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Hungarian report Hungarian report
by Euro Reporter
2014-12-15 12:28:07
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Hungary cannot bank on state ownership

The long saga of the Hungarian government’s battle with the country’s banks is entering its final act — and may end in a less bloody denouement for the lenders than earlier scenes seemed to portend. But that does not mean the outcome will be optimal for the country. Since coming to power in 2010, Premier Viktor Orban’s government has waged a campaign against banks that advanced billions of dollars of loans in foreign currencies, before the financial crisis. Back then, consumers flocked to borrow in euros or Swiss francs, as interest rates were lower than for loans in forints. But the Hungarian currency’s dive after the crisis caused debt servicing costs in forints to grow quickly, and bad loans to spiral higher — squeezing household spending. Mr Orban’s government says these loans were in effect mis-sold; banks say they followed the rules. But with foreign groups such as Austria’s Erste and Raiffeisen, Italy’s UniCredit and Intesa Sanpaolo, and Belgium’s KBC dominating Hungary’s banking sector, the premier seized on the controversy as a chance to put some banking assets back in Hungarian hands.

His government had been preparing to get the banks to convert the loans back into forints at less than favourable rates — causing banks to fear they would be made to shoulder heavy losses, and forced to merge or leave the market. They had reason to be nervous: the Fidesz party government had already clobbered them with a hefty banking levy and a financial transaction tax. Then in June, they were ordered to repay €3bn to borrowers for what the government — supported by a Supreme Court ruling — regarded as unfair overcharges on forex loans. In the event, the government last month agreed with banks that their forex loans would be converted back into forints next year at market rates, not below-market rates as had been feared. Hungary’s central bank agreed to provide up to €9bn in liquidity — more than enough to meet banks’ net requirements to hedge against the risk in making the conversion — to avoid any pressure on the forint in the currency markets. Last week, the government found another way to push Hungarian ownership of the banking sector above 50 per cent: it signed a preliminary deal to buy Budapest Bank, Hungary’s eighth largest by assets, from GE Capital for an undisclosed price. A few months earlier, it had bought MKB Bank, the number-five lender by assets, from Germany’s Bayerische Landesbank.

So, job done? Not necessarily. Mr Orban recently raised his target for Hungarian ownership of the sector to 60 per cent, while the country’s development minister has talked of 70 per cent. However, foreign bank ownership has been positive for several ex-communist countries, including Hungary’s near neighbours Poland and the Czech Republic. Since they did not have such big problems with forex loans, this suggests Hungary’s problem was caused in large part by regulatory failings. Moreover, Tim Ash, emerging markets strategist at Standard Bank, says: “The experience of countries which have had large or dominant domestically owned banking sectors is not very encouraging.” Take Slovenia, which left its biggest banks in state hands. That led to crony relationships with borrowers, some also state-owned, and a huge post-crisis bad loan problem that nearly required an EU bailout. In Ireland, where the banks were not state-owned but largely in Irish hands, a multibillion-euro EU bailout was needed — and the Irish central bank governor has talked of a need to boost foreign ownership to increase competition. Other voices are sounding warnings, too. Sir Suma Chakrabarti, president of the European Bank for Reconstruction and Development, said in a speech last month that some rebalancing of bank ownership in eastern Europe might be healthy, but the process should be market-based. “We at the EBRD don’t believe in targets for national ownership in any sector,” he added, without specifically mentioning Hungary. Such advice may be well-founded and well-intentioned. Sadly, Hungary under Mr Orban seems more interested in pursuing economic “sovereignty” for its own sake than finding models that offer the best chance of a vibrant, growing economy.

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Women struggle to be heard in 'macho' Hungary

They were few in number given the cold and too chilly to wear the skimpy outfits and fishnet tights typical of "SlutWalk" demonstrations. But there was no doubt the marchers in "macho" Hungary were boiling with rage. Around 200 protesters -- mostly women -- turned out to demonstrate against a new police safety video that campaigners say puts the blame for rape on the victim -- an allegation rejected by the right-wing government. The short film shows a trio of young women dressed up to the nines drinking heavily during a night out on the town, knocking back the shots and hitting the dance floor. One later ends up the victim of a sexual attack. "You can do something about it, you can do something against it!" is the clip's advice. “The video tells you that it's your fault, when the research shows that in 70 percent of rape cases the attacker is someone the victim already knows," railed Anna Gombos, a 31-year-old accountant who helped organise the march for SlutWalk, a global group against victim-blaming. "Committing rape against a prostitute is just as much of a crime as against a nun," Anna Rez, a 29-year-old philosopher, told AFP at the protest.

