Hungary’s parliament last week passed a law allowing mortgage borrowers in Swiss francs and euros to repay their loans by the year-end at exchange rates about 25 per cent below current market rates. Losses would be borne by the banks, including Hungary’s OTP and foreign lenders such as Erste Bank and Raiffeisen Bank International of Austria, and Bank Austria, a unit of Italy’s UniCredit. Two-thirds of Hungarian mortgages are in Swiss francs – taken out to take advantage of low interest rates, mostly when the Swiss currency was weaker. The franc’s sharp gains against Hungary’s forint have left many borrowers struggling to make repayments. But the plan to ease the burden on borrowers has caused the most serious clash to date between foreign businesses and the unorthodox economic policies of the government of Viktor Orban. Investors had already been unsettled last year by the largest banking levy in the EU, and retroactive “crisis” taxes imposed on the telecoms, energy and retail sectors. “This early repayment act is clearly an interference with private contracts, to a certain extent it is changing property rights,” said Josef Christl, former executive director of the Austrian central bank and now a banking consultant. “There is a general feeling that Hungary is not going in line with the European environment it operates in.” Maria Fekter, Austria’s finance minister, wrote last week to Gyorgy Matolcsy, Hungary’s economy minister, that “forcing market participants to take enormous losses on their books through legally decreed prices and exchange rates is not acceptable practice in a market economy”. Zoltan Kovacs, minister of state for government communication, told the Financial Times that the size and severity of the problem justified the measures taken. He also said that “in our perception” the law was not against EU rules. “The banks made Swiss franc loans to very risky population groups,” he said. “We consider the practices of the banks, especially in the last couple of years, as unethical.” He suggested there had been elements of mis-selling of loans to customers who did not understand the risks.See the full story at the FT. This story is going to have legs because in terms of the politics, it's brilliant. Most people will read this as being anti-bank and will be in favor of it, even though the real important move is a national government within the EU pursuing a self-interested economic policy.
Easter Eggs (1 of 21): Hot Air
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FEEDPreface to all 21 parts: This is a special holiday weekend, because not
only does it contain Good Friday and Easter, but it also begins the Slope
of Ho...
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