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Finance Essay Hungarian Financial Crisis - Term Paper Example

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Finance Essay Hungarian Financial Crisis

The occurrence of the international financial crisis has forced the financial markets to reexamine their patience to tolerate uncertainty. Day by day as the financial disaster increased, this in turn resulted in reduction of international liquidity and also an increase in uncertainty. On the other hand the shareholders had started to distinguish among the rising markets and judged that the Hungarian possessions have become more risky. However, it can be concluded that the vulnerability of the Hungarian economy was mostly due to these uncertainties. In this situation the Hungarian authorities were not very sure in what way they would handle these problems. They examined the market more minutely and had increased the deposit securities as per the European Union policy. But still this policy did not work and the Hungarian government was not able to save the public from this financial crisis and there was instability throughout the economy. So, in such a situation the Hungarian government had no other option than to take help from the International Monetary Fund and the European Union (Horvath, 1-2). ...
Moreover auctions were held to sell the new government bonds, but this too did not work. Again the shares of the Hungarian bank had fallen to a great extent. The forint had started to fall; the rates of interest had started to increase. The security market of the Hungarian government had suffered huge loss and also there was scarcity of liquidity in different financial institutions. The Hungarian authority already had huge debt under the communist administration. The GDP-debt ratio had decreased from 90% to 50% in the year 2001. Again due to incorrect policies adopted in the year 2002 the ratio had increased to about 15% and this resulted in 65% rise in GDP. On the other hand the debts of Czech Republic and Slovakia were 30% and 50% respectively (Horvath, 1-3). Reasons of Hungarian Weakness In the year 2008, Hungary was the first member of the European Union who had wanted financial help from the International Monetary Fund. This was considered as a failure of the Hungarian government. At this moment it was very difficult to state that in the near future which are the other countries who will have to face such crisis and which country will be mostly affected. There are a number of causes why Hungary was the first target of this financial crisis. One of the reasons is that the Hungarian government did not take into account stability while implementing the monetary policies. Also there were not sufficient foreign exchange reserves with the central bank. The debt in Hungary was very high compared to other countries, (that is ratio of Public debt to GDP and ratio of external debt to GDP). Again the fiscal policy measures were not appropriate; there was doubt whether the government had the capacity to maintain deficit reduction ...Show more

Summary

Hungarian Financial Crisis In the year 2004, Hungary had become a constituent of the European Union, and was able to transform itself from a planned economy to a market economy. Even though this transition of Hungary was very encouraging and there was a continuous development in the performance of Hungary, but on the other hand due to adoption of incorrect domestic economic policies as well as international financial disorder has resulted in the Hungarian Financial Crisis in the year 2008…
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Finance Essay Hungarian Financial Crisis essay example
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