Hungary goes through the mill again

"HUNGARY IS VERY good at fighting crises, just not at avoiding them." So says Péter Felcsuti, managing director at Raiffeisen International’s Hungarian arm and chairman of the Hungarian banking association. Felcsuti has experienced several challenging periods in Hungary, such as in 2006 when a budget deficit of 10.1% of GDP forced the introduction of austerity measures, including a 2% rise in social security contributions and an increase in the minimum rate of sales tax for food and basic services from 15% to 20%. However, he says the liquidity crunch that is now hitting the central European nation differs from previous crises in that it is purely financial, brought about not through any internal political strife or banking mismanagement but by contagion from troubled western markets.

The composition of Hungary’s banking system and its economy makes it particularly vulnerable to strife in other markets, with almost...