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European Commission ready to lend to Hungary

European Commission ready to lend to Hungary

The European Commission said Tuesday that it is ready to give financial aid to Hungary as its economy teeters on the brink as a result of the financial crisis.
EU spokeswoman Amelia Torres said the EU executive could borrow money on credit markets to lend to Hungary which is also seeking cash from the International Monetary Fund.
Over the past few weeks, Hungary's currency _ the forint _ has plunged against the euro and the U.S. dollar while the Budapest Stock Exchange's benchmark BUX reached its lowest point in four years.
Torres said EU regulators were still deciding the details of how they would aid Hungary and would need the support of EU governments before they could make the loan. The EU's 27 nations have agreed "in principle" to help Hungary, she said.
The EU has borrowed money before to help member states such as Italy.
Hungary already carried a large amount of public debt and was running the highest budget deficit in the European Union even before the current turmoil which saw banks shy away from lending and stock prices plummet.
Volatile exchange rates are a particular problem for Hungarians because many people took out housing loans and other debts in foreign currencies, mostly in Swiss francs and euros, which carry lower interest rates than Hungarian loans.
The tumbling value of the forint means regular debt payments have now become far more expensive for many people.
Hungary's central bank tried to support the currency by raising its key interest rate by 3 percentage points last week to 11.5 percent. High rates often attract investors seeking more interest for their deposits.
Under EU pressure, the government has trimmed some public spending but has avoided major reforms to social welfare, health or education.
State cutbacks have hurt economic growth _ GDP rose by just 1.3 percent in 2007 _ while Hungary now faces growing inflation, rising unemployment and increasing indebtedness.


Updated : 2021-06-23 08:27 GMT+08:00