For a few days Moody’s rating downgrading provided ammunition to everyone in the intensifying communication warfare. But while both sides of the political aisle engaged in mutual recriminations regarding the other side’s hypocrisy, a discussion of the underlying issues – whether the downgrading made sense and what impact it might have – fell by the wayside.

This week both the opposition and the government press were glad to discover that the government and the opposition parties are, respectively, hypocritical. Last Monday Moody's Investors Service downgraded Hungary’s government bonds by two levels, from Baa1 to Baa3 rating, just above junk status.

Following this move, Hungary’s creditworthiness is among the most damaged in the European Union and Hungarian bonds are tied with Romanian, Bulgarian and Latvian bonds as the riskiest among the new member states. Given that Standard & Poor’s already has Hungary just above junk status and Fitch is only a notch more generous for the time being, the credit rating agencies’ warning signal is clear.

Minister for the National Economy György Matolcsy, who is also in charge of the treasury, took the news with equanimity, arguing that the government had anticipated this judgment, which is indeed likely. In an interview with the BBC, Foreign Minister János Martonyi was less nonchalant and called Moody’s decision a ‘huge mistake’ given that the Hungarian fiscal policy is presumably on solid footing for years to come. Martonyi urged Moody’s to reconsider.

The largest opposition party, MSZP, harshly attacked the government on account of Moody’s rating decision. In Parliament, MP Gábor Simon asked in light of the downgrading ‘how much further [the government] would devastate Hungary’s market positions’. MSZP’s senior financial policy expert, Tamás Katona, called the decision a ‘slap in the face’ for the government and noted that after a wide variety of experts had already expressed their misgivings about the government’s fiscal policy, now they had been joined by Europe’s most influential credit rating institution.

Policy Solutions' analysis on Moody's downgrading of Hungary can be downloaded from here.