S&P Is Second Rating Agency In One Day To Warn It Will Cut Hungary To Junk

Tyler Durden's picture

Earlier today it was Fitch; now, way after the close, it is S&P's turn: the rating agency just put Hungary on junk bond watch, due an "unpredictable policy framework", and better yet, advised readers that the almost certain downgrade from Investment Grade would happen this month. Naturally, if Hungary, AAAustria is next. Then all of Eastern Europe follows quickly and Germany finds itself in a war with contagion on every single front.

From S&P

Republic of Hungary 'BBB-/A-3' Ratings Placed On Watch Negative Owing To The Unpredictable Policy Framework


  • In our opinion, the predictability of Hungary's policy framework continues to erode, weighing on the economy's medium-term growth prospects.
  • As a result, we are placing the 'BBB-/A-3' foreign and local currency sovereign credit ratings on Hungary on CreditWatch with negative implications.
  • We are also placing the 'BBB-' long-term counterparty credit rating on the National Bank of Hungary on CreditWatch with negative implications.

Rating Action

On Nov. 11, 2011, Standard & Poor's Ratings Services placed its 'BBB-/A-3' foreign and local currency sovereign credit ratings on the Republic of Hungary on CreditWatch with negative implications. At the same time, we placed the 'BBB-' long-term counterparty credit rating on the National Bank of Hungary on CreditWatch with negative implications.


The rating action reflects our view that a more unpredictable policy environment, stemming from a weakening of oversight institutions and some budgetary revenue decisions, will have a negative effect on economic growth and government finances.

The CreditWatch placement reflects our view that downside risks to Hungary's creditworthiness are increasing as the external financial and economic environment is weakening. The risks are further amplified by what we consider to be weakening institutional effectiveness, which has been undermined by changes to the constitution and the functioning of some independent institutions, such as the Fiscal Council. This is likely to have a negative impact on fiscal planning and investment activity, which we believe will continue to weigh on Hungary's medium-term growth prospects.

In our view, the imposition of temporary taxes on various services sectors could constrain investment and job creation over the short term, while moves to facilitate households' prepayments of foreign-currency-denominated mortgages at concessional rates could further reduce the supply of credit to the economy. These measures will constrain growth prospects and may put the government's fiscal targets in jeopardy and could prevent a sustained reduction in general government debt levels.


Resolution of the CreditWatch action is likely this month pending further information from the Hungarian government regarding how it will address the ongoing economic challenges.

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GenXer's picture

"We're very big in Bulgaria. And what-his-name, the other -garia..."

Ancona's picture

I guess that means we have some Sunday night theatre oi watch

shansnv's picture

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skin tightening Sydney

Thomas's picture

Hungary could become a lower case aitch. (Believe it or not, that is how you spell the letter "h")

redcorona's picture

This couldnt have anything do with rising Hungarian nationalism and the democratic decision to exist as a Christian nation could it? I mean, it's not like there's some sort of international plutocracy comprised of judeo-bolsheviks that would use economic measures as a weapon, right?


lolmao500's picture


Unites Stategaria?


doggings's picture

Switzerland is heavily exposed to Hungary, via CHF denominated mortgage debt.

The outstanding stock of CHF-denominated residential mortgages in Hungary currently stands at about 16% of gross domestic product (GDP), and most of these loans were taken out at the HUF/CHF exchange rate of 150–170— significantly more favorable terms than the current market rates


covert's picture

hungary used to be a great economy.



X.inf.capt's picture



Ray1968's picture

Quick, call Corzine!! I smell an investment opportunity.

Oswald Spengler's picture

Why is no one stating the obvious? The West is bankrupt. Countries cannot be bailed out because there is no capital left in the finacial system. The solution has already been worked out, but TPTB are taking their sweet time because the sheeple need to become innured to the idea that has been in the works for decades. OWO- One World Order.

cranky-old-geezer's picture



All of western Europe is junk too.  And America.

Any national government having to borrow money is junk status.   Ability to tax citizens isn't justification for AAA rating.

AldousHuxley's picture

Ability to tax citizens isn't justification for AAA rating.


How about ability to tax foreign citizens? US is still the baddest military in the world. When shit hits the fan, country with strongest and smartest military will rule.


