Austria’s outcry at Hungary because its mortgage plans
Thursday, 15 September 2011 08:20
According to WirtschaftsBlatt, a Vienna based newspaper, Austrian finance minister Maria Fekter raised objection in a letter to her Hungarian counterparty regarding the Hungarian mortgage loan repayment plan. The mortgage repayment plan would allow for all the mortgage debtors to wind up their mortgages denominated in Swiss francs at a fixed exchange rate (rate of 180 forint to the franc while the current rate is over 230 HUF). This means the exchange rate loss would have to be carried by the lender banks. Maria Fekter said this action would immediately damage the Hungarian bank system and would financially destabilize the whole CEE region, and even the entire EU.
“We reject the planned action as it would harm the legal certainty in an unprecedented way in any EU country” – stated Fekter in her letter. This plan confronts with investors’ expectations about a democratic, capitalist country. The letter reminds György Matolcsy, Hungarian minister for national economy, of the Vienna Initiative, in which all foreign-owned banks committed themselves not to withdraw any capital from their subsidiaries, and confirmed that they would continue their lending businesses even in the times of economic hardship.
Austrian banks hold some 5bn EUR worth of foreign currency loans outstanding in their Hungarian branches. Erste Group, which is the second largest player on the Hungarian market, has 3 bn EUR of outstanding loans, Raiffeisen International has a portfolio of 1.6 bn EUR, while UniCredit’s Bank Austria has 765 million EUR. Erste’s and Raiffeisen’s share prices have been under strong pressure since last Friday, partly because of the Hungarian mortgage plans.
The Austrian Ministry of Foreign Affairs and chancellor Werner Faymann protested against the plans as well. Michael Spindelegger, vice-chancellor and foreign minister called on the European Commission to request an injunction at the European Court of Justice. The Austrian media hold the Hungarian mortgage issue under close watch. The mortgage loan repayment plan is often called as ‘forced change’ or ‘appropriation’, reminiscent of World War II times.