It's like an AA meeting with nation after nation coming out of the closet to admit their addiction to debt. Now it's Hungary, where officials have made some eye-popping assertions to throw markets and speculators around the world into a tizzy. The new government of the center-right ruling Fidesz party says the country is not on the brink like Greece, but a closer look at the ledger books reveals some grim data. A spokesman for Prime Minister Viktor Orban set a shiver through markets, saying the economy of the country is in a "very serious situation." That statement on June 4 sent the forint into free-fall, and dragged along with it other central and eastern European currencies like the Czech koruna and Polish zloty. But is it that bad?
Tim Ash, an analyst at the Bank of Scotland in charge of the bank's Hungarian investments, said he was "surprised" by the statements.
"It is absurb, remarkable, and extremely dangerous. What kind of message does that send to foreign holders of Hungarian bonds?" asked Ash.
Realizing they may have gone overboard with their gloom-and-doom statements, the Hungarian government blushed and tried to backpedal a bit.
Outgoing Finance Minister Peter Oszko said Hungary no way is "on the brink of bankruptcy," and that such remarks were made so much political point scoring.
By June 7, the Hungarian government supplicated at the altars of the global markets, promising not to debt again.
Economy Minister Gyorgy Matolcsy said his government would strive to meet the 2010 budget deficit target of 3.8 percent of gross domestic product, set by the previous administration.
Matolcsy - speaking on television as the Cabinet met on an action plan - also raised the possibility of a flat tax, as well as tax cuts and a reduction of bureaucracy.
Details on the action plan are expected June 8, but Orban already has said efforts would be made to simplify Hungary's tax system, cut taxes and reduce tax evasion.
In late 2008, EU-member Hungary avoided defaulting on its debts with a 20 billion euro loan from the International Monetary Fund, the World Bank and the European Union.
In Luxembourg, IMF chief Dominique Strauss-Kahn said he "sees no reason to be concerned" about the current situation.
Luxembourg Prime Minister Jean-Claude Juncker, who led talks Monday between euro-zone finance ministers, said the Hungarian situation is in no way similar to that of Greece or other countries.
"It simply shows that there is a large nervousness on the financial markets and a high degree of volatility which is very often provoked by rumors" and lack of verbal discipline, he said at a news conference in Luxembourg.
Hungary began implementing austerity measures in 2006 to reduce its deficit, said analyst Sandor Richter of the Vienna Institute for International Economic Studies in an interview with the AP news agency.
He said the center-right Fidesz party, which recently won a two-thirds parliamentary majority, now faces a tough task of saving face as it realizes its campaign promises of immediate and radical tax cuts are not feasible.
"It is a very delicate situation, but I hope very much that reason will win and that they will follow the economic policy of the previous government," Richter said.
A recent analysis by the Vienna-based bank RZB Group, meanwhile, said the "doomsday words" of Fidesz politicians were "designed to cool down the expectations of the voters (about the tax cuts) and to prepare them for potentially uncomfortable measures."
"Clearly, the new government has extremely limited room to maneuver - especially in the shadow of the Greek crises and the Euro-zone debt problems," it said.
Mark Mobius, chairman of Templeton Asset Management Ltd, told Bloomberg, the statements are meant to prepare for the brutal beltightening measures to come for Hungarians.
As the Informant has already reported, Hungary is reeling from the global economic crisis.
Unemployment is 11.4, one of the highest in eastern Europe.
To deal with the crisis, IMF-prescribed bromides -- internal devaluation in order to lower wages to make them 'competitive' -- are squeezing people further.
For example, Hungary now has Europe's highest VAT tax at 25%.
The European Bank for Reconstruction and Development has less than rosy economic prognostications for the eastern European region for years to come.
“The consequences of the world economic crisis will burden this region more than the rest of the world in coming years,” declared the chief economist of the EBRD, Erik Berglöf.
Frustrated and disgusted by the bankruptcy of their ruling elites, Hungarians gave 16.7 of their vote to the far-right Jobbik party in recent parliamentary polls.
And if the crisis deepens, expect those numbers not only in Hungary but elsewhere in central and eastern Europe, heck the whole continent, to rise.