August 4, 2010
Vilnius, Lithuania
Remember the credit rating agencies– specifically Fitch, Moody’s, and S&P? Among other things, they take on the responsibility of rating the creditworthiness of sovereign nations.
This is a pretty important task that has become critical to the global financial system. Bear in mind, though, these are the guys who slapped perfect ratings on pools of risky mortgages– the ones where they gave no money down loans to people with no job, no income, no assets.
In terms of their sovereign ratings, agencies dish out their best scores to countries like the US and UK which borrow money like degenerate gamblers. Places like Abu Dhabi– which are cash-rich and in excellent financial health– are scored lower. It makes little sense.
Recently, in another brilliant move, S&P warned that the UK’s debt level ‘may prove inconsistent’ with its pristine sovereign rating.
Hardly a bold claim, wouldn’t you say?
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July 29, 2010
Budapest, Hungary
“Take your package and shove it!”
This was the tone set by Hungary’s new Prime Minister Viktor Orban last week as he engaged EU and IMF officials about his country’s bailout package.
Back in the early days of the financial crisis, Hungary’s economy was one of the hardest hit in the European Union. The EU and IMF moved quickly to stave off a total collapse by promising a 20 billion euro standby bailout package to back the country’s finances.
This package is enormous by any standards, comprising over 15% of the country’s GDP.
As in common in these sorts of deals, though, the IMF likes to dish out a lot of cash and then tell the recipients exactly what they should be doing with it. This was all fine and well in the last administration, but earlier this year, Hungary elected a new Prime Minister in Victor Orban.
Oban is apparently the sort of individual to look a gift horse in the mouth; Hungary’s most recent talks with the IMF disintegrated into a macroeconomic punch line, and Orban has made one thing perfectly clear to the IMF:
“I run this country, not you.”
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