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Does east follow west to the euro?

After EU accession in 2004, the next target for central Europe’s governments is the euro. In the scramble to comply with the Maastricht criteria, have they started to borrow techniques, invented by their western European counterparts, for massaging the numbers? Kathryn Wells reports, with research by Pauline Thomas.

COUNTRY PROFILES: Case 1: Czech RepublicCase 2: HungaryCase 3: PolandCase 4: Slovakia

EARLY IN 2005, Hungary sent out RFPs for a large asset-backed securitization to finance a motorway infrastructure project. The issuer was to be Hungarian motorway operator AAK, and the deal, securitizing cashflows of as much as €3 billion from vignette stickers, which drivers purchase from the motorway operator and display in their car windows in order to travel on the motorway system, was slated to materialize later that year.

The transaction, though, has never happened. This has not been due to a lack of demand but rather to the intervention of the EU’s statistical agency, Eurostat. As part of wider moves to clamp down on one-off boosts to state budgets generated by asset-backed securitizations, Eurostat decided not to allow more than €11 billion of such financial engineering in Germany and Hungary to qualify for off-budget treatment. Germany had been hoping that its securitization of €8 billion of civil servants’ pension contributions would be able to be shifted off balance sheet.

“Eurostat’s opinion is that this expenditure cannot be excluded from the public accounts, so it will have an impact on the public deficit,” European commissioner for monetary affairs Joaquin Almunia told a press conference in Budapest at the time.

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