Press Release: Joint statement by the Presidency of the Ecofin Council and the Commission on providing medium-term financial assistance to Hungary

In view of the adverse effects of the global financial turmoil on the economic and financial situation in Hungary, the Council Presidency and the Commission expressed on 13 October the EU's commitment to use all available instruments to support Hungary in withstanding the market pressures that have recently emerged in spite of the improved macroeconomic and financial policies undertaken by the authorities in recent years, including the significant reduction in the government deficit from mid-2006.

We have been in close consultations with the Hungarian authorities and the IMF over recent weeks, working together to develop a joint response to the growing tensions in Hungary's financial markets. The authorities have adopted a package of measures which foresees inter alia an acceleration of the fiscal consolidation this year and next and a reform of fiscal governance; action has been taken also to shore up market liquidity and financial stability, including with the support of the ECB; the Hungarian National Bank MNB has increased interest rates to stem the fall in the exchange rate of the forint.

Against the background of heightened financial market stress in Hungary, the European Community is ready to participate in a coordinated financing package with the IMF to underpin balance-of-payments sustainability in Hungary. The Community stands ready to provide a loan of €6.5 billion to Hungary under the Community medium-term assistance facility established under Article 119 of the Treaty[1] in conjunction with IMF assistance to the amount of €12.5 billion and World Bank assistance of € 1.0 billion. The concrete modalities will shortly be finalized in co-operation with the Hungarian authorities.

The financial assistance package will be provided in the context of a strong commitment by the Hungarian authorities to implement a flanking policy programme to be included in the forthcoming Convergence Programme update. We also support the IMF invitation to the large financial institutions operating in Hungary to continue providing adequate financing of the economy. Implementation of the policy conditions to be agreed in the context of the EU facility will be monitored by the Commission in collaboration with the Economic and Financial Committee.

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