beyondbrics

One could be forgiven for thinking that the primary task for Gyorgy Matolcsy, Hungary’s economy minister, this morning was to remove some of the confusion surrounding the collapse of talks between the government and the IMF and EU, which has roiled financial markets. But instead he succeeded in adding to it.

One minute Matolcsy was telling Hungarian television that the government would not impose any more austerity measures. And the next he was on CNBC, promising that Hungary would indeed achieve an ambitious budget deficit target of less than 3 per cent next year (as demanded by the IMF).

Cynics might be tempted to conclude that it’s Matolcsy himself who is confused — to cut the deficit that much will require further difficult decisions on spending and the revenue side (to paraphrase the IMF’s statement).

But there is another more seductive explanation – his messages were intended for very different audiences.

With municipal elections approaching in October and Jobbik, a far-right, anti-big capital party breathing down its neck, the ruling Fidesz party needs to show it’ll stick up for ordinary Hungarians in the battle with international lenders.

At the same time, the government has no desire to see its borrowing costs soar, or to trigger more consumer loan defaults owing to the impact of a weakened forint on the repayment cost of forex borrowers.

But Hungary’s government appears not to have learnt its lesson; in the 21st century world of 24/7 news coverage, it cannot send out mixed messages and remain credible for long.

This should have become abundantly clear a few weeks ago when a Hungarian official told a local audience that the country’s fiscal situation resembled that of Greece.

That official didn’t expect international investors to be listening. Well, they are. And they are just as capable of reading an English transcript of a Hungarian TV interview, as they are of watching a US business channel.