We suspect that Hungary will ultimately turn to some form of default as a way out of its current debt problems. The alternative is further austerity – and while we expect Hungary to pursue this path for a little longer, we are not convinced that the public (and by extension policymakers) have the appetite for the additional cuts that would be needed to bring debt down to a sustainable level. Needless, to say, default would have major implications for Hungary’s banks and financial markets.
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