The Orbán government has given up the idea of solving the forex loan problem quickly and in one fell swoop. For a couple of weeks it looked as if Viktor Orbán was thinking of a radical solution that would have meant making the banks pay the difference between the exchange rate at the time of the issuance of the loan and the current exchange rate. This could have been a tremendous burden. Just to give you an an idea, if someone took out a loan in Swiss francs in 2008 he paid 143.83 forints for one Swiss franc. Today the exchange rate is 241.51 forints to one Swiss franc.
The original idea was borrowed from the Croatian government’s decision a few weeks ago. There is, however, a huge difference in the number of people with forex mortgages in Croatia and Hungary. Apparently the “nuclear option” was abandoned because the government realized that the entire Hungarian banking sector could go under as a result.
In no small measure Sándor Csányi was responsible for this change of heart or at least for the government’s realization of the possibly grave consequences of such a move. After all, he sold a large number of his OTP shares which by itself prompted some panicky follow-through on the Budapest stock exchange. By now most observers interpret his move as a warning to Viktor Orbán. This is what can happen, and on a much larger scale, if the government goes through with its plan.
Those who don’t quite believe this scenario point out that no one knows how many OTP shares Csányi actually owns. A German source claims that what Csányi sold amounted to no more than 1% of his holdings. So, the argument goes, this shouldn’t have made a great impression on Viktor Orbán, who surely knows the details of Csányi’s finances.
But Ferenc Gyurcsány, who was interviewed on the subject, dismissed this argument. Csányi’s sale of this allegedly tiny portion of his holdings was not itself a threat. But implicit in this sale was the threat that if the government goes through with its plans he may dump the other 99%, the consequences of which might be immeasurable.
Gyurcsány knows Csányi only too well. When he was prime minister he had quite a bit to do with him because, after all, “he is a big player … with a tremendous amount of power.” In fact Gyurcsány agrees with János Lázár that Csányi and the other oligarchs have far too much power, which a prime minister must keep in check. He himself normally sent them away and told them that they cannot expect special treatment from him. He admitted that as a result his relationship with Csányi and the others was not the best. He didn’t sit with them with in the VIP section at soccer games spitting out sunflower seeds, a reference to Viktor Orbán’s not exactly elegant habit.
As for János Lázár’s reference to Csányi as an octopus, apparently Orbán suggested that his chief of staff sit down for coffee with Csányi to smooth things over but Lázár ignored the suggestion. When Orbán inquired about the meeting, Lázár told the prime minister that he has no intention of ever apologizing to Csányi. Orbán didn’t press the issue. I guess by then he decided that Csányi didn’t really deserve an apology, especially since he learned that Gordon Bajnai’s foundation had received a small grant from him. I’m sure that this “sin” will not be forgotten by the vengeful Viktor Orbán.
The relationship of Csányi, and the other oligarchs as well, with Orbán is complicated. For one thing, Csányi doesn’t seem to like him as a person. When Orbán was in opposition, Csányi often talked about him disparagingly in Gyurcsány’s presence. Admittedly, it is in the interest of these oligarchs to seek close relations with the powers that be. And yet if they feel that the government is working against their interests and that no amount of pressure will cause it to change its ways, they will not hesitate to abandon the prime minister and his party. Orbán cannot trust Csányi, Demján, and some of the others because they are not his men the way Lajos Simicska is. The behavior of Sándor Demján, who is up in arms about the nationalization of the credit unions, and Sándor Csányi seems to indicate that these oligarchs are fed up with the unpredictable, anti-business policies of the Orbán government.
There is another aspect of the relationship between the oligarchs and Viktor Orbán that has received very little attention. One mustn’t forget, Gyurcsány said, that the Orbán family’s wealth puts him and his family among the top five richest families in Hungary. Orbán has cleverly hid his and his family’s wealth, but he cannot hide behind front men and legal tricks forever. One day he will be caught. He became an MP practically straight out of college and today he is a billionaire. He is using his position to enrich himself and his family. That is not only immoral, it is a crime.
This interview took place with Olga Kálmán on ATV, and the reporter was visibly shaken by the news that the extended Orbán family may have become one of the five richest families in the country. Therefore she decided to follow up on the story. The next day she invited Mátyás Eörsi, a former SZDSZ MP and an old acquaintance of Viktor Orbán. Eörsi was also one of the members of a parliamentary committee that was supposed to find out how the former prime minister managed to acquire so many assets in a few years, allegedly from his modest salary. Unfortunately, creating these investigative committees in Hungary is a waste of time because they have practically no enforcement authority. They can’t even require witnesses to appear. This particular committee was just as useless as was, for example, the investigative committee on the sudden and unexpected decision of the first Orbán government to purchase Gripen fighter planes. Although the family’s enrichment was highly suspicious, the committee didn’t manage to pin anything on him. Olga Kálmán also took a good look at Orbán’s financial statements, the kind every MP must fill out yearly. These statements indicate that, especially given his five children, he could have led at best a modest middle-class life.
