Hungarian forint at record low against euro amid aid uncertainty

Jan 4, 2012, 13:00 GMT

Budapest/Brussels - Hungary's currency fell to a record low against the euro on Wednesday amid European concerns about the economic policies of Prime Minister Viktor Orban's government, which could threaten a financial aid package his country has requested.

A euro could get as many as 319.81 forints on financial markets on Wednesday morning. Analysts blamed the currency's tumble on the uncertainty surrounding a request for assistance Hungary has made to the European Union and International Monetary Fund.

A day earlier, the EU's executive said it had yet to decide whether to launch official talks with Hungary this month as planned on the aid request, noting that it was probing newly adopted Hungarian constitutional reforms which might violate EU law.

'The European Commission fully respects member states' right to make changes to their national constitutions,' spokesman Olivier Bailly said Wednesday. 'At the same time, the legislation ... has to reflect and to be fully in consistence with basic European values.'

'It is the commission's role as the guardian of the treaties to ensure that national laws are in conformity with EU treaties and values,' he added. 'Our concerns remain and they will remain until the commission has completed its legal assessment of the new laws.'

If the commission finds that the reforms are illegal and Hungary fails to change them, the EU's executive could drag the country before the European Court of Justice and demand the imposition of fines.

Before the Hungarian parliament adopted the new laws on Sunday, the EU and the European Central Bank had sounded the alarm about a bill targeting the Hungarian National Bank, as it could reduce the independence of the central bank.

On Tuesday, reports had circulated in Budapest that the Hungarian government actually wanted to use the bank's currency reserves to pay off its national debt instead of resorting to the international rescue package, which would come with strict conditions.

A government spokesman denied this.

Brussels has also criticized a new 'financial stability' law, which has cemented key parts of government tax policy so they can only be amended by a two-thirds parliamentary vote.

The EU's justice commissioner has additionally raised concerns about new laws that could affect the independence of Hungary's judiciary and data protection authority.