The renewed pledge of tax cuts though kept markets on edge, but the Greece-style debt crisis upshot some damage. The Hungary's Government on Monday vowed to cut spending as it strove to repair the smash up.

Economy Minister, Gyorgy Matolcsy said the country's new center-right Fidesz Government, which took office on May 29, would stick to the budget deficit target of 3.8% and would call for a cut in spending worth 1.0-1.5 % of gross domestic product to do so.

But he later said the Government could introduce a flat personal income tax for families, lower than current rates, which would be hard to square with commitments agreed under a 2008 bailout from the European Union and International Monetary Fund.

The Government's willingness to consider unorthodox measures was cause for concern, said the Moody's credit rating agency. While other analysts said Fidesz was still sending mixed messages to international and domestic audiences, a practice that prompted the selloff, which sent the forint to a one-year low last week.

Economists say last week's comments from officials appeared to be a case of the new government preparing to backtrack on promises made before it swept an April election.

But they said mixed messages, and previous statements that this year's budget deficit could be as high as 7% of GDP, continued to sow confusion.

"One cannot help being puzzled when Hungarian officials talk about a much larger than planned budget deficit and at the same time rule out austerity measures and instead promise tax cuts", said Danske Bank Analyst, Lars Christensen.