Hungarian Rescue Talks Fail

Tyler Durden's picture

Something is decidedly strange in Europe today: while there has been a favorable shift in bond spreads with the 10 year BTP dropping to 6.4% (although still waiting for LCH to react to its margin cut even as spreads are 100 bps wider) it is the 3M EUR/USD cross currency basis swap that has us confused as it has mysteriously moved violently tighter, from -140 bps to -121 bps overnight, indicating someone may know something in advance of yet another central bank liquidity infusion. As for the catalyst why one may be needed, we go to Hungary where we learn that "rescue" talks with the IMF and EU "on securing some form of backing to reassure investors" have broken down. As a reminder, should Hungary go, Austria and its billions in CHF-denominated mortgages will almost certainly be next, and with it a test of the SNB's EURCHF floor.

From Reuters:

European Union Economic and Monetary Affairs Commissioner Olli Rehn interrupted informal talks with the Hungarian government as the Commission did not receive assurances about the government's plans regarding its new central bank law, his spokesman said.


"The commission decided to interrupt the preparatory talks in Budapest," Amadeu Altafaj told Reuters over the phone on Friday.


"Unfortunately we did not receive assurances concerning the intentions of the Hungarian government, (which went on) to push forward in parliament the vote of the law that could potentially undermine the independence of the central bank," he said.

Which brings us to the original point - we may have reached the point in Europe, so familiar to US investors, where bad news is actually good news (remember the Fitch downgrade of all key European banks last night? neither do we), whether due to increased repatriation of EUR or rising expectations of liquidity bail outs.

Or maybe everyone just wants the day, the week and the year to be over as nothing makes sense any more.

Both work.

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GeneMarchbanks's picture

'Which brings us to the original point - we may have reached the point in Europe, so familiar to US investors, where bad news is actually good news (remember the Fitch downgrade of all key European banks last night? neither do we), whether due to increased repatriation of EUR or rising expectations of liquidity bail outs.'

We're all desensitized. That's where they like us to be...

Oh regional Indian's picture comment disappeared. Happens to the best of us, but this is what I said, paraphrasing:

Sovereign nations bent at the knee to their moneymasters, pledging their lands and people in perpetuity so that the great lie and their tenuous hold on power may survive another day or a week or few at most. 

This is what we are going to see. The IMF court of Monetary Benedection.

Ever wonder why a court gives you a Sentence? A sentence? hmmm...



GeneMarchbanks's picture

' comment disappeared.'

That'll happen when you hyper-hypothecate your comments ;)

Oh regional Indian's picture

Aha! Nice gene. Thanks. ;-) got it!


Popo's picture

Yes, we're all desensitized -- but it's likely true for those trying to remain enthusiastically bullish as well.  

No one believes anyone any more.    All rallies are short rallies.     And confidence fades fast.

GeneMarchbanks's picture

Hence the acceleration of the global bank run...

firstdivision's picture

Libor-OIS spread is still heading towards shit storm.

SixFeetFromTheHedge's picture

Well, today is "Quadruple Witch" day in one and a half hours from now. Maybe that's the reason for european stocks levitating so much?

fonzanoon's picture

Is it me or did bank of america's credit rating have to start off at AAAAA++++

It seems the are downgraded every 45 minutes and they are still A-stable

GeneMarchbanks's picture

'threats of debt default'

Outside of bad Hollywood action flicks, time bombs always explode.

bank guy in Brussels's picture

That's not off-topic, that's quite an on-target piece by Ambrose Evans-Pritchard there in the Telegraph about the revolutionary condition that now exists within the EU and euro-zone ... comments there in the UK Telegraph on Evans-Pritchard's articles, are often interesting too:

« Talk of 'nuclear default' sums up Left's anger at EU dictates »

Both his articles, and the UK Telegraph blog posts of Ambrose Evans-Pritchard, are nearly always interesting reading, his recent ones are linked on this page - articles in big headlines on the left, 'Ambrose Evans-Pritchard's Blogs' on the center-right, starting with « Europe's blithering idiots ... » :

JLee2027's picture

"We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won't pay," said Pedro Nuno Santos, vice-president of the Socialist Party in the parliament.

"Debt is our only weapon..."

