Former Prime Minister Ferenc Gyurcsány will not use the option offered to Hungary’s troubled borrowers to pay off their mortgages in a lump sum at a preferential rate, he said in a statement sent to MTI on Tuesday. In the document, the former PM called the scheme, initiated by the ruling Fidesz party and passed into law by parliament on Monday, “discriminative” and “deceitful”, and said that the programme would benefit wealthier borrowers who had sufficient reserves to pay off their loans and that it would further widen the gap with poor borrowers facing foreclosure.
The new law will have detrimental ramifications, making it more difficult for companies to take out loans and weakening the economy as a whole, the document said. “This populist move will further weaken Hungary’s already poor reputation and diplomatic ties,” said former PM Gyurcsány in the statement, adding that Hungary might face a series of international lawsuits and resulting payment obligations in the hundred billion forint-range.
According to Gyurcsány’s asset declaration published in January, the former head of government and his wife owe 62.2 million forints (EUR 214,000) in a loan they had taken out to buy their house in the provinces.
Under the new law, troubled borrowers can make a full repayment at 180 forints to the Swiss franc, 250 forints to the euro and 2 forints to the Japanese yen, unless the rate of the forint was higher at the time of taking out the loan. The plan drew an angry response from Austria, whose UniCredit Bank Austria, Erste Group Bank and Raiffeisen Bank International have roughly 6 billion euros  worth of foreign-currency loans outstanding in Hungary. Standard & Poor's, which rates Hungary's debt one notch above junk, is keeping a close eye on the forex plan, an S&P banking analyst said on Monday.
Before the vote, the Socialist Party had suggested in an amendment proposal that members of parliament and state dignitaries should be excluded from the preferential option, but this was turned down by the governing majority. The Socialist group abstained from the vote.
Source: Reuters, MTI