By the numbers, Hungary is not Greece.
Its budget deficit is about one-half that of Greece. It does not use the euro and so could, if pressed, lift exports by devaluing its own currency, the forint. And it is in the middle of an economic overhaul program with the International Monetary Fund and can call upon an additional $2 billion if needed.
But that did not prevent the politically charged comments made last week by senior Hungarian officials from sending world markets into a tailspin on Friday, Landon Thomas Jr. reports in The New York Times.
The reason, perhaps, is that the newly elected center-right prime minister, Viktor Orban "” like other political leaders in Europe "” is finding it nearly impossible to satisfy two very different constituencies: disaffected voters who are unwilling to see their pay and benefits cut further, and the European Union, the I.M.F. and bond investors, who are demanding ever deeper austerity measures as a way of reducing debt.
Compounding this dilemma is the increasingly stagnant condition of the European economies. On Friday, Eurostat, the statistical arm of the European Union, released data showing that euro zone economies grew just 0.2 percent in the first quarter, putting the region last among all the major global economies "” even behind slumbering Japan.
Japan, however, has a new and comparatively activist prime minister who some analysts say will stimulate its long-dormant domestic economy. So worries are now building that Europe will become the world's next growth laggard.
If Europe's recovery is snuffed out by its debt problems, it will pose a danger to the global economy as a whole "” a threat highlighted over the weekend in a letter the United States Treasury secretary, Timothy F. Geithner, sent to finance officials at a Group of 20 summit meeting in South Korea.
"Without further progress on rebalancing global demand, global growth rates will fall short of potential," Mr. Geithner wrote. "In this context, we are concerned by the projected weakness in domestic demand in Europe and Japan."
Spain, Greece and Ireland are battling to balance the growth-choking effects of government austerity programs, while Germany "” to the disappointment of many "” seems to be focusing more on pushing through its own budget cuts instead of stimulating its economy, which grew only 0.2 percent last quarter.
And while Britain's growth rate of 0.3 percent last quarter beat that of the euro zone, its own economy "” more reliant on government spending than peripheral euro zone economies like Greece and Spain "” will also suffer when the new government of Prime Minister David Cameron follows through with its promises of deep cuts in public spending.
Against this backdrop of slower growth in the euro zone, in Britain and in surrounding Eastern European economies like Hungary, last week's inflammatory comments by Hungarian government spokesmen carried a more powerful punch.
Peter Szijjarto, a spokesman for the new prime minister, was quoted Friday by news agencies as saying that the Hungarian economy was in a "very grave situation." He even raised the specter of a default, saying such speculation "isn't an exaggeration."
The day before, Lajos Kosa, a vice president of Fidesz, the governing center-right party, and other officials warned that Hungary was in danger of suffering a Greek-style crisis, with budget deficits possibly reaching 7.5 percent of G.D.P. this year. (They were officially 4 percent of gross domestic product in 2009.)
After the comments, the forint slid, the yield on 10-year Hungarian government bonds surged and shares on the Budapest Stock Exchange tumbled.
Over the weekend, the Hungarian government took pains to assure shaken investors that it was nowhere near bankrupt and that it intended to meet the deficit target of 3.8 percent of G.D.P.
Mr. Szijjarto also said Sunday that the introduction of a 16 percent flat tax on personal income was among the possibilities discussed at a three-day meeting on the country's economy.
The notion that Hungary might report a higher deficit has raised concerns within the country about the accounting of past governments and the possibility that they relied heavily on off-balance-sheet mechanisms to finance large infrastructure investments.
Speaking on background, government officials and bankers advising the government said over the weekend that Hungary was committed to continuing the deficit reduction begun by the outgoing Socialist government. And while they admitted that it was possible the deficit could overshoot its 2010 target, they said this would be caused more by differences over how to account for the finances of municipal and government-owned public entities than Greek-style number massaging.
Nonetheless, while likening Hungary to Greece may unnerve international investors, the comparison has domestic political merits. On the one hand, it could steel a reluctant populace for tougher spending cuts to come; on the other, it gives the government bargaining power to push through tax cuts and other deficit-busting measures that might stimulate growth.
"It is all about growth now," said a government official who declined to be identified, having not been authorized to speak publicly.
Such political gamesmanship could also backfire, with investors bolting the forint, as happened last week, and refusing to continue to finance the budget deficit. (Recent bond auctions have already been met by very weak demand.)
"If you were a neoconservative banker, you could believe that they were going to pursue a proper internal devaluation "” and if you were an indebted small businessperson in the countryside, you could believe they were going to cut your taxes to offset increased loan repayments," said Mark Pittaway, a history professor at the Open University in Britain with an expertise in Hungarian politics and economics. "Even with a perfect economic situation, not all of these things could be true, and some parts of this constituency were going to be very upset."
Indeed, according to Goldman Sachs, Hungary's projected growth rate of 0.1 percent is one of the lowest in all of Europe, and a number of analysts in Hungary are forecasting a negative number "” although that would be an improvement over the 6.2 percent contraction in 2009.
In Hungary "” a small, open economy that traditionally depends on exports to drive growth "” there is also a view that officials invoked the specter of a Greece-style financial meltdown to talk down the value of the forint and thus make Hungarian exporters more competitive in world markets.
But 75 percent of Hungary's exports go to a slowing euro zone economy, whose officials seem more inclined to talk down the euro to spur the region's own exports, rather than work to stimulate domestic demand. Given that, Hungary is unlikely to get the desired effect of a sharp increase in exports.
So, although the politics of last week's comparison to Greece may well have been local, the cause of it "” Europe's declining growth "” will remain decidedly global as long as Hungary's debts and deficits remain as high as they are.
Dan Bilefsky contributed reporting.
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