Viktor Orbán’s latest “action plan”

Viktor Orbán's plan of action in the wake of the economic crisis that his government in large measure created is an acceleration of the same policies that led to it in the first place. Interesting logic. The crisis is "an opportunity" to continue "the unusual steps taken hitherto." In fact, the pace of political, economic, and social change should pick up. There mustn't be any hesitation. Hence the birth of the new "Country Protection Plan." Because the country must be protected against foreign speculators and banks who are getting rich at the expense of the "Hungarian people." No more. The Orbán government will defend them.

Lately, Hungarians have been inundated with plans with many points. The first "action plan" of Orbán had 29 points. This one has only six, but most of them may have very serious consequences for the Hungarian economy. First and foremost, although it was only the fourth item on the list, the government accepted the suggestion of the Fidesz-KDNP caucus (which most likely originated with the Orbán-Matolcsy duo in the first place) that borrowers who can afford to pay back their forex loans in one lump sum can do so at a fixed rate of 180 Ft to 1 Swiss franc instead of the current 234 to 1. In cases where borrowers took out loans in euros the rate would be 230 to 1 instead of the current 282 to 1. The currency losses incurred would have to be borne by the lending institutions.

János Lázár, head of the Fidesz parliamentary caucus, made the mistake of announcing ahead of time that the government was contemplating such a move. As a result the stock of OTP, the largest Hungarian bank, fell over ten percent already on Friday. This morning it was announced that neither OTP nor FHB, another Hungarian-owned bank on the Budapest stock exchange, would trade today. Surely, exchange officials already knew before Orbán delivered his speech in parliament this afternoon what the outcome would be.

From Orbán's speech it was clear that he was well aware of the expected reaction from "international forums." Negative. However, he doesn't seem to care. The banking system will not collapse. After all, behind the Hungarian-owned banks there is the guarantee of the Hungarian state while the foreign banks in the country are simply branches of large western banks. These foreign banks have already decreased their lending activity, so no great harm will befall Hungarian consumers as a result of this latest move of the government. If Hungary is the target of foreign interference or pressure, the Hungarian government will take up the challenge and answer in kind.

Orbán didn't have to wait long for the expected reaction. The Austrian foreign minister and the Austrian Central Bank reacted angrily to Orbán's speech. After all, Austrian banks do extensive business in Hungary. UniCredit Bank, the Erste Group, and Raiffeisen Bank International are among the leading lenders in the European Union's emerging countries. They have about 6 billion euros ($8.23 billion) worth of foreign-currency loans outstanding in Hungary. 

An Austrian official told Reuters that the European Commission is intervening. "Already over the weekend there have been several attempts to get an idea of what [Orbán] is planning to do exactly and to convince him to back down because it would have a major impact on banks and it is not in line with the legislation of the European Union," said the official. Michael Spindelegger, the Austrian foreign minister, said that Vienna could take the case to the European Court of Justice if Budapest did not change its course. The Austrian Press Agency quoted him as saying that "Hungary's proposal violates what we have built up in the European Union. Private contracts have to be respected." Apparently the Austrian finance minister also wrote a protest letter to Budapest: "We decisively reject the planned measures because they represent a break from legal assurances as never before seen in any country of the European Union."

So, it's no wonder that Orbán indicated in his speech that "there will be organizations questioning the legitimacy of the move." But, as Lázár said shortly after Orbán's speech, "it was time to take a stand and decide between the people and the banks. We chose the people." But not simply "the people." The "Hungarian people." Someone counted how many times these two words were uttered in a fairly short speech delivered by Orbán: 37. The intent is obvious: foreign speculators gain "extra profit" by exploiting the "Hungarian people." Although both János Lázár and Lajos Kósa emphasized that "nobody wants the banking system to default," the secretary general of the Hungarian Banking Association said that the "plan is unacceptable for the banking community because it presents serious financial macroeconomic and growth risks." 

