---------- Forwarded message ----------
From: BOGDAN PREDA, BLOOMBERG/ NEWSROOM: <[EMAIL PROTECTED]>
Date: Jul 4, 2006 4:34 PM
Subject: [romania-economics] (BN ) Romania, Bulgaria May Adopt Euro
Earlier Than Hungary
To: [EMAIL PROTECTED]
Now... Isn't this interesting... :)
Romania, Bulgaria May Adopt Euro Earlier Than Hungary (Update2)
2006-07-04 09:24 (New York)
(Adds Romania, Bulgaria forecasts in fifth paragraph.)
By Agnes Lovasz
July 4 (Bloomberg) -- Romania and Bulgaria, which will
probably join the European Union by 2008, may adopt the euro
before Hungary, which is struggling to cut a burgeoning budget
deficit, said Standard & Poor's credit analyst Kai Stukenbrock,
``Hungary could join later than Romania and Bulgaria which
are on a better fiscal path,'' said Stukenbrock, an associate
director at S&P, at a conference in London today. ``Hungary is
the strongest challenge. We see a desolate state of public
finances, much more needs to be done.''
S&P, which on June 15 cut Hungary's credit rating to three
steps above its highest junk grade, says Hungary may switch to
the euro in 2014, at the earliest, the last among the countries
that joined the EU in 2004.
The budget deficit may swell to 11 percent of gross domestic
product this year, almost four times the euro adoption limit,
even after measures to reduce it by 350 billion forint ($1.6
billion), S&P said.
Bulgaria's budget gap may narrow to 1 percent of GDP in 2008
from 3 percent this year and Romania's deficit may be 2.5 percent
two years from now from 1 percent this year, S&P said.
Hungary's shortfall may be 8 percent of GDP in 2008 and 7
percent in 2009, said Stukenbrock. Without the deficit-cutting
program the gap would widen to 12.5 percent this year, he said.
S&P forecasts that neighboring Slovakia will probably adopt
the euro in 2009, a target that may be delayed by the incoming
government, which is ``less reform oriented'' than its
predecessor, said Stukenbrock. The Czech Republic may introduce
the euro in 2011 and Poland, which hasn't set a target date, will
probably switch over in 2012, he said.
S&P Ratings
S&P rates Hungary's debt BBB+, with a negative outlook, the
lowest debt rating from S&P among the EU's 10 most recent
entrants, while Slovakia, at A, has the highest grade.
Over the past eight years in Slovakia, two cabinets led by
Prime Minister Mikulas Dzurinda overhauled the country's tax and
pension system, relaxed labor laws, cut the budget deficit and
pegged the Slovak koruna to the euro to comply with the EU's two-
year test of currency stability.
``Our expectation of a 2009 Eurozone entry for Slovakia
might be somewhat on the optimistic side, given the position of
the new government and the still required consolidation to get
the general government deficit below 3 percent by 2007,''
Stukenbrock wrote in an e-mail today.
Slovakia's Smer party, which won the June 17 elections
promising to boost social spending, agreed last weekend to form a
coalition agreement with two opposition parties, HZDS and the
Slovak National Party. The two parties were members of the
coalition that governed Slovakia from 1994 to 1998 under HZDS
Chairman Vladimir Meciar, which was criticized for oppressing
minorities and selling state assets to government supporters.
`Not Large Enough'
Hungary's Prime Minister Ferenc Gyurcsany last month boosted
the estimate for this year's budget shortfall to 8 percent,
nearly doubling it from 4.7 percent earlier. The government will
miss its budget-deficit target for a fifth consecutive year.
The government's deficit-cutting plan announced on June 10,
which includes tax increases, cutting energy-price subsides and
scaling back bureaucracy, are not enough to meet euro adoption
terms, S&P said.
``We have the most reform oriented government in Hungary but
just because they have to be,'' he said. ``We are not so
skeptical about the fiscal consolidation package. We are not
saying its not going to materialize. What we are saying is the
package is not large enough to compensate for the deterioration
and the net effect is still a worsening of public finances.''
S&P has a negative outlook on Hungary's debt rating, which
indicates the ratings company is more likely to make another cut
to the grade than raise it or leave it unchanged.
``The negative outlook reflects the likelihood of the
ratings being lowered further if government debt levels continue
to rise as rapidly as at present,'' S&P said in a report
distributed at the conference today.
Government debt will probably increase to 74 percent of GDP
by 2009, from 62.5 percent last year, breaching the 60 percent
euro-adoption ceiling, S&P forecasts. Romania's debt may total
14.5 percent of GDP this year and Bulgaria's may be 23.9 percent.
--With reporting by Radoslav Tomek in Bratislava. Editor:
Farrand.
Story illustration: To see a menu of sovereign ratings, click on
{CSDR <GO>}. For more news on credit ratings, see {NI CRA <GO>}.
Click on {WB <GO>} for worldwide government bond data.
{TOP BON <GO>} for today's top bond news.
To contact the reporter on this story:
Agnes Lovasz in London at (44) (0)20 7330 7614 or
[EMAIL PROTECTED]
To contact the editor responsible for this story:
Chris Anstey at (44)(20) 7073 3220 or
[EMAIL PROTECTED]
[TAGINFO]
NI EMD
NI EM
NI EBN
NI BON
NI NEWBON
NI EEU
NI POLAND
NI EUROPE
NI FX
NI FSA
NI VOICE
NI SLOVAKIA
NI CZECH
NI HUNGARY
NI EEU
NI ROM
NI BULGARIA
NI CRA
NI FXVOICE
NI HUNGARY
NI US
NI ECO
NI GOV
NI FXVOICE
NI VOICES
#<582156.930675.2006-06-07T08:50:00.96>#
#<565760.2749878.2006-06-12T16:40:00.25>#
#<582156.930675.2006-06-07T08:50:00.96>#
#<565760.2749878.2006-06-12T16:40:00.25>#
-0- Jul/04/2006 13:24 GMT
--
______________
EuroAtlantic Club
monitoring Romania's journey towards the EU
http://www.europe.org.ro/euroatlantic_club/
mail to: P.O.Box 13-166, Bucharest 011737
e-mail to: [EMAIL PROTECTED]
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