Like Gyurcsány, Mátyás Eörsi is convinced that the Orbán family is among the richest in Hungary. In fact, he is pretty certain that way back in 1992 when Fidesz sold the half of a very valuable building it received from the Antall government, the whole amount landed in the Orbán family’s coffers, laundered through about twenty phony companies. These were the companies that were later sold to two phantom buyers for one forint each.
Prior to becoming a member of parliament in 1990 Eörsi had a fairly lucrative legal practice. He didn’t start with nothing as Orbán did. Moreover, Eörsi’s parliamentary salary was a great deal higher than average. He claims based on his own experience that there is no way that Orbán could have saved enough money to buy the house he did after he lost the election.
Eörsi as a lawyer is especially interested in the “legal techniques” by which Orbán manages to hide his immense wealth with the assistance of his front men. As long as he is prime minister he has no problem controlling whatever is being handled by others. But what techniques did he use to guarantee access to his wealth once he is out of office?
One reason for Orbán’s many political successes is that his followers believe that he is a man of modest means who takes their side against the bankers, multinationals, and oligarchs. But what will happen if his people find out that their beloved prime minister is in fact one of those hated oligarchs?
What a coincidence. Last night I had dinner with a rather well-to-do businessman (import/export, a small department store in Szolnok) and a director of Demjan’s company. Of course I asked what the oligarchs are thinking, and if by chance they had anything to fear from Orbán as the Russian oligarchs have from Putin.
According to the information I got, Demjan lost about 30% of his wealth since Orbán came to power. And the businessman said he hasn’t earn a single filler this year yet. In fact, he closed his department store for two weeks this summer. He hasn’ fired anyone yet, though, and didn’t write any red figures.
Rumor has it that the business world is fed up with Orbán but they are not going to revolt. They just take (or have taken) their money elsewhere.
As for the forex loans, I still believe that the banks are more responsible than the uninformed customers. It were the banks that broke the banking rules. I know of some people who try to make ends meet, but at enormous costs to health and quality of life. Last night we went for a long walk in one of the few posh villa neighbourhoods. I saw ” For Sale” signs in every street we went through. But then also elegant new houses in manicured gardens whose owners seemed to have no worries.
Public administration seems to become more efficient, though.
Downtown restaurant prices have already reached unacceptable levels. The menu sounds sophisticated, but the cooking is only so-so. Service continues to be lousy.
Actually, Orbán is not an oligarch as he has no business. He is a common thief, stealing the country blind as a power-addicted PM and megalomaniac autocrat.
“back in 1991 when Fidesz sold the half of a very valuable building”
Minusio: I agree with you on the banks responsibility, but that doesn’t change the unbelievably communist and harmful message that became public opinion on this issue. No personal responsibility, just expect the state to bail you out when things don’t turn out well. The financial knowledge of the general Hungarian population is abysmal, and they think this is right this way.
Agreed on ‘lack of responsibility’.
Just horrible that this government sets the worst possible standards in its vote-getting strategies.
It will lead to disaster economically.
Like so much else in Hungary, bank agreements and regulations are impenetrable for most people, announcements ever changing and numbering hundreds of pages. There are precious few resources for actually finding out anything, and it’s simply not reasonable to expect ordinary people to have the knowledge of every working facet of such a needlessly complex place. In most societies it’s reasonable to expect customers to read the small print – but often just to open an account in Hungary involves signing about 30 different forms … it’s simply impractical to even read them all – and so one could be signing anything. Similarly, ask a straightforward question and every bank advisor will give a different answer (just as, my experience is, asking a simple tax question will get a different answer from every NAV clerk; and even routine legal questions will get different answers from different lawyers). There is no Citizens’ Advice Point in Hungary. It’s difficult to actually find out anything about how anything works, or even what one should be doing. So this makes it difficult for ‘personal responsibility’ in complex matters to come into it. And this also makes it very easy for personal disaster to ensue.
