Hungary turns to the ECB
European Central Bank European Central Bank (ECB)
Bank created to monitor the monetary policy of the countries that have converted to the Euro from their local currencies. The original 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, (ECB See electronic code book. ).
In an unprecedented move outside the eurozone Eurozone
same as Euroland
Eurozone n → eurozona, zona euro
Eurozone n → zona euro , the ECB came to Hungary's aid Thursday to help it combat a financial crisis that experts here attribute to panic and speculation.
"Hungary's economy has grown stronger over the past few years and although vulnerability remains it has lessened and the country enjoys the support of institutions such as the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community , the European Central Bank and the International Monetary Fund (IMF IMF
See: International Monetary Fund
See International Monetary Fund (IMF). )," central bank governor Andras Simor said on national television.
"There is practically zero chance of a national bankruptcy in Hungary," he added.
But investors have nonetheless made known their concerns. The Budapest stock exchange Budapest Stock Exchange
Established in 1864, the major securities market of Hungary. has shed half its value and the national currency, the forint fo·rint
See Table at currency.
[Hungarian, from Italian fiorino, florin; see florin.]
Noun 1. , has lost more than 10 percent against the euro.
Hungary, which joined the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the
European Community in 2004, saw its deficit ratio balloon to a record high 9.2 percent in 2006.
But thanks to austerity policies, the public deficit narrowed to 3.4 percent of output by 2008. Economic growth in 2008 is expected to come to 2.0 percent.
Prime Minister Ferenc Gyurcsany has welcomed the help offered by the IMF as well as the ECB grant to solve liquidity problems faced by Hungarian banks.
These moves, he said, would "show speculators it would be difficult to bring the Hungarian currency down."
The central bank has meanwhile announced a series of measures to provide liquidity.
"Although the Hungarian banking sector cannot be insulated from the effects of the global financial crisis, domestic banks are properly equipped to meet customer needs arising from economic growth in the future," the central bank said in a statement, co-signed by the country's seven leading commercial banks.
The banks said lending "will continue to grow at an adequate, albeit declining, pace, and with tighter standards than in the earlier period."
"Maintaining financial stability is currently the government's overwhelming priority," Gyurcsany said Friday.
To that end he has convened a "national summit meeting" Saturday comprised of the government, political parties, trade unions, industrial leaders and bankers.
Among the subjects to be discussed are Hungary's accession to the eurozone, pension reform, education, party financing and state administration.