July 19, 2010
Negotiators for the International Monetary Fund and European Union walked away from talks with Hungary over the weekend, saying Budapest needs to do more to shrink its budget deficit before it can get any more bailout money.
The move is likely to alarm markets already suspicious of the new populist government's pledges to cut spending.
After nearly two weeks of meetings with senior Hungarian officials, the IMF and EU teams on Saturday called an abrupt halt to the discussions. They said Hungary couldn't have access—for now, at least—to the remaining funds in a 20 billion euro ($25.9 billion) loan package secured in late 2008 to rescue the country from a financial meltdown.
The rebuke to Hungary represents a warning to governments across Europe that the IMF and EU won't tolerate backsliding by borrowers on budget-cutting. The decision, which effectively withdraws the international safety net under Hungary's tentative recovery, also risks unsettling currency and debt markets.
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