With Portugal, the old axiom comes to mind - if you borrowed a little money they own you; but if you borrowed a lot then you own them.



jonjon831983's picture

Thanks for link.


I recall some possible Real IRA members were arrested in Portugal early this year.  I am guessing a lot of fringe groups may be prepping.  Just a speculation.

youngman's picture

Most people only know what "Hungary" is...not where it is located......I am going to make an Omelet now...

Tsar Pointless's picture

Say the word "Hungary" to your Average Amerikkkan, and they'll look at you as though you're pronouncing the word for 'having a desire, craving, or need for food' incorrectly.

Ask regular people to name one Supreme Court Justice. Ask them to point out Greece on a world map. Ask them to name one Senator from outside of their state. Ask them to name one Senator inside of their state.

I'm losing my job at the end of the year, and I'm so glad I am. I'd rather watch the societal collapse already in progress from the confines of my home.

There is a whole lot of stupid and ignorance out there. Why the expression of that truth is so repellent to most people is understandable.

Most people are stupid and ignorant.

Oh regional Indian's picture

Because we have been trained to believe that truth is bitter. And sweet is good. So sweet.

We are dying of sweet lies. :-)



juangrande's picture

Partly due to ignorance, but also perhaps
this information is rapidly becoming irrelevant

boiltherich's picture

And some of them post copiously here, though not as many as at HuffPo I think. 

hungarianboy's picture

thnx tyler. I think we'll here more the coming period from the Hungarian Masacre...

Surprised the Hungarian Forint didn't dropped dead yet ...

GeneMarchbanks's picture


Disheartening as it seems in the short term, good things can come from all this if Hungarians started getting interested en mass about the IMF's dealings.

Hopefully, the political class doesn't set fire to the forint in a desperation move...

Sziget's picture

nice to see other Hungarians here, the hungarian 99% realy needs some "not textbook/MSM" knowledge

OliverTwist's picture

This site is full of hungarians don't you know sziget?


Tense INDIAN's picture

some thing was very strange with InDIA too....Nifty from a high of 4830 crashed to 4651.......within an hour ...lately Indian indices have been correlated inversely with the dollar to the tick ...but strangely today the dollar was going a bit low....and the RBI did not increase RATES today at its policy meet.......still such a heavy fall....i expect a similar sudden downmove on the US and EUROPEAN indices.....

ucsbcanuck's picture

You're too rational man, too rational.

yogibear's picture

Default little PIIGS, otherwise your gonna be the slaves for European banksters for decades.

scatterbrains's picture

Very diplomatic that our banks should be downgraded first before France gets waylaid tonight maybe?

Bohemian Clubber's picture

R. Allen Stanford, charged with leading a $7 billion investment fraud, may be faking amnesia and should be tried in January as scheduled, prosecutors said, citing a prison medical evaluation.

Stanford’s scores on medical and neuropsychological tests “were sufficiently low as to evidence that he either was not trying or was faking,” Assistant U.S. Attorney Gregg Costa said, citing a doctor’s report.

sumo's picture

Allen was very naughty. He didn't give JPM a piece of the action. That's why Allen is facing trial and Jon Corleone-zini is not.

hourglass86's picture

Hungary, Greece or any other country that is under financial attack must show some balls and default. Enough with this joke! That would teach a good lesson to IMF, Wall Street and the rest of the world that you dont fuck with freedom and democracy.

nathan1234's picture

We are shortly coming to the stage

Every country for itself and it's people

Screw the people in other countries who want us to be their slaves


ISEEIT's picture

Glad I'm not alone feeling significant cognitive dissonence. We've gone from Euro about to tank to Euro about to launch with no legitimate catalyst.

swani's picture

Pavlovian responses set quickly in the unconscious. It seems the only way anyone can figure out these manipulated markets is to try to get into the minds of sociopaths. Maybe, we could start speaking to criminal profilers and psychoanalysts for investment advice.  

hungarianboy's picture

ust to be clear: without an IMF backstop Hungary’s creditors may not be so sure about the country’s solvency come spring. Apparently, it is the IMF or nothing for Hungary. 

When it was revealed that the IMF and the European Commission interrupted talks with Hungaryon a credit facility it has become evident that a deal cannot be sealed within one day, as Prime Minister Viktor Orbán boasted it could be. 

