Hungary - the barometer of central eastern europe

So Hungary's economic problems now place it as the key to what may happen in the rest of central Europe.

The first critical comment is that the bank crisis has now turned into a currency crisis as investors seek US Dollars and Yen instead of Euros, Pounds, Danish krona and Hungarian Florint.

The ECB (Euroland bank) is pumping cash into a non-Euro currency - amazing!

Therefore, analysts are drawing the conclusion that the Euro area will expand quicker than expected as weaker currencies seek the safety of a bigger currency and, of course, the Euroland attempts to protect the economies of its key trading partners (and therefore to protect its own economy).

Hungarian interest rates rose 3% to 11.5%.

Budapest has - on annecdotal basis - 40,000 empty properties after years of speculation.

We are seeing (theoretical) discounts of 30% on completed property.

With the Florint crashing, this makes property very cheap from a Euro (but most especially a US Dollar) perspective.

Cash rich investors holding US Dollars will find big bargains in Hungary now.

Something similar is happening in the Baltics - where the minnow currencies are really hard to trade and so quite protected against speculation - but at risk anyway.

These countries with a Euro peg may well simply jump into the Euro area.

Lastly, major devaluations in these countries will reduce the cost of labour and goods - and as these are export markets - this will make them stronger in the mid to long term - which make them even more attractive to cash investors using US Dollars.