Hungarian forint hits new record low

Hungary’s forint currency hit a new historic low against the euro yesterday, adding to the serious economic problems facing Prime Minister Viktor Orban two days after huge protests in Budapest.

The forint fell more than 20 per cent in the last few months of 2011. Te entry into a force on January 1 of a new constitution that has been sharply criticised abroad has created a new slide this week, traders said.

Yesterday the forint last traded at €318.86, down from the previous record of €317.59 set in March 2009 when Hungary was in the throes of the global financial crisis.

Analysts at CIB bank, part of Italy’s Intesa Sanpaolo, said yesterday’s fall may also be due to press reports, which it said the government had denied, that it planned to plunder the foreign currency reserves of the central bank.

The fall in the currency, plus difficulties auctioning bonds, late last year forced Orban to approach the International Monetary Fund and the European Union about a possible credit line of €15-20 billion.

But IMF and EU officials broke off initial talks in December, sharply criticising reforms of the central bank under the new constitution which they say risk seriously undermining the bank’s independence in setting interest rates.

Under the reforms, which the European Central Bank has also taken a dim view of, the head of the central bank has lost the right to nominate his deputies, with this power now in the hands of the government.

Critics say the new constitution also tightens Orban’s grip on other state bodies meant to be independent of government interference, including the judiciary, while removing vital checks and balances on government power.

On Monday tens of thousands of people took to the streets of Budapest to protest at what they see as an erosion of democracy, with organisers putting the total number at 100,000.

Both Moody’s and Standard & Poor’s have cut their credit ratings on Hungarian debt to “junk” status.