The Hungarian government secured a $6.7-billion loan yesterday from the European Central Bank in an attempt to stave off an Icelandic-style national meltdown. The EU newcomer's troubles derive from loans denominated in euros or Swiss francs, rather than the softer Hungarian forint. Frozen credit markets have left Hungary's government and citizens struggling to repay their debts.
Because of high interest rates, many Hungarians took out loans in foreign currencies, leaving the nation—just like Iceland—acutely vulnerable to a falling currency. The forint has plunged almost 8% just this week; today Hungary slashed growth forecasts and began to prepare a new budget. Hungary has also called in the IMF in case the country defaults, though the country's finance minister insisted that was "a last resort."
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