Regarding those Forex loans:
Has anyone seen a calculation comparing loans ? The interest rat for a Forint loan would have been much higher than a Forex loan obviously so some “devaluation” of the HUF must have been priced in with those loans. Now it would be interesting to compare what a customer really had to pay – calculating over the duration (say 10 years) and sing the effective rates.
Surely some people at the banks must have done those calculations – is anything in this direction published ?
I don’t know what the interest rates for housing loans would have been – but I’m shocked when I see consumer loans in HUF with an interest rate of 30 or even 40 %!
I have heard that the same banks operate differently–ie. with different restrictions–in Austria and Hungary.
It would be interesting to hear from banker-bloggers what these differences might be…
The loans were issued in HUF and hedged with SFR so the banks haven’t really taken a loss in that sense. The losses come when people could no longer pay. Also, banks are currently deleveraging to try to get their balance sheets in line with the current reality in Hungary so that’s also hurting them.
As I’ve said in the past, shame on people for taking on a currency risk they would neither ill afford or understand, shame on the government from not protecting a financially illiterate population from the aggressive actions of the banks and shame on the banks for their aggressive tactics and their abuse of current laws regarding personal bankruptcy and so on.
Now, who should pay for the mess. Well, if you say the banks you’ll freeze up the economy. However the banks shouldn’t get off scott free!!! If you say people should be foreclosed on then that will be a social and economic disaster. If the government pays we all pay but at this point it’s about the fairest thing that can happen without inflicting massive amounts of damage (that everyone is going to feel anyways).
That said, to do this I’m guessing the current regime would have to blow the 3% ceiling. They might have been able to get away with that without penalties in the past but with all this combativeness with the EU my guess is that room for negotiations may no longer be there. My guess is that OV is trying to “turkey” his way through this problem hoping that if the economy to improves, most everyone will be able to pay and…. I think that this strategy might not play out as well (if you can call those negotiations as being playout well) as it did with negotiations with the IMF and the banks (witness recent activity) seem to be getting tired of the situation. Lets just see how long everyone can ride before a solution is forced. I’m certain it won’t be negotiated.. 😉
Tip of the iceberg. Nice salaries in Fideszland:
[OK, 1,675,000 HUF a month is $90,000 a year, but keep in mind that the average gross [net] salary in Hungary is just $12,000 [6,000] a year. In addition, these apparatchiks get lots of bonuses as well]
Completely off topic. A group of people involved with dog rescue began an experiment. They got permission from the chief of a jail to organize a 12-week dog obedience course for their dogs. The idea was to teach the dogs some manners because this way it should be easier to find them permanent homes. They thought that this getting inmates and dogs together would be beneficial for both parties.The experiment was a great success. One of the inmates who is actually leaving the prison today decided to adopt the dog he was working with. The dog is a vizsla and the pair finished first at the final exam. Very nice little story:
Another outrageous thing in Hungary is the “fizetési meghagyás”.
This is how it works. Somebody [a utility company, an insurance company or your enemy – anybody] can go to a “jegyző” (kind of notary with lots of power). They claim that you owe them money. The “jegyző” does not investigate, even is not allowed to investigate the issue. But s/he sends you an official document claiming you owe this money.
If they cannot deliver this document in your hands, the default argument [“vélelem”] is that you did not want to pick up the document, so it is considered delivered by Hungarian law.
If you do not object within 15 days [for instance, you are abroad!], it becomes a judgement against you, a judgement you cannot even appeal in court [!], and they can take away the money form your savings, or can even auction your house.
Another thing. You cannot object electronically – it is the privilege of the lawyers. Either you hire a lawyer, or you send in a registered mail with two witness signatures. If the letter misses a single day [even weekend counts towards the 15], you are done in.
So please, never tell anyone you do not trust that you will go abroad for more than 3 weeks: they can take away your assets with this government-supported trick.
A little OT, but re house prices: Friends of ours who have an identical flat to ours have just had it valued – 13.5m Ft. We bought ours for 15m eight years ago.
A small apartment can be a good investment in Budapest. A friend of mine bought a tiny one
a week ago, and rented it out yesterday for a 10% yearly return to an ethnic Hungarian couple from Slovakia. She had six applicants.
You couldn’t find a more depressing example of why the Hungarian media is beyond salvation when Olga Kálmán a) pretends to be surprised Orbán’s family is raking it in and b) can listen to Gyurcsány pontificating about something he did himself (and is doing.) And have you noticed that no one mentioned Sándor Pintér whose own “ex-company” is expanding rapidly in all directions. As for Simicska being “Orbán’s man”, I think the reverse is closer to the truth. But interestingly, the European funds have been taken away from Simicska’s ministry (the one that Rosa Klebb aka Némethné administrates) and given to Lázár. A clue to power struggles going on behind the scenes between competing empires.
