Hungary, with NO alliance to the Fidesz Political Party.
    The European Union – if Hungary removed its present Government and replaced it with a Government, that EMBRACED – the Laws of Membership required to be a “Member of the Family of European Countries” – the CORE of Membership being DEMOCRACY – this would be the correct – morally and ethically and the respectful time, by the people of Hungary, having been previously asked – what currency did Hungary wish to predominantly operate Financially and Economically under.
    REMEMBER: the European Union has stated that Hungary, under Victor Orban as its Prime Minister, its “front & center” man to Brussels – the European Union, that the European Union views Hungary no longer, acting in the ‘Spirit” of Democracy.
    Hungary – factually known and accepted is ruled & governed by a dictatorially styled Government, under Victor Orban.
    The “ever-present” discussion on currency change in Hungary from the Florint to the Euro Dollar – is NOT the SAVIOUR of the “collapsing” before our very eyes Hungarian Economy.
    Who are our FRIENDS?
    We are ISOLATED – through the CREEDS practiced undertaken by the Fidesz led Government of Hungary – Victor Orban.
    The European & Global, inclusive of the European Union, Britain and the United States of America – the Reversing PROCESS needed – through the Image Capitulation – brand name – Damage & Scaring of Hungary – the SOLE doings of this present Fidesz led – Government of Hungary – under Victor Orban – that we FACE – confronts us at this time – GRUESOME.
    Hungary – we are in a state of Paralysis.

    “When the YOKE is Broken,
    the BURDEN is REMOVED.”

    The Yoke – the BURDEN – Hungary – its TIME.

    “History does NOT belong to Us – we Belong to it.””

  2. Hungarian Government – Trickery.
    What a time in our History to be playing or attempting to play jokes.
    We know Harry Houdini – was Hungarian born, the Master of Escape Acts.
    Hungary – we need more than ESCAPE Acts – to get us out the “Chains & Shackles” and “other” acts of escapism – that the great Harry Houdini used to thrill crowds accomplishing in his performances.
    Houdini used TRICKERY to his advantage and EARNED a reputation for his ability to entertain billions of people.
    Miracles – they HAPPEN.
    Hungary – lets to-gether in SOLIDARITY – create a MIRACLE.

  3. The euro is a political currency. Hungary would be insane to adapt it, and Western European countries would also be insane to let Hungary into the euro. Italy, Spain and Greece are already a big problem.

    Let’s get rid of the undemocratic European project and liberal “democracy” which was created to destroy the European nation states and their native people.

    Note: Also, Fidesz and their allies have to be put out of power. Same for the liberal left (so-called) opposition.

  4. Viktor Orban is undoubtedly the best political leader in the World today! Hungary and Hungarians are very fortunate, indeed, to have a leader like him! Only commies and libtards would object to Orban and his government!

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