The Hungarian stock market and currency fell sharply today after senior officials in the new government warned that the country's public deficit would be much bigger than expected.
The stock market lost 3.3% and the forint tumbled as investors feared that Hungary, bailed out in late 2008 by the EU and IMF, was in trouble again.
Secretary of State Mihaly Varga said the public deficit would be 7.5% of economic output this year, nearly double the 3.8% estimated by the predecessor Socialist government.
Lajos Kosa, vice president of the ruling centre-right Fidesz party and close to Prime Minister Viktor Orban, said the Hungarian economic situation was 'very critical, the state is comparable to that of Greece' and that 'the bankruptcy of the state is close'.
The comments made yesterday rocked the markets, already nervous that the Greek debt and deficit crisis could doom the European recovery and the euro zone.
In late 2008, Hungary received €20 billion from the European Union and International Monetary Fund to keep the country afloat as the global financial crisis savaged the economy.
Some analysts voiced caution about the remarks, suggesting they could have been made for political purposes as the government, which took power only last month, tries to convince the country to accept the tough decisions now needed to get the economy on track.