I dislike people making comparisons with Hitler but something that is not always appreciated about the Third Reich: Hitler’s grasp on power to a degree was cemented by allowing his minions to build and operate their own empires (be it Himmler’s SS, or Goering’s black marketeering) which meant they were competing against each other and not looking upwards. And in this parliamentary cycle, Orbán has been quite shrewd in allowing various “empires” to battle each other for bones, which has made his own position more secure. I can take Eörsi criticising Orbán’s wealth – he’s a reasonable decent man, but for Gyurcsány to do so, it is nauseating.
But Gyurcsany made his fortune before he became a minster, then prime minister, and he served in the latter position without accepting his salary.
On the other hand, Orban became enriched himself during his first term as prime minister.
That makes a difference in my counting.
Hungary budget balance –3,5 %
recommend a book on the Hungarian Elite
In Jan 2011 Orban was President of the Council of Europe at the same time Van Rompuy was the President of the Council of Europe. How does the protocol work ? back to back or side by side, like Romans on the lavatory ?
“…or Gyurcsány to do so, it is nauseating.”
Well then, let’s here it: what has Gyurcsany done?
I’ve heard him vilified but never with an explanation.
Being rich is not a good enough reason to hate him, after all, if you were even remotely clever during the changeover, you were able to pick up bargains.
As well, Fidesz has put him on trial without success;
so, Mr. HiBoM, whatever it is you know, enlighten us.
Exactly. Any such comparison is absurd. Orbán became rich by milking it in especially during his first time in office. Gyurcsány didn’t steal from the country as Orbán has been doing for years. He is well off but far from filthy rich and all is out in the open. Orbán’s financial empire is hidden. Who knows how much he owns of Közgép or even Puskás Academy. I have the feeling that he does a great deal of it.
Last year Austria lost its triple A rating in part because of Erste and Raiffeisen exposure to Hungarian forex loans. Erste has plans to close 43 of 184 branches.
You’re certainly have a good reason to dislike Gyurcsány, and hopefully you can- and will share with us, aren’t you?
Otherwise Orbán’s methods are painfully reminiscent of te ruler of the Third Reich, so, what are we supposed to do about it ? Ignore it, as it never happened?
Are you serious?
In my opinion we all should be aware of, what’s really goes on in Hungary, and – presumably – act about it, in case we don’t want to see history repeating itself.
What about you?
Just a reminder: the infamous Gripen affair provided all five of the Hungarian participiants with about 700 millions of HUF per capita – quite a decent sum of the time, the year 2002.
Take in account, that there is a company registered in Zurich with prominent Hungarian owners – no, not Orbán, Simicska – at the time, when the Hungarian ambassador called Schmitt…
Friggin’ coincidences, don’t you think?
Tappanch!! Your e-mail address doesn’t work. Please drop me a line–you have my address. Someone would like to get in touch with you.
The cold reality is that the forex mortgages must be foreclosed.
One of the reasons that there are so many ‘delinquent’ loans is because ‘moral hazard’ has occurred.
Mortgagees know that if they stop paying they will still be able to live in their houses.
And so they have.
There is a simple mechanism to stuff the banks – they lose on the foreclosed mortgages.
There has been a housing bubble and Hungary has an unusually high home ownership – with over 90% owning their own home.
There needs to be an orderly crash so that many foreclosed houses end up in the rental sector – with the banks taking the hit. And a strong rental sector that increases mobility.
That is the only way; get the pain over and allow the market to function as it should.
Yes it will be painful but it is the only way to retrieve a properly functioning market in a proper capitalist and democratic society.
In England many people on Social Security are living in houses that similar families in employment cannot afford. So the government has introduced a cap that will force many to move. Yes very painful – but only has to be done once.
Moral hazard is an interesting phenomenon – and goes to the route of human behaviour. Contract law is at the route of all commerce and cannot function if the government interferes with it.
Let the banks sort their own mess out – but ensure a soft landing. That’s all the government should do.
And the ‘national memory’ will be better equipped for the next ‘moral hazard’ risk.
Comparing Mr Orban to Hitler is pproaching the edge of political hysteria.
As for the Orban Constitution the UK has no constiution and the will of the parliament is sovereign.
Orban has fixed constituency boundaries to win..just like the Americans.
Liberals may not like his actions. But he is not a Liberal but a Christian Nationalist.
The crux is Orban will come out top in the 2014 election.