China can't do shit because they are still copying US military secrets.



TheFourthStooge-ing's picture

AldousHuxley posited:

When shit hits the fan, country with strongest and smartest military will rule.

Empires have always fallen back on that strategy; it falls apart when the military stops getting paid.


jez's picture

Yeah, I was thinking that. How many wars can you run simultaneously?

In other news, I see that dead US cannon fodder is now being used as landfill. Dunno if this would be a good example of the "smartest military" the poster was talking about:

cranky-old-geezer's picture



US is still the baddest military in the world.

It won't matter when USD loses WRC status.  America will collapse virtually overnight, and that "badass" military will be left stranded at hundreds of bases all over the world.

doggings's picture

lol @ the strongest baddest military with no ability to buy oil for their toys with useless green paper anymore.  fish in a barrel.  

they had better win the currency war that is already underway first, or the strongest baddest military in the world will all be making it's way home, pissed off. 

good luck with that.


oldman's picture


Now, this is truly 'stating the obvious'.

This is the reason that there was never, until recent times, a rating on US Treasury debt; it was understood by all that the US military was the AAA and therefore the debt was unnecessary to rate. The bond market always talked this up among themselves in the 'old days'---I remember it well from 1979-1984. It was one of the reasons we attacked Grenada---a show of force'.

thanks for the memory              om

Snidley Whipsnae's picture

AldousHuxley... You might want to consider who is making US Military hardware and what parts are being used... China is using good parts in their equipment and fake parts in American equipment...

"Counterfeit Electronics Parts Threaten Our Troops and Our Security"

"The following information was released by Michigan Senator Carl M. Levin:

Earlier this year, the Senate Armed Services Committee, which I chair, began an investigation of counterfeit electronic parts finding their way into the systems that our military uses to defend us. We recently held our first hearing to look at what our investigation has discovered so far, and what we have found will shock the American public.

There is a flood of counterfeit electronic parts entering the defense supply chain. It is endangering our troops and costing us a fortune. And the overwhelming share of these counterfeits comes from one country: China.

Here is some of what we have found:"Looking at just a slice of the defense contracting universe, the committee reviewed 1,800 cases of electronic parts suspected to be counterfeit. Those 1,800 cover more than 1 million individual parts. Now, 1 million parts is surely a huge number, but remember, weve only looked at a portion of the defense supply chain. Those 1,800 cases are just the tip of the iceberg."...

See rest of link here... http://www.militaryaerospace.com/index/display/wire-news-display/1539432306.html

eigenvalue's picture

But markets closed up once again. I doubt if our generation will live to see the triumph of the fundamentals. :(

winning's picture

I'm starting to think the markets have it right, and the reason they want to move hgher is they know the eventual outcome of this... ---> print.. the west is going to print its way out of this.. hyper inflation.. its the solution for the real estate depression and massive debts ... and it will drag stocks higher, much higher... granted it will cost $1,000 for a gallon of gas, and $2,000 for a gallon of milk, and your savings will be worthless, but dont worry your stocks will be a little higher ... 

HamyWanger's picture

Unless the printed money is directed directly to stocks, inflation is bad for them (especially discretionary and service sector stocks). You just have to watch where the DOW went during the 70's. 

X.inf.capt's picture

+1 for satire.


cranky-old-geezer's picture



... and RoboTrader will be happy.   He doesn't have to buy gas (no car) nor milk (lives off mom's soc sec / welfare / TANF / food stamps).

jeff montanye's picture

 you are cranky.  but not necessarily a crank

JustObserving's picture


Meanwhile in a universe, far, far away:

Chinese ratings agency threatens US with new debt downgrade


The head of China's biggest ratings agency, Dagong Global Credit Rating, is warning that it may downgrade the US's sovereign debt rating again because of Washington's failure to tackle the federal budget deficit.

"The measures available to them [the US] cannot be effective so they have another way out which is to depreciate the US dollar, to print more money," he says. "And that will also make it a lot worse, this has affected their credit and it is negatively affecting their credit prospects – so that their overall ability to pay back their debt will continue to go down.


max2205's picture

I gues it makes cents to downgrade the country that owes you 3 Trillion USD. DOESNT IT?!

