Fragility of Financial Institutions

On June 2, 2010, Kósa Lajos, the mayor of a town of 250 thousand and vice chairman of the senior party in the incoming right-wing government of Hungary, stated at a conference that the economic situation of Hungary, inherited from the socialist-liberal government of 2002 to 2010, was so grave that it was reminiscent of the Greek crisis, and Hungary was "close to a default." In a nice, quintessentially conservative-populist tone, he conjectured that "a temporary suspension of constitutional rights" might be "necessary" for dealing the crisis. As such, this is of no particular concern beyond the borders of Hungary.

What is more fascinating is the speed and intensity with which the news wreaked havoc not only on the small and otherwise rather insignificant Hungarian stock exchange and currency (Hungary is not a member of the Euro), but the EU and beyond. According to a foreign exchange observer website, "the euro was hit hard and dropped below 1.2 against the dollar [. . .]. Growth currencies such as Australian dollar and New Zealand dollar also got hammered." As a result of all this, the Euro sank "to a four-year low" vis-a-vis the USD.

Buckle your seatbelts.