* Leu hits all-time low vs euro on Romania VAT hike concerns
* Romania IMF talks might be delayed, uncertainty weighs
* Romania needs austerity to meet 2010 budget goal -analysts
* Hungary forint near all-time lows vs Swiss franc
(Adds Romanian comments, more detail)
By Marton Dunai and Dagmara Leszkowicz
BUDAPEST/WARSAW, June 28 (Reuters) - Romania's leu hit a new
record low against the euro on Monday after investors perceived
the government's plans to hike value added tax as a short-term
solution for the country's budget crisis.
After an attempt to slash pensions was rejected by the
Constitutional Court, Romania decided to raise value added tax
by 5 percentage points to 24 percent. []
The derailing of the government's plan for harsh spending
cuts dealt a blow to the administration of Emil Boc and while
the VAT hike may stabilise the budget, it failed to address real
budget problems and could prolong a deep recession in the EU's
second poorest member, analysts have said. []
The government said the International Monetary Fund (IMF)
Board would discuss Romania's aid deal on June 30 and release
aid on July 2, but the Fund's representative was quoted as
saying that the Fund might delay talks on the aid package until
early July. []
"Government support is fragile. Markets will not calm down
until the IMF clearly announces what it plans to do," Nicolaie
Alexandru-Chidesciuc, chief economist at ING bank in Bucharest
wrote in a note.
"The basic worry is that the process to get the IMF support
could derail," added Murat Toprak, emerging markets strategist
at Societe Generale.
"The market is extremely sensitive to any concerns or news
about fiscal consolidation... Sovereign risk is a key market
driver ... The tax hike is something that is going to damage an
economy which is at a standstill. It is another obstacle for
growth."
By 1350 GMT the leu <EURRON=> was down 1.8 percent, while
Bucharest's BET index <> fell 1.45 percent.
Other currencies in central Europe also fell, except the
Czech crown <EURCZK=> which was steady. The forint <EURHUF=> was
down 0.9 percent and the zloty <EURPLN=> fell 0.7 percent.
Hungarian bonds weakened on Romanian concerns and also
worries over the fall of the forint versus the Swiss franc, a
fixed income trader said. He said yields rose 10-15 basis
points, in relatively thin volumes.
NEW CZECH PM HAS MARKET APPROVAL
Hungary's forint fell close to all-time lows versus the
Swiss franc <CHFHUF=>, trading close to 215 at 1406 GMT, on
moves on the euro/franc cross, raising concerns over the large
stock of Swiss franc denominated debts of households.
Elsewhere, dealers said Czech President Vaclav Klaus's
appointment of Petr Necas as prime minister supported markets.
"Talks continue and if agreement is reached, the Czech
Republic will end up with the strongest government in years,"
4Cast said.
The Civic Democrats have been holding coalition talks with
two smaller centre-right parties, TOP09 and Public Affairs,
after the three won a total of 118 seats of 200 in last month's
election on pledges of austerity and fighting corruption.
[] []
Investors, analysts and rating agencies have cheered the
victory of the austerity-minded parties as the best possible
election outcome and most-likely grouping to conduct pension and
health reform -- areas in which the country has lagged
neighbours.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.72 25.722 +0.01% +2.33%
Polish zloty <EURPLN=> 4.141 4.111 -0.72% -0.89%
Hungarian forint <EURHUF=> 286.3 283.71 -0.9% -5.57%
Croatian kuna <EURHRK=> 7.191 7.194 +0.04% +1.64%
Romanian leu <EURRON=> 4.352 4.275 -1.77% -2.63%
Serbian dinar <EURRSD=> 104.31 103.83 -0.46% -8.08%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -11 basis points to 130bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +159bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +142bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +645bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +597bps over bmk*
10-yr T-bond HU10YT=RR +8 basis points to +506bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1543 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Marton Dunai and
Dagmara Leszkowicz, Editing by Sonya Hepinstall)
