S&P lowers Hungary view to negative

Standard & Poor's said it revised its outlook on the Republic of Hungary to negative from stable due to the weakening perspective for sustained consolidation of Hungary's public finances. At the same time, the BBB+ long-term and A-2 short-term sovereign credit ratings were affirmed.

The agency said it believes the increasing political incentives and pressure to dilute the fiscal reforms ahead of upcoming elections, coupled with the increasing cost of external borrowing, will interrupt Hungary's progress in reducing its deficit from 2009 and will keep the debt burden rising.

On March 9, the government's mandate was weakened by its defeat in a national referendum, in which a solid majority of voters rejected aspects of the package. The defeat will not meaningfully increase this year's budget deficit but it nevertheless confirms fading appetite among Hungarians to continue with the consolidation process, S&P said, adding that the possibility of new opposition referenda, which amount to votes of no confidence in prime minister Gyurcsany's fiscal reform plan, will further undermine the government's goal of reducing public sector debt dependency.

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