By Krisztina Than (Reuters) 
Hungary started talks with the International Monetary Fund and the EU about a new precautionary credit line to shield it from the storm engulfing the eurozone, but Budapest faces tough talks if it sticks to its unorthodox economic policies. For Prime Minister Viktor Orban, who previously rejected an IMF backstop, going back to the Fund is seen as a big political defeat. But he is unlikely to give in easily to the tough conditions the IMF usually sets when granting financing lines. Analysts said a new IMF agreement could help avoid a cut in Hungary’s credit rating to “junk” status, but it will be very hard for the two sides to find common ground given the unconventional measures Hungary has made.
Fitch Ratings, one of two agencies threatening to remove Hungary from investment grade due to its weak growth outlook and unpredictable policies, recently said a new IMF programme would be a positive step and could reduce ratings pressure.
“However, it is a long way from being agreed and Fitch believes the country is facing a challenging economic and financial outlook. Significant downside risks remain,” it said.
If the centre-right government fails to agree with the IMF in the end the punishment — from financial markets as well as rating agencies – will be severe.