Abstract
In Hungary, the special features of the crisis to be solved run parallel: deep deleveraging, foreign exchange loan crisis (housing crisis), and recession. In this chapter, the joint efforts of the Central Bank and the Bajnai Government to stabilize the country are accounted for. Hungary regained its momentum. The economy was put back on a sustainable growth path with a moderate budget deficit and declining internal and external debt. Unemployment was diminishing, export was strong, contributing to a positive balance of payments. Though the exchange rate was 10% weaker than before the crisis, the nonperforming ratio of foreign exchange denominated mortgage loans was still much below 10%.
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Notes
- 1.
The debate is summarized well: “Estonia president has tweet for ‘smug’ Paul Krugman”; Reuters, June 7, 2012. Available via https://www.reuters.com/article/us-estonia-krugman/estonia-president-has-tweet-for-smug-paul-krugman-idUSBRE8560OH20120607
- 2.
The music of the opera was composed by Eugene Birman, and the libretto written by Scott Diel. The vocal star Iris Oja sings the words of both Paul Krugman and Toomas Hendrik Ilves. The opera is available via https://www.youtube.com/watch?v=t2paj1mrCQI
- 3.
Details of the Manifesto are available in English: Hungarian Spectrum (2009).
- 4.
According to the 2019 September decision of the Governing Council, banks’ balances kept on the dedicated reserve account (not in O/N deposits) are not punished by negative rates.
- 5.
The duration of the loan expresses its sensitivity to the interest rate. For example, in the case of a loan, the duration of which was 15 years (that was the average duration of mortgage loans), a 100 basis point increase in the interest rate would mean a somewhat less than 15% increase in the installment of the loan (Berlinger 2019). If the FX loans had been converted to forint, this would have meant a 400–500 basis point increase in interest rates and a consequent 65–70% immediate increase in the installment.
- 6.
It was the Várhegyi Committee, named after the leader of the team Éva Várhegyi, the outstanding Hungarian economist. The Committee’s Report which revealed several anomalies and bottlenecks in Hungarian retail banking was sent to every MP, but the Hungarian Parliament did not put the Committee’s proposals on the agenda (Várhegyi 2006).
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Király, J. (2020). Recovery from the Deep Recession (March 2009–April 2010). In: Hungary and Other Emerging EU Countries in the Financial Storm. Financial and Monetary Policy Studies, vol 49. Springer, Cham. https://doi.org/10.1007/978-3-030-49544-2_8
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