S&P Screws Austria: Hungary Downgraded to Junk

By John Galt
December 21, 2011 – 14:55 ET

Over the past few years I have been writing and commenting on the other housing crisis in Europe, that being of the nations who issued mortgages in Euros to Eastern European nations. Hungary was one of the largest nations in which the citizens borrowed heavily from Austrian banks in Euros but their local currency, the Forint, was used to pay those banks back. That worked fine until the Euro skyrocketed in value and the Hungarian economy crashed in 2007-2008 along with the rest of the world, then to make matters worse, instability in European banks caused them to halt any thought of loan modifications or working with the distressed economies of Eastern Europe. Hungary was the epicenter as per the article I posted last week, Another Shocker: Hungarian Debt Slaves Revolting against their Austrian Bankster Masters, the rebellion to becoming a debtors prison for Austria has created an atmosphere of animosity if not outright rebellion.

Today, the consequences of the Austrian experiment in Subprimonomics has come home to roost as Hungary was downgraded to junk status by Standard & Poor's with a negative outlook:

Ratings On Republic of Hungary Lowered To ‘BB+/B' On
Unpredictable Policy Framework; Outlook Negative

Here is the summary or excerpt of the downgrade announcement:

• In our view, the predictability of Hungary's policy framework continues to weaken, harming Hungary's medium-term growth prospects.
• We are therefore lowering our long- and short-term sovereign credit ratings on Hungary to ‘BB+/B' from ‘BBB-/A-3′ and our long-term counterparty credit rating on the National Bank of Hungary (the central bank) to ‘BB+' from ‘BBB-'.
• We are also removing all ratings from CreditWatch negative, where they were placed on Nov. 11, 2011.
• We are assigning a recovery rating of '3′ to Hungary, which reflects our assessment of “meaningful recovery” of 50%-70% in the event of a sovereign default.
• The negative outlook reflects our view that there is at least a one-in-three possibility of a downgrade over the next year if we see that Hungary's fiscal or external performance deteriorates.

Ouch. The impact on Austrian banks should be felt by the end of the week or first of next year with a wave of downgrades but worse, something the media will not discuss openly:

A wave of RMBS and CMBS downgrades to junk in Austria, France, and Germany. Buckle up, the party is just beginning.