* Zloty hit by govt-cbank row, debt worries
* EBRD most concerned about Baltics, Hungary
* Czech May industry data slightly worse than flash estimate
(Adds new quote, detail, updates prices)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, July 13 (Reuters) - Worries over worsening
budget deficits and rising public debt pushed central European
currencies lower on Monday, led by the zloty which has been hit
by the government's demand to take the central bank's profit.
A rally that had pulled the region's currencies up from
record lows in March stalled last week due to rising nervousness
among investors ahead of results season and signs that an
economic recovery may still be a ways off.
Plummeting budget receipts and rising social costs are also
threatening to unravel years of slow fiscal consolidation, and
on Monday Poland, Hungary and Romania all warned of mounting
budget concerns.
A Polish deputy finance minister said there was a chance
public debt could hit 55 percent of gross domestic product
[], which could trigger painful budget cuts and
create political ripples ahead of a 2010 presidential election.
In Hungary the finance ministry said its budget deficit would
exceed the full-year goal by the end of September, however
higher tax revenues in the last three month of 2009 are expected
to bring it back on track. []
And in Romania, a cabinet minister said the country may need
budget deficit ceiling wider than the 4.6 percent agreed under
Bucharest's IMF-led 20 billion euro bailout [].
The zloty had already begun to suffer last week after
Poland's government sparked a row with the central bank by
asking it to disburse its 2009 profit -- largely achieved due to
the weakening zloty -- to plug the crisis-sparked budget hole
[].
"Foreign investors have reacted to the news (on the dispute)
with a slight delay, and it weakened the sentiment (on the
Polish currency), although not very significantly," said
Krzysztof Wasilewski, dealer at Millennium bank in Warsaw.
By 1528 GMT, the Polish zloty <EURPLN=> had fallen 0.6
percent from Friday's domestic close. The Romanian leu <EURRON=>
and the Hungarian forint <EURHUF=> had lost 0.1-0.2 percent,
while the Czech crown <EURCZK=> had inched up.
RECOVERY PAINS
Dealers said the zloty's fall was also accelerated by
technical factors, as the unit broke a support level of 4.4 per
euro earlier in the day. The next key level was seen at 4.45.
Currencies have been regaining ground over the past months
helped by global hopes that a recovery was coming, but data last
week indicated the economic pain was far from fading out in
emerging Europe and depressed regional currencies.
Czech industrial output figures for May were slightly worse
than a flash estimate last month, posting a fall of 22 percent
on the year. []
Analysts said the data, which resembled trade and
manufacturing figures from other countries in the export-heavy
region, indicated the economy had still not halted its fall.
"Overall it is another number that shows the second quarter
GDP result will be very bad," said CSOB analyst Petr Dufek.
The head of the EBRD, one of the region's main lenders, over
the weekend said the economic crisis was not over and within the
European Union he was most concerned about the Baltic states,
followed by Hungary. []. He said financing problems
for companies were still a cause of concern.
Those worries may put upside pressure on CDS prices,
especially in Hungary, while a report in the Czech Republic
showed a record number of companies had filed for bankruptcy in
the first half of 2009 [].
A string of inflation, retail sales and current account data
are due on Tuesday, while industrial output data are to be
published in Hungary on Wednesday and in Poland on Friday.
Debt markets were relatively quiet on Monday. Poland sold
1.32 billion zlotys in 52-week T-bills [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.017 26.02 +0.01% +2.83%
Polish zloty <EURPLN=> 4.396 4.369 -0.61% -6.39%
Hungarian forint <EURHUF=> 277.79 277.22 -0.21% -5.13%
Croatian kuna <EURHRK=> 7.337 7.315 -0.3% +0.38%
Romanian leu <EURRON=> 4.219 4.214 -0.12% -4.85%
Serbian dinar <EURRSD=> 92.88 93.227 +0.37% -3.66%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 158bps over bmk*
4-yr T-bond CZ4YT=RR +23 basis points to +200bps over bmk*
8-yr T-bond CZ8YT=RR +9 basis points to +311bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +406bps over bmk*
5-yr T-bond PL5YT=RR +9 basis points to +329bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +299bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -8 basis points to +764bps over bmk*
5-yr T-bond HU5YT=RR -17 basis points to +678bps over bmk*
10-yr T-bond HU10YT=RR -15 basis points to +579bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1828 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia and
Dagmara Leszkowicz, Editing by Michael Winfrey and Patrick
Graham)
