freelogoOur objective is to provide English speaking readers interested in Hungary with a well balanced view of political activities in Hungary by featuring contents from various printed and online sources together with our own commentaries. We are convinced that Hungary is built on all sorts of different ideas, thoughts and opinions and, despite of the new Media Law, our aim is to provide an alternative and reliable source of information – contrary to the one-sided press of the government – for those who want to hear the voice of a free Hungary.

Hungary’s Foreign-Loan Plan May Damage Economic Growth, Budget - S&P

Hungary’s plan to allow borrowers to repay foreign-currency mortgages below market rates may hurt lending, growth and public finances, according to Standard and Poor’s, which rates the country’s debt a step above junk. “We have to take a view on the predictability of government policies to support sustainable growth performance, which is essential to anchor public finances,” Frank Gill, a London-based senior director at S&P, said in a telephone interview. “We remain concerned.” Hungary plans to allow early repayment on mortgages denominated in Swiss francs or euros at more than 20 percent below market rates, forcing lenders to swallow the losses, Prime Minister Viktor Orbán said on Monday. The European Union said the proposal may violate the bloc’s rules. Hungary, where two-thirds of mortgage loans are denominated in Swiss francs, is struggling to reduce its exposure to currency swings and help borrowers after the Alpine country’s currency rose to a record, triggering defaults and pushing up monthly payments. S&P rates Hungary ‘BBB-’, its lowest investment grade, with a negative outlook, which means it’s more likely to cut the rating than to raise it or keep it unchanged.
OTP Bank Nyrt., Hungary’s largest lender, dropped 1.5 percent to 3,685 forint. It fell 12 percent since the plan was unveiled on Sept. 9. Raiffeisen Bank International AG (RBI), which also has a unit in Hungary, rose 0.8 percent to 23.65 euros in Vienna after falling 15 percent in the last two trading days.
The forint weakened against the euro and against the Swiss franc, trading at 283.44 forint and 235.41 forint respectively. The cost of ensuring against default on Hungarian government bonds for five years using credit-default swaps was 459 basis points today, little changed from Monday, when it reached the highest in almost 2 and a half years, according to data provider CMA.
OTP competes mostly with units of international banks, including Raiffeisen, Erste Group Bank AG (EBS), UniCredit SpA (UCG), Bayerische Landesbank, KBC Groep NV (KBC), and Intesa Sanpaolo SpA. (ISP) The government’s plan is “unacceptable” to lenders, the Hungarian Banking Association said on Monday. The government doesn’t expect “masses” to take advantage of the Cabinet’s mortgage proposal as legislators won’t force banks to issue forint loans, Economy Minister György Matolcsy said. The plan to fix exchange rates poses a “significant threat” to the financial industry and the wider economy, the Banking Association said. The lenders are “ready” to turn to Hungary’s Constitutional Court and the EU to fight the plan, it said. “Any measures that would impose a capital loss on foreign banks invested in Hungary could accelerate the shrinkage of their local balance sheets, tightening credit conditions, and weighing on domestic demand, overall investment activity and growth,” S&P’s Gill said. “That will negatively impact public finances.”
Hungary’s economy may grow 1.4 percent in 2012, compared with the government’s forecast of 2 percent, Gill said. The EU will examine whether the plan violates rules on cross-border capital movements and state subsidies, European Commission spokesman Amadeu Altafaj told reporters in Brussels on Thuesday. “It would have a serious negative impact on the Hungarian banking system,” Altafaj said. It may lead banks to tighten credit and damage the investment climate, with “negative repercussions for the Hungarian economy.” The plan “is in contravention of all expectations an investor may have in a functioning market economy and democracy,” Austrian Finance Minister Maria Fekter said in a letter to Matolcsy on Monday.
Orbán roiled markets last year by effectively nationalizing private pension funds, levying extraordinary taxes on banks, energy, retail and telecommunication companies to plug budget holes, curbing the power of the Constitutional Court, eliminating an independent Fiscal Council and creating a media watchdog staffed by his allies.
The franc-fixing plan for mortgage repayments is the latest attempt to help borrowers, many of whom took out loans at about 150 forint per franc and are struggling with their payments as investors sought to place funds in Swiss francs to avoid riskier euros and dollars. The government agreed with lenders in May to offer household borrowers who aren’t late with repayments the chance to fix a franc exchange rate of 180 forint for their installments until the end of 2014. The difference between the fixed-rate payments and those that would have resulted under actual exchange rates will be recorded in separate forint accounts to be settled from 2015. That proposal only offered a “temporary solution” and the people’s demand for a “permanent solution beyond a temporary one is justified,” Orbán said on Sept. 2.
Source: www.bloomberg.com

Last Updated on Friday, 30 August 2013 09:11

Newsletter

Comments

Written on 13/09/2017, 20:13 by admin
guest-post-eu-and-orban-two-good-friendsThe decision of the European Court of Justice, according to which Hungary should accomodate more than one thousand refugees is at the same time appaling...
Written on 06/10/2016, 19:58 by admin
guest-post-the-day-after-the-referendumThe much anticipated referendum about the resettlement of migrants in Hungary was declared invalid, however, those who voted overwhelmingly rejected the...
Written on 23/06/2016, 06:31 by admin
disintegration-or-something-else-gyurcsany-s-solutions-to-the-ills-of-western-democracies  Something has gone wrong. Quietly, but ever more noticeably, more and more people in more and more places are in revolt. In the American...
Written on 06/04/2016, 19:20 by admin
how-germany-and-its-leftist-liberal-supporters-killed-solidaritySolidarity. This is the word that is probably is the most used and misused term in European politics. Its original meaning is supposed to mean to show...
Written on 23/03/2016, 20:30 by admin
the-orban-regime-can-only-end-in-failure  Change in the Orbán regime is only possible in the event of its downfall, so ruling Fidesz either becomes successful with its current set of...
Written on 23/03/2016, 20:20 by admin
anger-or-resignation  No matter how hard Mr Orbán is trying to get rid of his old cronies, he just cannot get rid of himself. He is too old for his system. The...
Written on 14/01/2016, 20:51 by admin
europe-s-new-yearThe European continent had a very difficult year in 2015, but that may be dwarfed by 2016. The most heated issue will be, without a doubt, the migration...
Written on 09/12/2015, 14:16 by admin
the-secret-diaries-of-viktor-orban-nov-dec-2015November 14th 2015I awoke to the shocking news about the Paris attacks last night. Words cannot express my feelings of shock.It turns out that one of the...
Written on 12/11/2015, 14:31 by admin
spies-in-the-newsroom   According to a new scheme, the government might place spies in the newsrooms, to have a better view of what is being written. This all...
Written on 29/10/2015, 20:02 by admin
greczy-s-blog-many-for-hungary  Some may want to do so, but DK will not write off its plans to win 2018 elections and to have a desperately needed co-operation with other...
Joomla templates by Joomlashine