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!"