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Hungary escapes bankruptcy with international aid

Text by AFP

Latest update : 2008-11-02

Hungarian Prime Minister Ferenc Gyurcsany said in an interview published Sunday that his country had escaped state bankruptcy because of international aid. Hungary was offered $25 billion in financial support from international institutions.

Hungary, hard hit by the global financial crisis, avoided state bankrupty thanks to international aid, Prime Minister Ferenc Gyurcsany said in an interview published Sunday.

"State bankruptcy, in parallel with a deep social crisis that would have resulted from it, could have come about from the financial crisis," he said in an interview with Vasarnapi Hirek newspaper.

Earlier this week, the International Monetary Fund, the World Bank and the European Union offered Hungary 20 billion euros (25.1 billion dollars) in financial support to help prevent the economy from going bust as a result of the global credit crunch.

Gyurcsany thanked other European leaders who he said played "a key role in the aid given to Hungary," specifically naming British Prime Minister Gordon Brown, German Chancellor Angela Merkel and French President Nicolas Sarkozy.

The government had feared the worst, including a collapse of the national currency, the forint, he said.

"The collapse of the forint against the euro to an amount of 350-400 forints per euro would have immediately led to inflation on the order of 20 to 30 percent," the prime minister said.

He added that such a scenario "would have provoked the loss of a quarter or even a third of citizens' incomes."

The country's currency has hovered in recent days between 252 and 260 forints per euro (one euro is approximately 1.30 dollars).

"At the same time, facing a lack of purchasers of state treasury bonds, we would have had much difficulty in paying salaries for teachers, doctors and even retirees," said Gyurcsany.

He said "that would have created a real and profound social crisis, from which the country has been saved."

But while the financial crisis may have been dealt with, the country must now "prepare itself" for a long economic crisis, the prime minister said.

Date created : 2008-11-02