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Erste Bank expert optimistic about Hungary

The chief analyst of Austria’s biggest bank has said chances for a political agreement about the difficult economic condition of Hungary are good.

Erste Bank Group AG (Erste Bank) chief economist Friedrich Mostböck said today (Tues) he expected Hungarian Prime Minister Viktor Orban to agree to a compromise with the International Monetary Fund (IMF), the European Union (EU) and the European Commission (EC) regarding possible further capital injections to rescue Hungary from going bust. Mostböck told radio station Ö1: "There is a political crisis in Hungary, not an economic crisis."

International businessmen turned their guns on Orban for introducing a disputed crisis tax which cost them dear. Several Austrian company chiefs hit out at the right-wing prime minister in the same concern since the levy lowered their earnings in the economically challenged country. Hungary has also been criticised internationally for setting up a fixed exchange rate for foreign currency loans. The decision meant immense losses for investors and banks.

Austrian retail sector companies and banks manage around 2,000 branches in the Eastern European (EE) country which joined the European Union (EU) in 2004. Risks linked with Austrian finance institutes’ engagement in the country were underlined by rating agency Standard & Poor’s (S&P) when it decided to lower Austria’s rating and economic outlook last month.

Speaking to Ö1, Mostböck emphasised today that Hungary is doing significantly better than many other European countries as far as the state debt was concerned. The Erste Bank economist said Hungary’s debts were as high as 77 per cent of the country’s gross domestic product (GDP). Eurozone members like Italy and Greece are challenged by two-digit figures while Austria’s debts were as high as 72.2 per cent of its GDP last year. The EU average was 80.2 per cent in 2010, up sharply from 65.7 per cent in 1999.

Economists and consumers are worried about what effects a state bankruptcy of Greece, Italy, Portugal or Hungary could have on the EU’s other member states. Pollster Spectra found last month that just 10 per cent of Austrians believed that the domestic economy would do better in the near future. This share is almost as low as at the beginning of 2009 when just seven per cent of Austrians said the same. Spectra never recorded a lower percentage for people with this opinion ever before. The research group, which interviewed 1,000 Austrians, said last month that 33 per cent of them feared a worsening of the economic climate in Austria.

The Association of Young Entrepreneurs spoke with 2,200 self-employed Austrians younger than 40 in January to find that around seven in 10 of them feared a new crisis. The association also said that just two per cent feared being incapable of weathering the expected turmoil.

Stefan Bruckbauer, the chief economist of Bank Austria (BA), said S&P’s disputed decision to downgrade Austria from the best possible level of AAA to AA+ "will cause stress and insecurity again". Bruckbauer warned that investors were "certain" to react to the American rating agency’s move.

Referring to football, Viennese Institute for Economic Research (WIFO) boss Karl Aiginger said S&P "showed Austria the yellow card". He put the decision into question because due to the "immense activity" of the domestic economy" while other experts criticised S&P for failing to consider Austria’s low jobless rate. No other European country does better in this concern than the alpine country which registered an unemployment rate of 4.1 per cent last month.

Austrian Times

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expert economist rsquo rating Ouml debt Erste crisis International seven European domestic Bruckbauer Austria Hungary Bank Italy ouml Mostb economy

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