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A right-wing take on FX mortgages

November 15th, 2013

A conservative economist contends that forex mortgages endanger European financial stability and calls for EU action to ease the burden on debtors.

Earlier in November, Fidesz floor leader Antal Rogán put forward a proposal to help Hungarian families indebted in foreign currencies (see BudaPost November 6). Since then,  PM Orbán has called on the Supreme Court to pronounce a ruling ensuring uniformity on issues related to foreign mortgages in order to help the courts (many debtors have taken the banks to court for either misleading them or for changing the contract without their consent. Some judges have ruled in favour, others against). Finance Minister Mihály Varga added that such a decision by the Supreme Court could also help the government to draft a comprehensive and legally coherent solution on FX mortgages. On Tuesday, the Supreme Court announced that it will issue a general statement, but that it is not in a position to offer guidelines applicable to all FX related court cases (see BudaPost July 9).

The announced extension of the fixed exchange rate scheme to all debtors and the moratorium on evictions for the winter is only a temporary help for Hungarian families indebted in foreign currencies, Károly Lóránt writes in Magyar Nemzet. The conservative economist proposes that forex mortgages be considered as speculative transactions in which all potential losses are assumed by the debtor rather than the creditor. Lóránt points out that the Hungarian government alone cannot resolve the situation by converting FX debt to Forint loans, since such a transaction would significantly reduce the reserves of the National Bank or increase public debt. The problem, however, is not a national one, Lóránt adds, noting that several other countries throughout East and Southern Europe suffer from the same issue, and thus “the problem of forex mortgages is a European problem”. As the mass insolvency of debtors would undermine the financial stability of the whole EU, Lóránt calls for an EU-level solution. He reminds readers that in 2011, MSZP MEP Edit Herczog  addressed the president of the European Central Bank and asked how the EU wants to resolve the situation of the FX loans, but no ECB guidelines were forthcoming. Lóránt believes that all this means that “Hungarian debtors have been neglected by the EU.”  He speculates that one possible solution would be to convert loans denominated in currencies to Forint credit at a favorable rate. Such a conversion, however, should not be done by individual governments but rather by the EU, Lóránt concludes.

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