Europe markets rebounds but crisis may delay euro

By Krisztina Than

BUDAPEST (Reuters) - Eastern Europe's battered markets recovered on Monday but financial woes prompted the IMF to offer financial help to Hungary and set Poland's central bank and government at odds over the latter's 2012 euro entry plan.

The crisis has highlighted the vulnerability of the region's developing economies to market shocks and has forced politicians to run a reality check, with Hungary reducing its public deficit targets and cutting its economic growth forecast.

A weekend agreement by euro zone countries to shore up the European banking sector drove stock and currency markets higher across the region on Monday, but ripples of the global financial crisis continued to reverberate.

Hungary, one of Europe's most vulnerable economies due to its high deficits and heavy reliance on external financing, was hit the hardest in falls on Friday, with the forint plunging to two-year lows versus the euro before rebounding on Monday.

Responding to this Monday, the International Monetary Fund said in a statement: "We will provide technical assistance as needed and, in the context of a supportive policy setting, are ready to undertake discussions on possible finance assistance."

In Hungary officials are investigating potential illegal market manipulation after last week's losses and said the IMF's aid would be a last resort.

"We needed this offer so those who attack us see that we have strong allies and that Hungary is not alone," Prime Minister Ferenc Gyurcsany told a news conference. "We needed this offer so we'd never have to resort to using it."

Hungary's MKB Bank, a unit of Bayerische Landesbank said it had suspended issuing foreign currency loans in Hungary to protect clients from currency swings.