According to some estimates the loss to the banking industry will be only €357 million because the number of Hungarian borrowers who can pay back their loans in one fell swoop is fairly low. However, as Kester Eddy of The Financial Times noted, it is less clear "to what extent borrowers will be able to take out additional forint loans from other banks to pay off their current mortgages at the preferential rates." If they could do this, it would be "a nice earner for OTP and FHB which have cheaper access to forint-based deposits."

Orbán's speech included a threat to those "responsible for the forex crisis." After all, he said, Romania and Austria, two neighboring countries, limited forex borrowing. It was only the MSZP-SZDSZ government that didn't. He and his government will make sure that the people responsible will pay for their irresponsibility that created an unbearable burden on the Hungarian people.

Since I'm sure that we will talk more about this speech, for the time being I will only summarize the other five points of the "Country Protection Plan." The first point was the fight and legislation against usury. The second was fixing the prices of essential services like gas, water, and electricity. Third, he mentioned a "stability package" that would involve changing existing legislation on taxation and social security. The two last points were lowering the sovereign debt, especially paying back the IMF loan in full, and employing hundreds and thousands of people next year in large public works projects.

Orbán's message was well summed up by Hírszerző's headline: " Bankers, usurers, exploiters, tremble!" 

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Member

“The currency losses incurred would have to be borne by the lending institutions.” Let me guess, Orbans’ wealthy buddies have some mortgages to repay? Does Orba truly believes that regular, every day Hungarians has the kind of income that they were able to put some savings aside beside paying down their mortgage? What a joke. Orban puked out the bunny from that hat again, and here is the HUngarian public have their mouth dropped for the generosity.

John T
Guest
“He and his government will make sure that the people responsible will pay for their irresponsibility that created an unbearable burden on the Hungarian people.” If you take this logic through to its conclusion, he’ll be banging up all of the people who took out the loans then. Sure the banks will have sold these loans with a positive spiel (and they no doubt will have seemed attractive at the time). But providing they clearly made the point that currencies fluctuate, then there has been no miselling. And the truth of the matter is that a large chunk of the people who took out these loans were living way above their means, buying houses, cars etc that they couldn’t afford, with no savings or assets to draw on if things went wrong. Orban’s line from his speech is very clear – its foreigners who are responsible for all of the current ills, aided by traitors in Hungary. Such a travesty of the truth. And bearing in mind he is now squeezing foreign companies in the energy and utility sector, its hardly going to encourage foreign investment in the future. But I think Orban won’t mind if the western companies leave,… Read more »
Kirsten
Guest

“Vienna could take the case to the European Court of Justice if Budapest did not change its course.”
That is a very good idea, and I think this could be easily lost for Fidesz. With all these policies I think Fidesz must be already considering leaving the EU (“liberation”), which is possible with the Lisbon Treaty.

Paul
Guest

Odd how the Chinese aren’t considered foreigners by Orbán.
I’m pretty sure if you asked the average Hungarian to choose between European ‘foreigners’ and Chinese ‘foreigners, they wouldn’t opt for the latter.

Ron
Guest

I wonder if this is a kind of nationalization through the banks, in this case the OTP and FHB.
I expect, as mentioned above, that not too many people will be able to afford to repaid the forex loans, unless they are able to get of forint denominated loan. And I bet you the conditions will not be favorable for the people, but only for the banks.
But I expect a lot of companies, which have forex loans will change to forint (if their turnover is more than 50%in forint). I expect that the bank (read OTP and FHB) will demand that the bank can nominate a Supervisory Board member. And I bet that this Supervisory Board member will be a Fidesz person.
Of course this will be kept very quiet.

