Cicero's Songs

As Monday looms ahead, there is now the real probability that Greece could default this week.  No one knows what happens in that event: the policy makers and many market practitioners now think they can cope- but the reality is that no one knows. I think we are about to find out whether Mrs. Merkel's policy of masterly inactivity will actually work. I don't think it has, and I suspect that the impending Greek default could well lead to the failure of Hungary and Bulgaria. This feels like the calm before the storm.

The coming week is likely to be a highly turbulent one in the European markets, following the withdrawal of an IMF mission to Hungary. The failure of the mission means that implied IMF and wider international support for Hungary will not be put into place. Essentially it means that the supra-national bodies do not believe that the Hungarian government has the policies or even the will to tackle the widening deficits and increasing debt burden that it faces. It is a pretty serious slap on the wrist for Hungary. However it is not just an expression of no confidence in the new government of Viktor Orban . It also reflects the fact that Hungarian politics generally has become increasingly disconnected from economic reality over the course of the last decade. Famously the previous Hungarian Prime Minister, Ferenc Gyurcsany , admitted that his Socialist government had lied completely about the economic position of the country , however such candour was not refreshing: it only underlined ...