Hungary asks EU and IMF for financial support

Finance ministry says support would promote economic growth.

The Hungarian government has requested financial support from the European Union and the International Monetary Fund.

The support is expected to be in the form of a precautionary liquidity line.

A statement issued today by the Hungarian finance ministry, said: “The government has commenced negotiations with the International Monetary Fund and the European Union about establishing a new type of co-operation which could promote Hungarian economic growth instead of austerity measures.” The new agreement would be finalised in the early months of next year, the statement said.

The finance ministry said yesterday that the “new co-operation” with the IMF would not increase government debt because it was not taking out credit. Instead, it would use the support to make an “insurance contract to increase the safety of investors in Hungary, it said.

The ministry said that Hungary should be financed by the markets but doing so had been “hindered by the protracted crisis of the eurozone”.

Markets in Hungarian debt have been hit by rumours in recent days that credit-rating agencies would downgrade the country’s bonds to junk status.

A European Commission spokesman said that the size of the financial assistance Hungary was seeking was not yet clear and would have to be established depending on Hungary’s request.

Hungary received assistance from the EU and the IMF in 2008. The centre-right government of Viktor Orban broke off talks with the IMF in 2010 in a move which has soured relations between the government and the fund.