Hungary’s budget, spillover risks from France

Hungary’s 2027 budget delivered a positive surprise for investors, although we harbour doubts about whether the government can meet the fiscal criteria for euro adoption by 2030. Elsewhere, the spike in French government bond yields hasn’t had spillovers to Central and Eastern Europe. And the banking linkages that were a channel of contagion during the euro-zone debt crisis in the early 2010s don’t look like a source of vulnerability now. Perhaps the bigger concern is that events in France might prompt a re-assessment of fiscal risks in other countries with large budget deficits, including Poland and Romania.