Hungary asks EU and IMF for 'precautionary' help of €20bn

Hungary is to ask the International Monetary Fund and the European Union for a "precautionary" two-year financial rescue package worth between €10bn and €20bn, proving that even the earliest victims of the credit crunch remain in intensive care.

The economy minister, Gyorgy Matolcsy, said that his government would negotiate a fresh credit line from the IMF and the EU in case the financial situation in Europe deteriorates.

Investors were encouraged by the rollover of European Central Bank funding to leading eurozone banks this week, but the publication of vital "stress tests" on 100 key financial institutions on 15 July will be an important moment in the quest to restore confidence.

"Our intention is that we extend the existing IMF/EU deal until the end of the year and from the beginning of next year we continue with a two-year precautionary agreement but in a way that we signal that this is a different deal, not urgency," Mr Matolcsy said.

He added that Hungary was preparing to run a larger budget deficit than the 3 per cent of GDP previously agreed with the IMF in 2011-12. Hungarian national debt is running at 80 per cent of GDP, high even by European standards.

Hungary was one of the first nations to approach the IMF for assistance, agreeing a €20bn (€16.5) rescue package last October, after foreign finance fled from the country in the financial panic. Although not a member of the eurozone, renewed fears last month that Hungary might default on its debts added to the febrile atmosphere affecting money markets across the Continent. Comments from a government spokesman about "skeletons in closets" were later rescinded.

Much of Hungary's debts are denominated in Swiss francs, which has proved to be a fast appreciating currency during recent volatility.

The Hungarian government will create an asset management company, in effect a "bad bank", to help borrowers who are defaulting on their loans due to sharp gains by the Swiss franc. Mr Matolcsy said: "If we want to squeeze this animal into a zoo cage, then it is a bad bank, but a special kind, as it is not a bank."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower