Moody’s cuts Hungary to "junk," government sees attack
Credit rating agency Moody’s cut Hungary’s debt to "junk" grade late on Thursday, dealing a blow to Prime Minister Viktor Orban’s unorthodox economic policies and prompting his government to denounce the move as a "financial attack."
Moody’s lowered Hungary’s sovereign rating by one notch to Ba1, just below investment grade, with a negative outlook, hours after rival Standard & Poor’s held fire on a flagged downgrade after Budapest said it would seek international aid.
The move followed warnings from all three major ratings agencies that Orban’s policies, which have eschewed traditional austerity in favor of revenue-boosting steps like a special bank tax and the nationalization of $14 billion in pension assets, had put Hungary’s finances at risk.
It also came after Orban relaunched aid talks this week with the International Monetary Fund, a dramatic reversal after he cut cooperation with the Fund short last year after sweeping a 2010 election on a vow to regain "economic sovereignty."
Moody’s cited rising uncertainty about Hungary’s ability to meet fiscal goals, high debt levels and what it called increasingly constrained medium-term growth prospects.
"Moody’s believes that the combined impact of these factors will adversely impact the government’s financial strength and erode its shock-absorption capacity," it said in a statement.