HUNGARY'S IMF STAND-OFF INTENSIFIES - Hungary's currency fell to new lows and yields rose on government bonds yesterday as the country's stand-off with the European Union and International Monetary Fund intensified. This comes after the Hungarian Parliament enacted a new law last week that threatens the independence of the country's central bank. The Central Bank Law removes the right of the governor to nominate deputies while allowing the prime minister to appoint a third deputy governor and two additional members of the rate setting council. Other changes in the country mean the Hungarian government also now has more influence over the country's audit and budget watchdogs, according to the likes of Hilary Clinton, the European Central Bank and European Commission President Jose Manuel Barosso. Hungary called on the International Monetary Fund for "a safety net" credit line in November, only for negotiations between Hungary and the IMF/EU to break down, primarily over the central bank law, earlier this month
Veronika Gulyas, reporter at Dow Jones Newswires in Budapest, says that said foreign investors' confidence in Hungary has been shaken and they will return only when the row with the IMF is solved. Prime Minister Viktor Orban, in a weekly address to the country, said last week there was no way that international bodies should have a say in Hungary's sovereign policy. Ms Gulyas says it is hoped that his attitude will have eased by tomorrow's address. Hungary was the first European country bailed out by the EU and the IMF when the global markets froze up after the collapse of Lehman Brothers in 2008, and the first of its repayments is due next month. She says that that first repayment would be made and the country has no problem with its refinancing until the second half of the year.
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MORNING BRIEFS - December saw the first decrease this year in the activity of Irish services companies due to the fragile economic conditions and a lack of confidence among businesses. The NCB Services index shows that after rising in November, new business fell in December as companies reported weak client confidence. New orders have now fallen in seven of the past eight months and the latest fall was the fastest since December 2010. But, new export business rose last month as companies said that marketing campaigns helped to boost new business. The latest increase extended the current period of expansion to five months, NCB noted.
*** Exchequer figures yesterday show that Ireland met budget targets set for 2011 under its EU/IMF package, despite missing its tax revenues by €873m. Tax receipts were hit by a fall in VAT - the Government's main tool for raising additional funds in 2012 - that deepened in December. A delay into January of the payment of some €261m in corporation tax receipts due last month also accounted for part of the shortfall. Revenues ended 1.8% behind expectations, a slightly better outcome than the government had predicted last month. Overall, Ireland's budget shortfall widened to €24.9 billion at the end of December from €18.7 billion a year ago, mainly due to capital injections for the banks.
*** Toyota and Honda saw sales in the US fall sharply in 2011 as production was hit by natural disasters in Japan and Thailand. Both carmakers saw sales fall by about 7% during the year compared to 2010. Their fortunes contrasted sharply with rival Nissan, which saw a strong rise in sales. South Korea's Hyundai also posted much-improved figures. Overall car sales in the US in 2011 rose by 10% on the previous year, to 12.8 million. Japanese car makers have had a tough year in 2011, with both the March earthquake and tsunami, and floods in Thailand affecting production.
*** European shares fell yesterday, ending four days of gains, led by banks after Italian lender UniCredit priced a rights issue at a massive discount, highlighting the struggle the sector faces to raise funds. UniCredit was the worst performer in Europe, down 14.5%, after it launched a €7.5 billion two-for-one rights issue at a discount of 69% to its closing share price on Tuesday.
*** Asian shares and the euro fell this morning as concerns about the ability of euro zone countries to refinance their huge public debt dampened investors' appetite for risk ahead of a French bond auction later in the day. On the currency markets, the euro is trading at $1.2910 and 82.82 pence sterling.
