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Banks forced to cooperate

December 17th, 2011

The government’s tough and uncompromising determination has successfully convinced the banks that they have to do more to help indebted Hungarians, struggling to service their loans in foreign currencies, a pro-government commentator believes.

Banks would never have agreed to make a significant sacrifice without the government’s pressure on them in the past year, comments Tamás Nánási in Magyar Nemzet, in a report on the agreement between the government and the Hungarian Banking Association.

György Matolcsy, Minister of Economy outlined on Thursday the deal the government has reached with the Hungarian Banking Association. According to the scheme, Hungarian debtors with loans denominated in foreign currencies will service their debt in the next five years at favourable fixed rates (180 Forints to the Swiss Franc, 250 Forints to the Euro). The banks agreed to cover two-thirds of the interest on the difference between the current and the reduced instalments. By doing so, they will ease the burden of  debtors by 600 billion Forints. The government will provide 300 billion Forints to cover the remaining one-third of the interest. In addition, the banks also agreed to write off 25 percent of the debt of those who until 2011 September had failed to service their loans.

Nánási interprets the agreement as a clear indication of the success of the Orbán government’s strategy. While the previous Socialist government and the National Bank did nothing to help indebted Hungarians who could hardly service their loans in foreign currencies, Orbán has successfully cleared up the mess of his predecessors, which could  easily have created a deep social crisis.

Nánási believes that the key to Orbán’s success was that he played tough with the banks, and was not afraid to dictate harsh conditions (see BudaPost September 10). Though some analysts feared that banks would retaliate by leaving the country, they are still present in the Hungarian market. It seems that Orbán has managed to convince them that it is also in their best interest to do whatever they can in order to help the debtors, and that this is the best way to secure their investments, Nánási concludes.

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