Hungary has officially requested precautionary financial help from the IMF and the European Union, confirming a sharp reversal of the government's opposition to working under the international lender's guidance. Both the IMF and the European Commission said on Monday that they had received a request from Hungarian authorities for possible financial assistance, in line with an announcement made by Hungary last Thursday.
They said the Hungarian government was seeking precautionary help. Hungary took investors by surprise last week when it said it planned to seek a new deal with the International Monetary Fund, after a previous loan expired last year and the centre-right government sought to pursue its own policy ideas on spurring economic growth.
But the eurozone debt crisis, and Hungary's weak economic outlook coupled with the threat of a downgrade to "junk" debt status prompted the government to take a sudden U-turn. "The IMF has received a request from the Hungarian authorities for possible financial assistance. The authorities have sent a similar request to the European Commission and indicated that they plan to treat as precautionary any IMF and EC support that could be made available," Christine Lagarde, Managing Director of the IMF said in a statement on Monday.
The IMF said its delegation, which is currently in Budapest for a regular economic review, would now return to Washington for consultations with the Fund's management. "The European Commission today received a request from the Hungarian authorities for possible EU financial assistance. They have also indicated that their intention is to treat any EU support that might be made available as precautionary," the Commission said in separate statement. Prime Minister Viktor Orban's government - which has pursued unconventional policies since it swept to power in April 2010 - may face hard talks with lenders if it wants a deal without strict conditions attached, analysts have said.
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