[P2P-F] hungary and the banks

[Michel Bauwens]

*Austrian Banks Facing Payback as Hungary’s $22 Billion Debt Slaves
Revolt*<http://www.bloomberg.com/news/2011-12-13/austrian-banks-facing-payback-as-hungary-s-debt-slaves-revolt.html>,
http://theautomaticearth.blogspot.com/2011/12/december-18-2011-2012-end-and-return-of.html

*When Hungary’s former central bank governor was buying a house two months
before Lehman Brothers Holdings Inc. collapsed and the country sought an
emergency bailout, he received an offer he couldn’t refuse.

Peter Akos Bod, now an economics professor at Corvinus University in
Budapest, was given a choice of mortgages by his bank. The 60 year-old
could select a loan in Hungary’s currency, the forint, at 13 percent
interest, or one in Swiss francs at less than 6 percent. After crunching
the numbers on a spreadsheet, he picked the cheaper franc loan. "It was
rational," he said of his 2008 decision in an interview in the Hungarian
capital. "I put it into a model."

Three years later, Bod and about one million compatriots who took mortgages
in francs are faced with a debt pile that has swelled to 4.9 trillion
forint ($22 billion). The currency’s 40 percent slump against the franc has
raised repayment costs, pushing mortgage arrears to a two-decade high and
prompting Prime Minister Viktor Orban’s government to brand the loans "debt
slavery."

To help homeowners, Orban imposed currency losses on banks including Erste
Group Bank AG and Raiffeisen Bank International AG (RBI) that may total 900
million euros ($1.2 billion), according to Cristina Marzea, an analyst at
Barclays Capital. Faced with the risk Orban would impose further measures,
lenders have offered to accept $2.2 billion of additional losses if the
government promised to take no further action. If it doesn’t, banks are
threatening they may withdraw from the country.

'Too Risky'
"Against the backdrop of a potential western European financial crisis,
this raises the risk that western lenders will just pull out of Hungary
because it’s just too risky, which would be disastrous," Neil Shearing,
senior emerging markets analyst at Capital Economics Ltd. in London, said
in an interview. "Hungarian banks are incredibly dependent on their western
European parents for short-term credit lines. At the very least it means
credit is going to remain very tight."

Six of Hungary’s seven biggest banks have foreign parents, including
Italy’s Intesa Sanpaolo SpA and UniCredit SpA (UCG) and Germany’s BayernLB.
Only OTP Bank Nyrt., the country’s largest lender, is still domestically
owned.

'Free of Debt'
Almost 18 months after Orban was elected in April 2010, he passed a law
allowing Hungarians to repay mortgages denominated in foreign currencies at
discount of about 25 percent to today’s exchange rate. As long as a client
applies before Dec. 31 and repays the entire loan before Feb. 28, the banks
have to make up the difference.

"I paid it back last week," Bod said. "I’m free of debt slavery," said the
former industry minister. The plan "is easy to explain from a political
viewpoint. It’s cheap for the government, expensive for the banks, good for
voters."*



-- 
P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net

Connect: http://p2pfoundation.ning.com; Discuss:
http://lists.ourproject.org/cgi-bin/mailman/listinfo/p2p-foundation

Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
http://twitter.com/mbauwens; http://www.facebook.com/mbauwens
-------------- next part --------------
An HTML attachment was scrubbed...
URL: https://lists.ourproject.org/pipermail/p2p-foundation/attachments/20111219/eee398d0/attachment.htm