Euro slides as Hungary says economy in trouble
I still have hope for Hungary. They have just sworn in their new centre-right Government and they need to have a chance to turn the economy around after what the socialists did to it. This article however, does remind us that the Euro is in trouble and that hopefully the European Union falls apart and Europe returns to individually run countries. This socialist/communist experiment has been a costly dudd and needs to end sooner rather than later…
The euro slumped to a four-year low against the dollar yesterday amid concerns that Europe’s debt crisis will worsen still further after Hungary said that its economy was in a “very grave situation”.
Stock markets in Europe and the United States also slid sharply lower as concerns about the worsening debt crisis combined with figures from the US showing slower than expected growth in American employment figures — and rumours of trading losses at Société Générale.
The euro was trading at $1.2051, down from $1.2158 late on Thursday. It is the first time that it has dropped below the $1.20 mark since March 2006.
Gold prices rallied in response, hitting record highs in euro terms, while oil fell more than 3 per cent to below $72 a barrel.
Hungary’s markets also fell sharply after a spokesman for Viktor Orban, the Prime Minister, suggested that his country had only a slim chance of avoiding a Greek-style debt crisis — although he said that it would do so.
The new Hungarian centre-right Government, sworn in less than a week ago, said that it would soon reveal plans to tackle the economy’s problems. It has said it wants to boost growth through tax cuts and economic stimulus measures.
Peter Szijjarto, the Prime Minister’s spokesman, said that his Government was “ready to avoid the path that Greece took … After realising what reality is, we will not hesitate to act.”
Mr Orban said that any action that his Government took could involve only “patching up” the economy. “Measures aimed at improving the financial situation must be linked with deep structural changes,” he said. His comments followed a warning from the European Commission on Thursday that Hungary must cut its budget deficit faster.
After the Government’s comments, the Hungarian forint fell 2 per cent against the euro to a one-year low of 289.80, before recovering slightly.
The fall in markets across the world was fuelled by disappointing American jobs figures. The Labor Department said that the US had added 431,000 new jobs in May. Although this was the fastest increase since 2000, the bulk of the gains –— 411,000 — represented the Government hiring temporary workers to carry out the 2010 census, leaving the overall net gain at an unexpectedly modest 20,000. Private sector hiring came in at only 41,000 new jobs. The unemployment rate edged down from 9.9 to 9.7 per cent, underlining the slow pace of recovery.
Market turmoil was also fuelled by market rumours in Paris that Société Générale was set to announce heavy losses in its derivatives division.
The Paris-based bank refused to comment, but one analyst said there was little evidence to substantiate the speculation.
“No one is quoting a precise figure and it’s the sort of rumour you get every two or three months — in fact, it’s more of a feeling than a rumour really,” he said. “There’s no reason to suppose there’s anything in it, but the markets are particular nervous at the moment.”
SocGen’s exposure in Eastern Europe also contributed to the run on its share price amid fears that Hungary could default on its sovereign debt. The bank has significant exposure in Romania and, to a lesser extent in Bulgaria, Hungary, the Czech Republic, Poland, the Slovak Republic and Slovenia.