Economy Minister warns of currency crisis, “social collapse” without deep reform

Hungary will witness a currency crisis this year unless the government implements radical structural reforms, the economy minister said in an interview to Monday’s Nepszabadsag daily.

Gordon Bajnai told the paper that for the past ten years Hungary had failed to take any of the steps necessary to prepare itself for tough times.

“Investors in the country are more and more impatient and they think that Hungary has only taken chicken steps and have not prepared for difficult times. They ask, why do we kid ourselves that it is possible to carry on financing our spending spree in excess of our achievements using foreign credit,” said Bajnai.

He said successive governments had failed to wean Hungary off foreign credit by addressing the most basic problems.

“Since 1998 there has been no major attempt at modernisation. Very few people are a part of the workforce and lots of people live on state handouts,” he said.

Bajnai said it was imperative to expand the tax base while at the same time cutting the burdens on businesses while reducing taxes and state spending.

He said European Union financing could not suffice as a replacement for government financing.

“One cannot replace the other,” he said.

Bajnai gave warning that the country faced a big risk this year of a currency crisis if the government is incapable of ushering in the reforms needed.

“Then already this year there could be a currency crisis which would cause a social and economic collapse. We must take determined steps to stop this from happening,” he said.

Hungary’s forint recently slid to an all-time low of 317 against the euro but has since climbed back to levels above 300 to the euro due to intervention by the central bank.