The Crossroad of Principle

imagesOn September 5, Fidesz National Assembly caucus Chairman Antal Rogán announced that the party’s representatives would give banks in Hungary until November 1 to modify their foreign-currency-denominated loan contracts in favor of borrowers. Rogán said that if banks failed to meet the deadline, the Fidesz caucus would authorize the government to submit a law to the National Assembly stipulating unilateral modification of the fx-loan contracts to the detriment of the banks (source in Hungarian). Rogán said:

The Fidesz caucus holds banks responsible for the propagation of foreign-currency loans and the situation that has emerged surrounding them. We think that it is a defective product. They misled people at the time they introduced them, because they did not reveal the true risks, while they wrote the contracts in such a way as to transfer all of the risks connected to exchange-rate fluctuations and all burdens onto the debtors, that is, onto the family taking out the loan (source in Hungarian).

The impending modification of foreign-currency-denominated loans will entail the conversion of these loans into forints at an advantageous exchange-rate for borrowers (source in Hungarian), which Chairman-CEO Sándor Csányi of OTP Bank, the biggest bank in Hungary, estimates will cost banks in the country 950 billion forints, or 3.15 billion euros (source in Hungarian).

Rogán has been one of the Orbán administration’s most prominent voices on the issue of foreign-currency debt, particularly since becoming head of the Fidesz National Assembly caucus in June 2012 (see Orbán Government Measures to Reduce Household Foreign-Currency Debt).

Rogán knows what he’s talking about at both a theoretical and practical level: he earned a B.A. in economics from the Budapest University of Economic Sciences in 1995 and subsequently worked for a number of years at the Hungarian National Bank; and, according to his official 2012 financial declaration, he has 48 million forints (160,000 euros) in debt—30 million in either forints or foreign currency to banks and 18 million to a private individual (source in Hungarian), presumably money borrowed in order to take advantage of the government’s so-called “final-repayment plan” on foreign-currency-denominated mortgages in late 2011 and early 2012 (source in Hungarian).

This debt amounts to 28 months of the total monthly pay of 1.7 million forints (source in Hungarian) that Rogán earns as National Assembly representative and mayor of Budapest’s fifth district.  

Rogán is not the only member of the Orbán administration with debt to banks and private individuals: Fidesz National Assembly representative and Mayor of Debrecen (eastern Hungary, pop. 208,000) Lajos Kósa owes 21 million forints to banks and 23 million forints to private individuals (source in Hungarian); State Secretary in Charge of the Prime Ministry János Lázár owes 19 million to banks and 18.5 million forints to private individuals (source in Hungarian); and Minister of Public Administration and Justice Tibor Navracsics and National Economy Minister Mihály Varga each owe 9 million forints to banks (sources A and B in Hungarian).  

It would be cynical to believe that the Orbán administration is forcing banks to convert their foreign-currency-denominated loan stock into forints out of sheer self-interest.

It would be naive to believe that self-interest is not a factor in the administration’s decision to enact this measure.

More evidence to suggest that in the Orbán II era, government policy is where the crossroads of opportunity and principle meet.

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