According to campaigners, only one in 10 rapes is reported to the authorities in this central European country of 10 million. The reluctance, they say, is due to a police tendency to blame women for the crime. Critics say this is symptomatic of what they call a rise in machismo under Prime Minister Viktor Orban, a father-of-five populist who upholds "Christian values”. Orban has also been accused of centralising power, stifling the opposition and curbing the independence of the judiciary and media since he came to power in 2010. The premier, whose country is in the European Union, has no women in his cabinet. And women deputies account for only 10 percent of the 199-seat lower house of parliament, placing Hungary near the bottom among states in the worldwide Inter-Parliamentary Union -- and the worst for a European country. "You cannot call this a democracy, when half the population has no representation," said Krisztina Debreceni, a 26-year-old financial administrator clutching a "Macho parliament, not democracy" sign at the protest. Experts say that in the 25 years of rapid change since communism fell, gender issues have been far from the top of the "to-do" list. Quotas might help, as they have in other former Soviet bloc countries, they contend.

"You cannot say that Hungary is more conservative than Slovakia, or Poland is less macho. The lack of quota is what makes the difference," Andrea Peto from the Central European University told AFP. But government spokesman Zoltan Kovacs debunks quotas as a bad idea. He also disputes any political discrimination against Hungarian women, saying several state secretaries are female. He cited government policies designed to help women, such as extended maternity leave, more part-time jobs and increased state benefits that reward women for staying at home. "From a demographics perspective there is a need to have more babies," Kovacs told AFP. "We focus on quality and competence. Don't let someone become a deputy because she is a woman, but because she does a good job," the spokesman said.

But there are some positive signs. Some in the business community are taking steps, including an initiative called "We are open!" that has grown to include 800 big and small firms since it was founded in 2013. Last week, the group urged members and other companies to formally pledge to promote gender equality at work, notably boosting the number of women managers and job-sharing possibilities. "Research shows that half of people wouldn't want to work with women," Edina Heal, head of Google Hungary and a "We are open!" founder, told AFP. But it also shows that companies are more successful if they have more women," she said. Organisers hope the pledges will yield tangible results within a year. "If people realise this is a problem, then they can do something about it," Heal said.

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‘National independence under attack’: Hungary’s PM answers McCain's remarks

Hungary’s national sovereignty had come under US attack said the country’s Prime Minister Viktor Orban after Senator John McCain earlier criticized Budapest’s relations with Moscow and called the top official a “neo-fascist dictator.” "Hungary's national independence is under attack here," said Orban speaking on state Kossuth Radio on Friday. The prime minister added that McCain’s statements were “extreme manifestations” which only “reflect on the person who said them”.  McCain’s comments on Tuesday came as a response to President Barack Obama’s appointment of Hollywood producer Colleen Bell as the new US ambassador to Budapest. During a highly charged speech at the US Senate, McCain said that he is “not against political appointees... I understand how the game is played, but ... [Hungary] ... is on the verge of ceding its sovereignty to a neo-fascist dictator getting in bed with Vladimir Putin, and we're going to send the producer of 'The Bold and The Beautiful' as the ambassador."

In turn Orban said that “the country’s independence in terms of energy, finances and trade relations is unappealing to those who profited from Hungary’s dependence prior to 2010.″ He added that the “the file on the South Stream gas pipeline is now closed” but Hungary’s interest has remained “to have a gas pipeline that arrives in Hungary avoiding Ukraine”. In the interview he pointed out that he “would not be a viceroy in Hungary commissioned by some foreign state”.

Washington has been exerting heavy pressure on Hungary over the country’s decision to support South Stream gas pipeline and “fearing Moscow’s rapprochement with Budapest,” admitted Orban last month. Meanwhile, relations between Russia and Hungary were “entangled in geopolitical and military and security policy issues” he said as cited by AFP. The deal that would see Russia’s Rosatom expand Hungary’s nuclear power has also come under criticism from the US, the PM added. Under the €10 billion deal between the two countries, Rosatom will build a 2,000 megawatt addition to Hungary's state-owned nuclear power plant MVM Paksi Atomeromu.  Hungary is highly dependent on Russia’s energy and Moscow remains Budapest’s largest trade partner outside of the EU - in 2013 exports were worth $3.4 billion. Nevertheless Orban has said that Hungary seeks to lower dependence on external energy resources and the expansion of the nuclear plant was the “only possible means” to do it. “We don’t want to get close to anyone, and we don’t intend to move away from anybody,” Orban said.

 


       
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