Member

It is not really off subject. I just read it on Bloomberg.
“Hungary’s government is planning to repay 250 billion forint ($1.2 billion) in value-added tax to businesses this year without using budget reserves, the Economy Ministry said.
The government will have to refund the money after the European Union’s Court of Justice decided on July 28 that Hungary has “failed to fulfill its obligations” under the EU directive on VAT and ordered the Cabinet to pay the costs.
The government will consider selling part of its stake in refiner Mol Nyrt. to ensure that revenue is on target in 2012,”

Eva S. Balogh
Guest

Some1: “The government will consider selling part of its stake in refiner Mol Nyrt. to ensure that revenue is on target in 2012,”
Just to bring back reality. MOL today is at 14,425 Ft. The Hungarian state bought it at 23,500.

Paul
Guest

What exactly did the government do wrong with VAT then? And which government did it?

Jano
Guest

I’m sure others either has or will say how much and why the rest is nonsense, but as the devil’s advocate I have to say that I totally agree with the fight against usury. That’s actually one of the biggest problem of the Roma minorty and the poor in general.

volt-egyszer-egy-gorbanyev
Guest
volt-egyszer-egy-gorbanyev

Watching the US Open (tennis)
Common between Nadal and Orban: complete meltdown.
Will it be guardianship, bankruptcy???
Oh, Orban, an unusually conceited big crook.

Ron
Guest

Paul: What exactly did the government do wrong with VAT then? And which government did it?
It was introduced in first instance under the Gyula Horn government, but only had to do with delayed payment of the VAT. That is if you made a certain turnover and/or invested in fixed assets you could reclaim. So this was a bummer for starting companies mainly.
The VO government introduced that the invoices actually had to be paid before they could reclaim. Also they changed (made easier) for export companies to reclaim. Reason is that at that time there were a lot of VAT scams by companies, such as invoice with vat received, invoice not paid, reclaim VAT, once VAT received the owner collected the money and went abroad.
Under the Medgyessy government Hungary entered in June 2004 the EU. From that moment on Hungary was breaking the EU law and should have been corrected. That is companies can reclaim the VAT whether or not they actually paid the VAT.

Paul
Guest

Thanks Ron.
If my understanding is correct, then I feel some sympathy for the government. Their approach seems fairer and less open to fraud.
Not that I begin to understand the ins and outs of VAT!

Eva S. Balogh
Guest

Jano: “I totally agree with the fight against usury. That’s actually one of the biggest problem of the Roma minorty and the poor in general.”
Orbán wasn’t talking about this kind of usury but banks’ interest rates on some short-term loans.

Johnny Boy
Guest

“Orbán wasn’t talking about this kind of usury but banks’ interest rates on some short-term loans.”
No, he was clearly and explicitly talking about “usury crimes that hurt people in some of the poorest regions of the country”.
This obviously applies to Roma criminals who take other Roma’s allowances by force.

most-vagy-soha
Guest

the only politics, Orban knows if the brutish offensive.
forget moral, fairness, reason, compassion,and he will go down in history as another failed but rather rich actor.
who can explain why Hungary is so poor on good leaders?

Member

The best fight against usury is to provide human conditions, work and proper social support. Most people who relied on money borrowed, needed the money for food. THis is why “grocer usury” became the most common usury. (They provide bread and food through the month, and when the pay cheque comes in they collect the money tenfold). Putting usurers into jail will not solve the cause, so while Orban tries to look like a hero for his (ever) populist speech, we yet to hear about the social programs that will step in place instead to help the “people in some of the poorest regions of the country”.

Member

In my understanding the VAT is not something that Hungary would nit get back. THe VAT is collected, and should be refunded to certain businesses who paid the collected VAT to the government. SO, I am not sure how is this “shortchanges” the government in the big scope of things.

An
Guest

Sorry, this is going to be a little off-topic.
This is the story of Index, the popular online news portal, or how Fidesz is dismantling independent media (through gaining ownership, in this case)
This article is about the struggle of Index’s team and their owner, Zoltan Speder, a Fidesz-affiliated business man, which ended with the departure of key staff at Index.
http://www.kreativ.hu/media/cikk/mi_folyik_az_indexnel
(in Hungarian)

Johnny Boy
Guest

An: this article is about how the owner of Index changes things at Index.
Index is commercial media.
What is your problem with the owner changing things at his owned media company?