The UK has a constitution guaranteeing freedoms and responsibilities – it’s just not written down – common mistake – and it has been fashioned over hundreds of years.
Better to have an unwritten one enshrined in history than Szajer’s clumsy inept attempt.
The UK parliament is sovereign if it votes to abolish the monarchy its will prevails
Walks like a duck, quacks like a duck – what could it be, then?
It’s a duck, silly, that’s what it is, you know..!
– Now you may try yourself: walk like a duck, quacks like a duck…:
Yo’reu so right, dear!
Never mind, though, that not so long ago he was indeed a. liberal, and an ateist of that..!
In the main time – as I gather – plea se, consider the term: “ORBANIST”!
Believe me – or the facts, if anything – Orbán cares only about Orbán,, not you, not the nation, not even the people of Transilvaia, or anyone else for that matter. Always what serves him at the moment, whatever could that be.
Could be hard to accept, I know…
If you have any doubts, just listen to his latest polemies from Bálványos, praising certain aspects of the Kádár era, and figure out yourself, just how consequent is your hero, when it comes to his interest.
Well, posting from a phone presents some problems after all, sorry about it!
Pragmatist. A doer and wants re-election. If enough people like him he wins. Tough. That’s elections.
Time has come (again) to remember: Don’t feed the trolls!
But then they’ll never learn…
Minusio mention plagiarism in Hungary but not in Cardiff; google
…IB examiner plagiarism. Examiners ??!! must be a first
There are simply too many homes under water to do this. To foreclose on all of these homes all at once would not only hurt the banks it would hurt me and every other home owner in the country. The hurt would go beyond that in that it would seize up the economy and turn Hungary into an even greater economic wasteland than it already is.
Most are now trying to sell their homes which means my home is worth about 20% less than it was at time of purchase. In real terms that number is worse because when i convert the sum back to USD i take another 10% hit. And, we did not overpay for our home. So we can see the effects of people not being able to pay their mortgage right now and that is without mass foreclosure. I, do not want a mass foreclosure. What I want is a much less corrupt government that has at least one economic clue that can grow the country out of the current mess it’s in. Unfortunately everyone in the current lot has had their hands in the cookie jar and so no one can come out and say anything without themselves being exposed. You know that is what saved Gy from the malicious politically motivated charges against him.
The housing market in Hungary has always been disturbed. Just look at the housing prices with mortgage terms vs rental costs. That calculation has always favored buy and that’s what people have done up ’till now. What is needed now is liquidity and its not the rental markets that will provide that, is economic growth. Digging ditches is akin to Gulag economics and we all know how well that worked out.
It’s a shame that today’s political leaders don’t follow their hero, Horthy, when it comes to personal enrichment. He steadfastly refused to profit from his position as regent.
Lwiih I did emphasise that it should be “a soft landing” and “an orderly crash”. And that this is the only part of the government’s involvement.
For example allowing the weaker banks to go to the wall and helping people to rehouse.
Only this will retrieve as free a market as possible otherwise you will have ‘house-price decay’ for years, if not decades.
Such as you have now.
We experienced a sort of crash in the 90’s when a slow erosion occurred and many people were in negative equity. One of our problems are too many people chasing too few houses so a different problem from you.
But we have always avoided moral hazard.
Better to have a quick ‘re-adjustment’ than long slow sclerotic erosion of the housing market.
You housing asset wont’t recover until you are pushing up the daisies!
There has never really been a free housing market in Hungary, at least not one that I recognize as being free. At only one time in all the time I’ve been here did I ever see something resembling a normal market. It seems that even that market was pumped up by OV and then shut down by Gy. That, my friend, cost a lot of people a lot of money ‘cos they bought at a time when prices were high.. Liquidity in Hungary seems to have always been a problem. People paid cash for housing (which is why prices were depressed and why renting didn’t make sense). Under Fidesz there seemed to be more liquidity and when Gy undid what Fidesz had set in place, the change in the market was almost instantaneous. At first it just manifested its self as longer mean time on the market but of course that was quickly followed up by lower and lower prices. So, that bubble left many people in a position where they could no longer sell. To give you an idea, we were offered 17m for an apartment that we had which we declined. When we finally did decide to sell, it went for 13.5m.
Then, comes the currency devaluation which triggered the FX problem so the spiral continues downwards!!! To mass foreclose on people now will only add pain to this misery… better to give them time to work out an option for themselves rather than make the paper loss a real one. Better to get out of the way of business so that people can get real jobs so they can pay for things like a house.
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