ECONOMICS European Financial Stability Facility

The birth pains of a rescue fund

By Jim Brunsden - 22.07.2010 / 05:15 CET

Uncertainty remains over how fund will operate; EIB and German national debt office to help set-up.

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Fact file

Hungarian woes

The starting point from which the EFSF was modelled was a €50 billion EU fund being used to support non-eurozone countries in balance-of-payments difficulties.
During the financial crisis of 2008-09, the fund provided support to Hungary, Latvia and Romania.
Hungary this week suffered a sharp drop in the value of its currency and its stock market, when the European Commission and International Monetary Fund suspended a review of its economic policies. Hungary is not entitled to further aid from the balance-of-payments facility until the review is completed.
The Commission said that the Hungarian government had to make “increased efforts” to bring its budget deficit below 3% of gross domestic product in 2011. “The corrective measures considered so far fall somewhat short of the required adjustment and are largely of a temporary nature,” it said. It said that review had been suspended to give Hungary time to make the changes necessary.
Viktor Orbán, Hungary's prime minister, said on Tuesday (20 July) that the country would “meet its international obligations.” He said, however, that Hungary had the right to decide what measures it would use to cut its deficit.