Part 7/10:
Recent developments, particularly the increase in European bond yields following Germany's announcement of extensive public infrastructure and defense borrowing, further complicate Hungary's situation. High bond yields diminish demand for Hungarian debt, leading to increased borrowing costs, which threatens to create a vicious cycle of escalating debt and financial instability.
The Threat of a Debt Doom Loop
Hungary now stands at a critical juncture where it risks falling into a damning debt doom loop. This scenario occurs when a government borrows more to service its existing debts, which inflates the cost of borrowing and necessitates further borrowing—an unsustainable cycle.