Hungary Downgraded to 'Junk' By Moody's

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    Nov 25, 2011 2:13 PM GMT

    The key drivers for the downgrade and negative outlook are as follows:

    1.) The rising uncertainty surrounding the country's ability to meet its medium-term targets for fiscal consolidation and public sector debt reduction, particularly given Hungary's increasingly constrained medium-term growth prospects.

    2.) The increased susceptibility to event risk stemming from the government's high debt burden, heavy reliance on external investors and large financing needs as the country enters a period of heightened external market volatility.

    Moody's believes that the combined impact of these factors will adversely impact the government's financial strength and erode its shock-absorption capacity. The rating agency's decision to maintain a negative outlook on Hungary's ratings is driven by the uncertainty surrounding the country's ability to withstand potential event risks emanating from the European sovereign debt crisis.

    Moody's has also downgraded by one notch to Ba1 from Baa3 the foreign-currency debt rating of the National Bank of Hungary (NBH) given that the Republic of Hungary is legally responsible for the payments on NBH's bonds.
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    Jan 10, 2012 5:39 PM GMT
    When it comes to government and sovereign debt, the rating agencies look at political and economic factors.

    In fact, the downgrade is affected by many things including the right wing neo-facist constitutional reforms regarding limiting the press, limiting religion to those that are "approved" (the Episcopal Church and Reform Judiasm will not be recognized) , limiting free speech, taking away of minority rights including gay rights which may result in its explusion from the EU and the economic benefits they get, not to mention Hungary's falling out with the IMF, putting their financial support in doubt.