In September Fidesz parliamentary faction leader Antal Rogan called for a final solution to the foreign currency debt problem. Rogan’s speech prompted Prime Minister Viktor Orban to issue banks the following ultimatum: “solve the FX debt problem by November 1st or parliament will act.”
On Monday 4 November Rogan introduced legislation to broaden the scope of the exchange rate cap program introduced in 2011.
In 2008 households that had FX loans saw their monthly debt service double as a result of 20 per cent devaluation in the value of the forint against the Euro and the Swiss Franc. The exchange rate cap program was introduced in July 2011 as part of the current government’s response to this crisis
Households with payment arrears of less than 90 days on FX loans not exceeding HUF 20 million (USD 95,000) were given the option of making fixed monthly payments for a period of three to five years with the difference between what was owed and paid accumulating in an account. As the average monthly savings amounted to just HUF 1,000 or 2,000 (USD 5-10) only 5712 people signed up for the original program.
In April of 2012 a new exchange rate cap program was introduced with participants paying only principal and the state and the bank splitting the interest. By the end of August 2012 some 160,000 currency exchange cap accounts were opened representing HUF 10 billion in deferred principal repayment and some HUF 20 billion in interest relief.
On Monday Rogan proposed to extend this program to those owing more than HUF 20 million as well as to those who are more than 90 days behind in their payments. He also proposed to extend the moratorium on foreclosures and evictions until the end of April 2014. The latter comes as no surprise as parliamentary elections are likely to be held the first week of April.
Whatever the merits of Rogan’s proposal, it is bound to disappoint those who were hoping parliament would pass legislation forcing banks to convert FX loans to regular forint loans and/or to write off part of the principal owed. While Rogan’s proposal will no doubt bring relief to some it falls far short of solving the foreign currency based debt problem once and for all.
Referenced in this article:
“Árfolyamgát-épités”, HVG, 2 November 2013 (no. 44), pp. 6-7