Axa: Hungary fears are political rhetoric

Fears Hungary will be the next European country to suffer a debt crisis are unfounded, and simply based on "political rhetoric", say Axa strategists Raphael Gallardo and Sebastian Paris-Horvitz.

Gallardo, the head of macroeconomic research, says interest rates in Eastern Europe remain low and policy there is likely to remain fairly accommodative. However, Hungary stands out because it is facing huge structural problems, he adds. "To me Hungary is like a fallen angel," he says. "It was the best pupil in class, never defaulting on its debt post-World War II, until it all collapsed in 2006. Hungary had a general election, fiscal spending exploded, and the Government hid it from the markets. It introduced extreme austerity measures to cut the budget deficit from 10% of GDP. But t...