An
Guest

@Johnny Boy: Nothing. It is just a very interesting story. Of course Fidesz can buy up all Hungarian media and make it right wing, through ownership. Looks like they are working on it.

Johnny Boy
Guest

An: it’s about time!
Somehow the long-standing, overwhelming left wing bias in Hungarian media must be corrected.
There is still an enormous work to do.
(And if anyone would claim that Index was not left-winged, look where the journalists from Index are going: Origo, HVG. Same with the people fired from MTV, the all knock at ATV for job.)

An
Guest

@Johhny Boy: I wouldn’t have any problem with it if they were building a right wing media alongside with the existing, you say, left and liberal media. All voices should be heard. But the problem is that they are not building a right wing media but a Fidesz-run puppet media. And I am not sure they will stop before they silence ALL other voices in the mainstream media.

Johnny Boy
Guest

You automatically categorize all right wing media as Fidesz puppet media, so I’ll take both as one definition.

Rigó Jancsi
Guest

@JohnBoy: Right wing is generally seen as conservative, left wing as socialist. While Fidesz today may be conservative in many ways, especially regarding the KNDP people, dismantling banks and nationalization (e.g. pension fonds) is not really a trademark of the right wing, that’s rather socialist, don’t you think? An independend right wing media would critize moves like that. Fidesz-puppets don’t. That’s the difference, and tht’s why it’s not one definition.

Member

@JB “left wing bias in Hungarian media”
Left wing, right wing, middle wing. These pesky journalists still will publish pictures of the notes from Orban the 5th and Gyurcsany side-by-side. Freedom of speech Johnny, in yo face! Read Eva’s next …

Jano
Guest

“The best fight against usury is to provide human conditions, work and proper social support” – Doesn’t help much if the usurers take away all the social support from their victims immediately after they get it.

Member

Jano: “Doesn’t help much if the usurers take away all the social support from their victims immediately after they get it.” How about providing the support before they forced to use usurers to buy food? If they do not use the usurers, the usurers would not go after them. hmmm

Nick
Guest

I’m no fan of Orban, but this time I do hope he wins his fight against the banks. What were banks thinking of when they made loans to naive people in a foreign currency? They acted totally irresponsibly and have caused a huge amount of misery in Hungary. So they deserve all they get frankly.
By the way a freind of mine who took out one of these loans now gets paid in Swiss Franks as he works for a Swiss company. He told the bank he would repay his loans directly in Swiss Franks. The bank refused this sensible suggestion. Instead he has to convert his franks to forint at one rate, then repay his loan in Huf. His payments are then credited at another rate.

Member
Nick: “I’m no fan of Orban, but this time I do hope he wins his fight against the banks. What were banks thinking of when they made loans to naive people in a foreign currency? ” Nick, with all due respect , as I do feel sorry for all the people who are in this truly unfortunate situation (and I have relatives who are), but this is capitalism. HUngary is not a communist country no more. People welcomed capitalism, the access to more selection, to be able to travel freely, to buy cars without twenty years of wait, democracy (?), the possibility to purchase homes, better wages and so forth. With all the good some bad will come. THe transfer from “communism” to capitalism is painful but everyone has to learn to make educated decisions. WHen Orban tries to “punish the banks”, he could do more harm then good for Hungary as a whole, as well as for other countries. His solution is a communist solution and a populist one, not a forward thinking one. He in fact does not solve the problem but playing with other’s money (again). Those people who may put their investments (smartly) in banks will… Read more »
Member

@Nick “repay his loan in Huf. His payments are then credited at another rate”
LOL, sons of bitches. I’m guessing the explanation is that the contract says clearly that the repayment is expected in HUF.
Just a word about banks and ‘naive’ people. Hundreds of thousands of naive people? They knew the risk, they just underestimated it.
What I don’t understand why the ‘blanket’ bailout? Why not to differentiate by income and assets? Do you have BMW? Sell it!

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