IMF and the European Union Support Larger Deficit in Hungary to Help Banks

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Monday, 19 July 2010 11:30

The NYT reported that negotiations between Hungary and the IMF and EU on the release of additional funds reached a deadlock over the weekend. Buried deep in the article, the NYT reported that:

"The I.M.F and E.U had criticized Hungary’s decision to impose a special tax on financial institutions, saying it would send the wrong signal to investors and could hurt economic growth."

This is striking since apparently the IMF and the EU are insisting that Hungary tax measures like cutting benefits for retirees rather than tax banks. This would have been worth publicizing.

The IMF has publicly claimed that it supported making the banks and either financial institutions pay more towards supporting government budgets. The effort to force Hungary to get rid of its bank tax, apparently accompanied by the threat of withholding funds, suggests that it is not following in practice the position that it has taken in public. This contradiction merits attention from the media.