With the notable exception of Hungary, most countries in Emerging Europe have now started to step up efforts at fiscal consolidation. In particular, the new governments in Slovakia and the Czech Republic both came to power advocating austerity measures, while Romania and Ukraine have both raised taxes and cut spending in order to keep their IMF-led loan deals alive – in stark contrast to Hungary. Of course, such steps will come at a cost, though. In the region’s healthier economies such as Turkey and Poland, fiscal cutbacks will act as a brake on growth over the coming years. Elsewhere, however, budget cuts will come at a bigger cost. In some cases – particularly Romania – they may even push the economies back into recession. But the alternative of doing nothing has its costs too. With markets quick to punish fiscal laxity, those countries with large amounts of FXdenominated debt, notably Hungary, are playing a dangerous game.