In fact, the government and the IMF see things so utterly differently that one needs a really wild imagination to see an agreement on the horizon. 

There is PM Orbán on one side, who thinks the IMF is a bank where he can waltz in and demand credit without a payslip if there’s not enough cash in the drawer for the electricity bill. 

On the other side, there is the real IMF that will be willing to lend money to an unreliable business partner only if it can scrutinize the borrower's house from basement to attic. It look into every corner and every hole with a flashlight, making sure that it will have a say in what measures will be needed to get its loan back. 

We do not mean to stand up for either of these approaches, but it is quite clear that amid the eurozone crisis and with such a worn-out credibility of Hungary’s economic policy the IMF’s perception of being the lender of last resort is not far from reality. 

When Hungary made the - most unprepared - announcement to re-engage with the IMF and seek an "insurance-type, precautionary" credit deal, market confidence in Hungary was eroding rapidly, which was reflected in government security yields and the forint’s exchange rate too. 

We pointed out already then that the mere way the cabinet communicated the move narrowed its own manoeuvring room. It was also evident that the government was not clear how far it can go with emphasising its #8216;unorthodox’ economic policy and quintessential national sovereignty. 

2011.11.21 13:58 
Hungary rolls over for the abhorred IMF

Hungary will need EUR 5-6 bn worth of foreign currency funding and a seamless operation of its fixed-income market next year. In the past few weeks the yield of fx bonds were hovering around 9-10% on the secondary market. While at such high financing level the sustainability of the country’s debt-to-GDP ratio is not a realistic goal, we cannot even be sure that so much money can be conjured up amid unfavourable investor sentiment. 

But Hungary’s refinancing need is rather pressing. One of the main conclusions of the European debt crisis is that the biggest danger looms over not the countries whose rate path is steeply ascending but over those whose debt ratio is "just" high. 

The drying up refinancing funds can easily lead to liquidity or solvency problems. For that to happen in Hungary it would be enough if the country failed to raise the necessary funds for only a few months. 

And at this point the situation becomes exceedingly simple: the IMF is a so-called dummy variable. If the Fund decides to grant Hungary a credit (credit line) then the market will trust that the country remains solvent. And - depending on the IMF’s flexibility - the government can carry on with its economic policy using ad-hoc decisions, the creditors will not worry about it too much. 

But without an IMF credit facility Hungary will have nothing. From January onward the country can expect yet another wave of the debt crisis and the inevitable downgrades it will trigger in Europe (and Hungary). And this could lead to nasty scenarios, for which you don’t need a wild imagination to grasp.


Source: Hungarian finance news portal,

Dcheeth2's picture

In other words, until you get rid of that ridiculous word "democracy", we ain't speaking to you.



Sziget's picture

The Hungarian goverment working on it very hard i can assure you.

Snakeeyes's picture

I testified yesterday and was asked what question the committee should ask Dudley. I said "If The Fed has 1 bullet left, would they use it on us or Europe?" Then I added "Not to kill us, but to save us." Nice Freudian slip.

I also added the point that without transparecny, The Fed could try to bailout out Europe, without our knowing it. I put the price of the bailout (as did the economist froim the AEI) at $4 trillion. Would Germany put up that much and NOT have riots? Of course not. Who are you going to call? FedBuseters! And the IMF. So I said that the Fed swaps program could get to $1 trillion.

My testimony:

The Brookings Institute economist said "Europe with the exception of Greece is solvent and in great economic condition. Europe simply needs liquidity." I answered "But the Titanic sank in an ocean of liquidity!" 

Eurozone is solvent and in great economic shape? Apparently he didn't look at my testimony or the IMF report. Or ask Hungary.

ucsbcanuck's picture

- Hungary in trouble, meaning Austria in trouble

- Ireland's economy contracted:

- IMF head warns of risk of second Great Depression

- Eurozone may be in recession

- Greece looks like it's going to default

And yet markets are up...

Does. Not. Compute. 

ucsbcanuck's picture

Oh yes, and don't forget the downgrades - banks as well as potentially Spain and Italy.

Despite all the negative news markets are up? 

Whiskey Tango Foxtrot