The commonsense answer to the question above is in the affirmative. Although both countries are crunched for credit, Hungary has the advantage of being an EU member, albeit not yet one adopting the common currency. Ukraine, on the other hand, is in a bind. Its run-ins with Russia over energy imports means that country is not one to approach for financial help. OTOH, Ukranian membership in the EU is a distant proposition in comparison to those of several other nearby countries. Forced to fend off for itself, the Ukraine looks more likely to be first in line at the IMF cue. Even if Hungary's currency--the forint--isn't faring too well [see chart below], recent EU pledges of support seem to have arrested it from plummeting somewhat. From the Financial Times:
The mood in Europe was unsettled as Budapest received a €5bn credit facility from the European Central Bank and Kiev said it was seeking an IMF loan of up to $14bn to “stabilise Ukraine’s financial system”. It was the first time in the 15-month credit crunch that multilateral agencies such as the International Monetary Fund had taken steps that are likely to lead to a bail-out of continental European countries – a clear sign of the acute difficulties debtor nations face in raising finance from credit-starved markets.This also:
“Many countries seem to be experiencing problems because of the repatriation of private capital by foreign investors or the reduction of credit lines from foreign banks,” Dominique Strauss-Kahn, IMF managing director, told the Financial Times. “We are ready to support these economies and we are in discussions with a number of them.”
Hungary’s problems stem from foreign currency loans [which have become dearer to service given forint devaluation] and big budget deficits. Ukraine’s banks face difficulties repaying foreign credits as the current account is widening. Authorities in both countries insisted they were not in difficulties.
The European Central Bank on Thursday stole a march on the International Monetary Fund in extending support to a country in need of credit to cope with the global financial crisis. While the IMF had earlier indicated it was ready to help Budapest and remains ready to assist, the ECB on Thursday came up with a €5bn ($6.7bn, £3.9bn) credit line, to cover Hungarian banks’ acute shortage of euros.
In Budapest, the forint strengthened on news of the ECB’s intervention. But the forint’s 1.5 per cent rise against the euro reclaimed little of Wednesday’s 7 per cent plunge, the biggest daily decline in five years [that'd be the loooong blue line in the previous chart]. And shares fell 8.6 per cent, extending Wednesday’s steep 11.9 per cent drop.
In Kiev, currency and stock markets fell as Yulia Tymoshenko, prime minister, disclosed the IMF was ready to consider $3bn to $14bn as a special loan to stabilise Ukraine’s financial system. The hryvnia closed 3.1 per cent down against the US dollar while the PFTS share index dropped 5.2 per cent, making it almost 80 per cent down on the year. The market reactions highlighted not only scepticism about the planned interventions but general fears about the impact of the global crisis on emerging markets.
The ECB’s move signalled its willingness to extend help beyond the 15-country eurozone to other European Union members when financial stability is threatened. The Frankfurt-based institution has rarely made such loans in the past, and never before have they been made public.
Hungary’s central bank announced other measures to breath life into static government bond markets. Orsolya Nyeste, chief treasury economist at Erste Bank in Hungary, said: “The mood has improved because of the measures, but the markets are still digesting what has happened.”
Meanwhile, Gordon Baj-nai, economy minister, told the FT a recent revision of the 2009 budget showed the government was already committed to further spending cuts, taking the 2008 budget deficit to 3.4 per cent of gross domestic product. ”Our next task is to carry out structural reforms to improve competitiveness. First you need stability – and I’m now relaxed about that – and then we have to go further.”
