LONDON — Hungary’s new government added to sovereign-debt fears Friday, shaking global financial markets after a spokesman for Prime Minister Viktor Orban was quoted as warning that the economy had been left in a “grave situation” and that talk of a default wasn’t “an exaggeration.”
The remarks put added pressure on European banks with exposure to Hungary, while serving to undercut overall risk sentiment, analysts said, weighing on European stocks and exacerbating a weak tone on Wall Street.
The Hungarian forint fell sharply for a second day, dropping 2 percent to trade at 286.75 per euro.
The euro dropped sharply to a series of four-year lows Friday, sinking decisively below the key $1.20 level, after a disappointing U.S. jobs report added to fears of the euro-zone sovereign-debt crisis.
The spokesman said the economy’s plight was the result of the previous government’s having “manipulated” figures and “lied” about the economy, Bloomberg News reported. A committee is set to report on the state of the country’s finances over the weekend, which will be followed within 72 hours by a government action plan, the spokesman said.
“I don’t think it’s an exaggeration at all to talk about a default,” said the spokesman, Peter Szijjarto, according to Bloomberg.
The remarks unsurprisingly have stoked fears of a default or a restructuring, to the detriment of European banks.
“These developments are important because the losses on the Hungarian debt will likely be shouldered by European banks that are already about to be hit (with) a second wave of (write-downs),” said T.J. Marta, chief market strategist at Marta on the Markets.
