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Japan may follow Fed in rate cuts; Hungary in bailout
(Agencies)
Updated: 2008-10-29 14:59 Hungary Bailout Governments have pledged about $4 trillion to support banks and restart money markets to try to stem the crisis set off by the bursting of the bubble in the US housing market, but a growing number of governments have had to look for help of their own as the financial woes ripple outwards.
In the latest sign of the extent of the damage, the International Monetary Fund, the European Union and World Bank agreed to a $25.1 billion economic rescue package for Hungary. The IMF will lend Hungary $15.7 billion, while the European Union stands ready with an additional $8.1 billion in financing and the World Bank another $1.3 billion. The IMF is lending Hungary more than 10 times its quota, or subscription, in the fund, way above the usual limit of three times for countries in trouble. "The Hungarian authorities have developed a comprehensive policy package that will bolster the economy's near-term stability and improve its long-term growth potential," IMF Managing Director Dominique Strauss-Kahn said in a statement. "At the same time it is designed to restore investor confidence and alleviate the stress experienced in recent weeks in the Hungarian financial markets," he added. The agreement comes after Iceland, a high-profile victim of the global credit crisis, raised interest rates by 6 percentage points to 18 percent in an attempt to defend its currency. Iceland has been driven close to collapse by bank failures, and the central bank said the dramatic rate rise was part of a deal struck with the IMF for a $2 billion loan. The Fed said late on Tuesday that it had established a $15 billion temporary currency swap line with New Zealand to address pressures in US dollar short-term funding markets, the latest in a number of such swap lines. Even with such government efforts, the financial crisis could reduce the hedge-fund industry to as little as a third of its current size, billionaire investor George Soros said on Tuesday. "The hedge-fund industry is going to move through a shakeout," Soros, one of the world's first hedge-fund managers and still among the best known, said. |
