Hungary to Join ERM-II in 2 years, says City

Hungary may join the ERM-II exchange rate system in two years' time, London-based analysts of emerging markets said on Monday.

In its latest report on emerging Europe's convergence progress, Nomura International said it believes that the new Fidesz government will be pro-EU and pro-EMU which "should be an important additional policy anchor, perhaps more important than the IMF and EU SBA (stand-by assistance) programme".
Nomura said it sees Fidesz setting an EMU adoption target date for 2015, with ERM-II membership after the fiscal situation has calmed. This would imply joining the ERM-II in the first half of 2012, "given 2011 is likely to be a bumpy fiscal year as the government cuts taxes to boost growth before revenues have fully picked up".
Nomura said the key risk to this outlook will be if Fidesz "returns to its pre-election populist spending after ERM-II".
Overall, Hungarians remain pro-euro and "we think the previous Prime Minister Gordon Bajnai's policy momentum on the issue should be maintained", Nomura added.

News Monitoring