Hungary govt denounces Moodys downgrade as financial attack.

By bne IntelliNews November 28, 2011
Hungarys economy ministry has denounced the downgrade of credit agency Moodys on countrys debt to junk grade as a financial attack, MTI news agency reported. Moody's lowered Hungary's foreign and local currency government bond ratings by one notch to Ba1, the highest junk level, with a negative outlook. The ministry claimed the economy is moving in the right direction, despite the difficulties due to external shocks, and noted that the current account and fiscal balance will be on the positive side at end-2011. In light of a possible deepening of the European debt crisis and consequent slowdown in the economic growth, Hungary has planned reserves of 1% of the GDP in the 2012 budget, which will endure that the fiscal target will be met, the ministry added. At the same time, Hungarian central bank declared it would stick to its policy of not making any comments on the actions of the rating agencies. The markets, on the other side, reacted sharply, with forint weakening considerably and coming near to its all-time low of 317.9 forint for euro, before rebounding slightly, portfolio.hu informed. The credit default swap spread reached 644bps versus 603.8bps on the previous close, reflecting how the cost of insuring Hungarys bonds rose after the announcement of the downgrade. The previous highest value was reached in March 2009 in the midst of the financial crisis.

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