Hungary was under increased pressure on Thursday to secure IMF support after a second rating agency cut its debt rating to "junk" status and the ECB warned Budapest over central bank independence. Hungary is seeking a 15-20-billion-euro ($19.7-26.2 billion) credit line from the European Union and International Monetary Fund but EU and IMF officials quit talks here last week in protest at government plans to reform the central bank.
The latest downgrade came late Wednesday from Standard & Poor's which said the move "reflects our opinion that the predictability and credibility of Hungary's policy framework continues to weaken." The cut hit demand at an auction of Hungarian 12-month treasury bills on Thursday, forcing the government to lower the amount on offer to 30 billion forints (98 million euros, $128 million) from a hoped-for 40 billion forints. The interest rate demanded by investors was 7.91 percent, up from 7.29 percent at the last auction on December 8, state debt management agency AKK said.
S&P hit out at Prime Minister Viktor Orban's planned reforms of the central bank which "raise questions about the independence of oversight institutions and complicate the operating environment for investors." S&P's downgrade "reflects investors' negative views" about Hungary, Gyorgy Barta, analyst at CIB, part of Intesa Sanpaolo, said Thursday.
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