Ireland and Hungary Raise Fresh Concern for Europe

Europe’s debt problems are far from over, as Ireland’s debt rating dropped, and negotiation between International Monetary Fund and Hungary came to a stalemate.

As per Moody’s Investors Service research, Ireland government’s bonds rating dropped from Aa2 from Aa1. This drop in rating suggests weakening economy and rising debt, which is certainly a concern for the country.

The financial strength of Irish government dropped significantly, but gradually, which is considered to be the primary reason of this fall in rating.

The financial sector took a hit early in 2008, and it’s been worsening since then. Besides, tax revenue of the country dropped considerably, which was a major contributor to government funds. The debt to equity ratio had dropped to 64% last year, and it’s falling since then.

Europe, since early 2008, has not been able to improvise the financial stability of the continent, even long after other parts of the world started recovering. And the situation has been worse for countries of PIIGS (Portugal, Italy, Spain, Greece, and Ireland) in the past few months.

Meanwhile, talks between IMF and Hungary didn’t reap any positive outcome. Negotiators discussed the economy and possible improvements with Hungarian authorities. However, a wide spectrum of issues still remains open, and the negotiating team would return back to Washington soon.

This IMF mission, headed by Christoph Rosenberg, intended to discuss further on the terms related to $25 billion aid accepted by Hungary in 2008.

After the discussion, IMF believes Hungary is still far behind its target of keeping the deficit level below 3% of its GDP, and the country will have to take serious actions to boost consumer spending.