(November 3, 2009, Weil Gotshal News)
Recently, David Dederick, managing partner of Weil Gotshal’s Budapest office, was quoted by
Inside Counsel.
The article, entitled “The Central Europe Report: Thriving Markets Confront a Crisis,” deals with the different ways that the Visegrád Four (the V4) are weathering the global economic storm.
The segment dealing with Hungary examines factors leading to the collapse and looks towards the future. While post-soviet laws allowed for foreign investments and opportunity flourished, high government spending left the nation vulnerable to the events of 2008. According to Dederick, "the deficits became a serious issue for investors in Hungarian state obligations". He continued, "at the peak of the crisis, with investors leaving emerging markets en masse, Hungarian authorities discovered that investors were no longer willing to buy state bonds. The bond market essentially froze up."
In October 2008, the International Monetary Fund and the European Union stepped in, providing $25 billion with the stipulation that deficit must be reduced and public financing restructured. "There’s a silver lining to all this," Dederick is quoted, "although it doesn’t paint Hungary as the most attractive country in the region [for foreign investors] at present, the introduction of IMF and EU assistance has forced the current Hungarian government to adopt reforms that will set the country on course to becoming competitive in the not-too-distant future." Dederick’s outlook is positive: "When it does emerge, many of the factors that made Hungary a favored destination for investors in the past will still be relevant."
The article was written by Melissa Maleske and Mary Swanton and appeared in the October 1 issue.