Snidley Whipsnae's picture

Justobserving... I was going to post this info and was scrolling through to see if someone had posted it already...

Nice catch. +1

1000pips's picture

So, will they still serve Golosh?

Tsar Pointless's picture

I don't know.

I see this as quite bullish.

I mean, at least The Maldives aren't a downgrade target.

Could be worse.

Schmuck Raker's picture

The Maldives will probably make it another year, or two, before they're Seriously Underwater.

Global Hunter's picture

Big ups sleepy Hapsburgs Austro-Hungarian Empire stepping up stirring up shit on the big boys stage.

WestVillageIdiot's picture

How can this not be a bad dream by now for the Germans?  Nearly 100 years ago they were lefting holding the bag on a war where they were more and more surrounded.  The Austro-Hungarian Empire did little to help them.  A Hail Mary pass got Russia out of the war and bought some time for the Germans.  Then Luedendorff bled the army white.

The Germans left the war with their strength sapped to almost nothing but were still able to instill in their population the Stab in the Back theory.  This made the Germans believe that they had not actually lost The War to End All Wars. 

How will the person after Merkel convince the Germans that they could have won if only they hadn't been sold out? 

ACP's picture

Darn, so the rally next week will be only 99 handles on the spooooooozh, as opposed to 100.

max2205's picture

I rated it as Junk two years ago. These guys are really slow....

Kina's picture

Why is MarketWatch showing EU/USD 0.6928  -0.6827

Down 49.63%





Not yet you guys, not yet.


Atomizer's picture

Targets for Monetary Policy in Coming Year


While your scrolling thru history, turn on your speakers and enjoy…


Mozart - (Requiem Mass in D Minor)


Repeating the same playbook rules has become mundane for most. Wonder how the elected soles convincing the masses reflect on their failure each evening? My guess.. humiliation and despair fill the minds of false authority. The best fruit is always found at the top of the tree. LOL @ the newly elected fucksticks.

lolmao500's picture

And when do they man up and downgrade America to junk? And France to BBB?

JustObserving's picture

Geithner laid down the law:

Geithner: No Risk U.S. Will Lose AAA Credit Rating - EVER

Message was lost in translation to chinese

Reese Bobby's picture

I bet he didn't say that to a crowd of Chinese college students.

XRAYD's picture

He's catching on fast ...


Timothy F. Geithner, said today: “The crisis in Europe remains the central challenge to global growth. It is crucial that Europe move quickly to put in place a strong plan to restore financial stability.”

SlipperyPete's picture

Hungary is the least of the problems.

Less debt than most.  Less budget deficit than most.  They ARE willing to skin the population to implement austerity and control their own currency

compound interest's picture

+1. I can back that up. Hungary is not in good shape, and it always used to push its luck. But now real austerity is happening there, its debt has decreased recently (it is at about 70-77% of GDP, but in absolute terms it's about 1/3 of the greek debt), and the budget deficit is at around 3%, and the government is really focused on not to let the deficit run out of control again. Now it is really under control.

The currency is under control, too, no sign of intention of monetary easing. But it should stay that way! A small country like this can't get into the money-printing currency war, should stay out of it. The only thing Hungary SHOULD NOT do under any circumstances is monetary easing for short-term gains.

Non Passaran's picture

But they changed laws to make the CB less independent and they allow citizens to repay CHF loans using a "discounted" rate (which is involuntarily paid for by local and foreign banks who did not profit from the stronger CHF). And they did a bunch of other weird shit.
It is not working and no wonder they call them unpredictable.

compound interest's picture

you are right. but even this "rogue" gov't (by EU standards) recognized the gravity of the debt, and the need for reducing and keeping the deficit low at any cost. the deficit is the growth rate of the debt, and even the hungarian PM knows that. Hungary is the country that pushes its luck all the time, but does what's right in the last minute. this country has played it many times.

AUD's picture

Is that why Hungary has the record for the number & severity of hyper-inflations?

Antifaschistische's picture

"while moves to facilitate households' prepayments of foreign-currency-denominated mortgages at concessional rates could further reduce the supply of credit to the economy."


...This is just like my bank telling me to raise my credit score by establishing "revolving credit."

This downgrade threat is punitive to punish Hungarians for giving the banks a haircut on mortgage liabilities.