* Forint under further pressure after Thursday's fall
* Zloty flat, crown, leu eases on politics
(Adds further details including bonds, new prices.)
By Sandor Peto
BUDAPEST, June 4 (Reuters) - Central European assets fell on Friday as risk aversion increased with the euro's <EUR=> retreat against the dollar, while concerns over Hungary's budget and the new government's plans weighed on the forint <EURHUF=>.
The forint had already fallen on Thursday due to comments from a government politician that the country had a slim chance of avoiding a Greek-style crisis.
The comments by Hungarian government party Fidesz vice president Lajos Kosa directed attention at a country so far not mentioned as part of the European Union's debt crisis, but which is still under the scrutiny of the IMF and EU after seeking a bailout in October 2008.
Analysts mostly dismissed Kosa's comments saying comparisons with Greece were misleading and wrong.
Most of Central Europe's assets gave up early gains by mid-Friday as the euro was unable to break out from levels close to 4-year lows and markets were waiting for key U.S. employment figures.
The forint <EURHUF=>, which fell more than two percent against the euro after the Kosa comments on Thursday, weakened further by 0.85 percent by 1038 GMT to 283.40. Dealers and analysts said local markets remained nervous as the comparison with Greece hit confidence even though Hungary's public debt at 80 percent of GDP was well below Greek levels.
"It peaks at a high level compared to other emerging markets but Hungary is not Greece unless Fidesz sets off on a route of large scale, unfinanced tax cuts," SEB analyst Mats Olausson said in a note.
The new government said on Friday that it would present an action plan in the next days, soon after it releases a report on the budget which it said could have a deficit twice as much as the former government's target of 3.8 percent. []
Hungarian government bond yields which surged by about 30 basis points on Thursday, rose further. The yield of three-year bonds rose by 25 basis points to 6.85 percent on Friday.
"The future hinges on what the government will say," one trader said. "I expect them to say that spending will be cut as of July to bring down the deficit to the region of 5 percent."
GROWTH, BUDGETS EYED
Poland's zloty <EURPLN=> gave up all of its early gains and was flat at 4.118 against the euro, still outperforming the region. The Czech crown <EURCZK=> shed 0.3 percent, while the Romanian leu <EURRON=> weakened by 0.4 percent.
Poland's economic growth around 3 percent remains robust, but other countries in the region struggle to return to economic growth as recovery in their western European export markets is slow, and recession has weighed on their budgets.
Czech President Vaclav Klaus asked right-wing Civic Democrat leader Petr Necas on Friday to lead talks on forming the next government after centre-right parties won a decisive victory in an election last weekend. []
The Civic Democrats have been negotiating with two new centre-right parties on forming a coalition, but have run into problems on issues such as taxation and fighting corruption.
Markets had cheered the election outcome, seeing a centre-right government as the best option to reign in yawning budget deficit in the coming years.
In Romania, investors weighed up an upcoming confidence vote in the government over IMF-backed cost cutting measures needed to lift the country out of recession.
The vote, over backing the planned cuts of 25 percent in public sector wages and 15 percent in pensions, is expected next week and could provoke further protests and strikes and delay the next tranche of a 20 billion euro aid package. --------------------------MARKET SNAPSHOT-------------------- Currency Latest Previous Local Local
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today in 2010 Czech crown <EURCZK=> 25.869 25.805 -0.25% +1.74% Polish zloty <EURPLN=> 4.118 4.117 -0.02% -0.34% Hungarian forint <EURHUF=> 283.4 281 -0.85% -4.6% Croatian kuna <EURHRK=> 7.255 7.259 +0.06% +0.75% Romanian leu <EURRON=> 4.212 4.197 -0.36% +0.6% Serbian dinar <EURRSD=> 102.81 102.64 -0.17% -6.74% Yield Spreads Czech treasury bonds <0#CZBMK=> 2-yr T-bond CZ2YT=RR -5 basis points to 132bps over bmk* 7-yr T-bond CZ7YT=RR +3 basis points to +158bps over bmk* 10-yr T-bond CZ9YT=RR +8 basis points to +152bps over bmk* Polish treasury bonds <0#PLBMK=> 2-yr T-bond PL2YT=RR -1 basis points to +404bps over bmk* 5-yr T-bond PL5YT=RR +1 basis points to +361bps over bmk* 10-yr T-bond PL10YT=RR 0 basis points to +295bps over bmk* Hungarian treasury bonds <0#HUBMK=> 3-yr T-bond HU3YT=RR +24 basis points to +618bps over bmk* 5-yr T-bond HU5YT=RR +32 basis points to +603bps over bmk* 10-yr T-bond HU10YT=RR +13 basis points to +517bps over bmk* *Benchmark is German bond equivalent. All data taken from Reuters at 1238 CET. Currency percent change calculated from the daily domestic close at 1600 GMT.
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(Reporting by Reuters buros, writing by Sandor Peto; Editing by Toby Chopra)
