Hedge Funds Are Betting Against Hungary
French and Belgian bank stocks have crashed and the bond yields of Greece, Italy and Portugal may be peaking. Now hedge funds and bond vigilantes have begun to zero in on Hungary as the fashionable European country to bet against. One of the first countries to get bailed out by the International Monetary Fund in the early days of the financial crisis, Hungary has undergone a severe retrenchment since then with banks, consumers and the government cutting back drastically. Now, after a brief export-driven growth spurt, Hungary, like the rest of Europe, could well be headed for a second recession. As with Greece, Spain and Italy, the Hungarian government and its large banks have been reliant on foreign investors for their borrowing needs and, as a result, the country’s foreign currency debt burden of 110 percent of gross domestic product is one of the highest in the world.
http://dealbook.nytimes.com/2011/10/07/hedge-funds-next-target-hungary/
Hungary's new path is the hidden danger to Europe
Viktor Orbán, Hungary's prime minister, triumphantly declared recently that the country was firmly on a different path to Greece. With a package of fiscal reforms announced in March, Hungary's outlook has improved and the economic fate of the country remains squarely in its own hands, but a much more troubling shift is under way.
Under the guise of economic reform, Mr Orbán has veered from an ancient Greek path, one that underpins the entire European Union - that of democracy. The Fidesz government has leveraged its ability to warp the constitution, cementing institutional and democratic rollbacks into the rule of law. (…) Mr Orbán's government has fashioned a fiscal council that now has three members, all of whom are Fidesz loyalists or will soon be appointed by the party. And while the council's operating budget has been slashed by more than 98 per cent, its political authority has ballooned. Worse, the council has the ability to dissolve parliament - a death stroke to any future opposition government.(…) At the EU's inception, member countries drafted the Copenhagen criteria - three non-negotiable tests that a nation must pass in its application for membership. To join the EU, a country needs a functioning, free market economy. It needs to adhere to the political and economic aims of the union. It also requires institutions that guarantee democracy and civil liberties. This is where Hungary increasingly falls short. Alarmingly, there is no institutional or legal recourse that the EU can fall back on to enforce the rules. Hungary is the first example of a member country that has not just dragged its feet on the path to democracy - it has back-pedalled.
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Impact from Hungary set to be "visible” but under control
UniCredit unit Bank Austria sees limited parallels with rival Erste Group Bank , which warned on profit this week after taking big writedowns in Hungary and Romania, its chief financial officer said. Erste, the region's second-biggest lender, said on Monday it could lose up to 800 million euros ($1.1 billion) this year and skip its annual dividend after big writedowns in Hungary and Romania and taking hits on its sovereign debt holdings.
"The Hungarian situation which was the other big topic is something that we already disclosed quite recently what our exposure is, which -- by luck rather than anything else -- is a bit more moderate than others so we expect the impact to be visible but very much under control," Giordano said. Hungary is forcing banks to take losses on foreign-currency loans to consumers who can now repay at below-market rates. Erste faces a 500 million euro loss in Hungary this year and plans to inject up to 600 million euros into its unit there.
http://www.reuters.com/article/2011/10/12/bankaustria-idUSL5E7LC1PF20111012
Hungary’s Leader Warns of Lehman Moment in Europe
A Lehman-style crisis will likely hit Europe in the autumn due to a toxic combination of economic shocks, Hungary’s Prime Minister Viktor Orbán said Tuesday in a speech in which he warned of severe headwinds facing his country. “There is a serious danger that the 2008 October U.S. financial crisis will be repeated in the euro zone,” Mr. Orbán said. “The euro zone is under serious pressure from two sides. On the one hand, it’s under pressure due to an increasing public debt; on the other hand, there are serious attacks against the European banking system. “Financing across Europe is getting more and more expensive; it’s now not only the Greek, the Irish, Portuguese and we [who] pay a lot, but also Italy and Belgium and France too.” Mr. Orbán said Greece was unable to repay its debt, but other leaders weren’t as “brutally outspoken” in admitting as much.
http://blogs.wsj.com/emergingeurope/2011/10/11/hungarys-leader-warns-of-lehman-moment-in-europe/?KEYWORDS=Hungary
Hungary: the cost of Viktor Orbán
With the forint touching Ft300 to the euro on Wednesday for the second day running, Hungarians can see the price they must pay for the government’s recent move to allow mortgage borrowers to offload some of their foreign exchange losses on to their banks. While the eurozone crisis is partly responsible for the HUF’s travails, it’s not the whole story. The forint is down 9 per cent in a month, compared to a 5 per cent drop in the Polish zloty and 2 per cent in the Czech crown. And it may have further to fall. To Prime Minister Viktor Orbán it must have seemed a clever move: let Hungarians pay off their foreign currency loans at a discount rate, and let the greedy banks take the hit.
http://blogs.ft.com/beyond-brics/2011/10/05/hungary-the-cost-of-viktor-orban/#axzz1aYqTis6F