Hungary Close To Sovereign Default - Eastern Europe About To Implode?

[interestrateripoff]

http://www.telegraph.co.uk/finance/markets/7804494/Global-markets-tumble-on-US-jobs-and-Hungary-crisis-fears.html

In Hungary the Prime Minister's official spokesman said the economy was in a "grave situation" and said a default on its debt was possible. The comments ignited fears that a debt crisis could be brewing in Eastern Europe.

"In Hungary, the previous [socialist] government falsified data," said the spokesman. "In Greece, they also falsified data. In Greece the moment of truth has arrived. Hungary is still before that."

The Hungarian currency, the forint, fell about 2pc against the euro following the comments. "More news on specifics is expected this weekend, and the news is not likely to be pretty, as the previous administration was obviously up to no good, and as the PM will likely try to firmly pin as much of the situation on his predecessors as possible," said John J Hardy, currency consultant at Saxo Bank. He said the situation was "reminiscent of Greece", but different, partly because Hungary can devalue its currency.

So Hungary can devalue which is great news providing of course it doesn't have large debt say denominated in Euro's or another foreign currency.....

Still it's all contained we've got the best of the best working on it.

Has the giant squid helped Hungary?

[interestrateripoff]

Euro Slides Below $1.20 on Concerns Over Hungary, Franc Hits Record High vs Euro -

Risk aversion came back in a strong way to end the week strengthening the Dollar and Yen against all of their major counterparts. Fears over the Euro debt crisis expanded, to Hungary with a Hungarian government spokesperson saying "it's no exaggeration to talk about default" by the nation. In 2008, Hungary need a $24 billion international bailout to avert default.

A default would mean creditors holding the Hungarian sovereign debt bonds would not get their full investment back. Many of these creditors are banks in Europe and a default would hurt their balance sheets. This is similar to what we saw with Greece except Hungary isn't part of the Euro-zone. Initially the markets will sell the Hungarian currency - the Forint - and banks will try and minimize their exposure to the country's debt.

The EUR/CHF pair roared to a record low as the Euro was sold off and investors poured into the safety of the Switzerland banking system. Another reason for the Franc gains was that at the end of 2009, the Swiss franc made up about 62% of total outstanding Hungarian banking sector loans, compared with about 31% for the forint. That has caused a massive forced covering of forint exposure, which has driven the Franc higher.

Still it's contained and European banks are in a great position...

[interestrateripoff]

http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=40866

While devaluation could, combined with other measures to restrain demand and wages, help the peggers regain some lost competitiveness, their large foreign-currency-denominated debt deters them from straying from the euro. Loans denominated in foreign currency amount to nearly 90 percent of total lending in Latvia, 85 percent in Estonia, and 65 percent in Lithuania. Even among the floaters, the scope for exchange rate flexibility is limited by the degree of foreign-currency borrowing. Hungary and Romania, for example, have large euro-denominated debts to Austrian banks.

Considering it was an Austrian bank that set the 2nd leg off during last depression is history about to repeat? Still it's contained.

[interestrateripoff]

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3260052/Europe-on-the-brink-of-currency-crisis-meltdown.html

The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.

They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.

Europe has already had its first foretaste of what this may mean. Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis”, this time unfolding in Europe rather than America.

Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.

AEP from 2008

[interestrateripoff]

http://fistfulofeuros.net/afoe/economics-and-demography/austrian-banks-the-most-exposed-to-eastern-europe-forex-lending/

January 16, 2009

Economics and demography

Austrian Banks The Most Exposed To Eastern Europe Forex Lending

by Edward Hugh

Bloomberg are reporting (via Der Standard) that Austrian banks have the biggest exposure to Forex lending in Eastern Europe. This is hardly breaking news, and I have had working notes for a post on this lying around for months (here, please excuse the mess, I will append some of this to this post if time permits at the weekend). The issue is simply finding the time to do everything. Basically I would say that all this business about not devaluing currencies (and hence imposing wage cuts) in Eastern Europe is to do with this issue (also highly exposed are the Swedish banks, and Italy’s Unicredit). Der Standard cite an as yet unpublished International Monetary Fund report to the effect that Austrian banks have loans outstanding in Eastern Europe equal to about 70 percent of the country’s gross domestic product, a higher percentage exposure than any other country.

If you are in the business of liking scary quotes, you could try this one (which comes from the king of scary quotes and dreaded anthropologist’s grandson - Ambrose Evans Pritchard - but that doesn’t make it any less scary:

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon. Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

The more sobre version would be this one from Paul Krugman that I keep using:

“There is a burgeoning economic crisis in the European periphery,” Krugman said on the ABC network Dec. 14. “The money has dried up. That’s the new center, the center of this crisis has moved from the U.S. housing market to the European periphery.”

Either way, the economic meltdown in parts of Europe’s Eastern and Southern periphery is now in the process of working its way back up the pipes and to the core, to Germany in terms of the collapse in GDP growth and exports, and to Austria in terms of stress on the banking system.

Germany’s economy may have contracted the most in more than two decades in the final quarter of 2008 as the global financial crisis hurt exports and damped spending, the Federal Statistics Office said. The economy probably shrank between 1.5 percent and 2 percent in the fourth quarter from the third, Norbert Raeth, an economist at the statistics office, said at a press conference in Frankfurt today. A 2 percent drop would be the worst quarterly contraction since German reunification in 1990 and the most for West Germany since the first quarter of 1987.

Bloomberg

And while I am here, Izabella Kaminska has a timely piece on forex lending exposure in Poland over FT Alphaville. The situation in Poland is important, since the country is widely regarded as the strongest and least vulnerable of the EU10 economies (see Christoph Rosenberg, for example). So basically, I would say that rather than being just one more “meltdown” in Eastern Europe, if Poland crumbles this will be the last domino to fall, bringing all the rest down in its train - craaaash (I wrote a longish piece on Poland back in October, here). The Leu and the Forint will need to correct to levels which bring back export competitiveness, and behind them will come the pegs in the Baltics and Bulgaria, bring with them all the west european banks who funded the lending.

I'm sure there's nothing to be worried about....

[interestrateripoff]

http://www.globalresearch.ca/index.php?context=va&aid=18545

by Prof. Michael Hudson

Global Research, April 9, 2010

Government debt in Greece is just the first in a series of European debt bombs that are set to explode. The mortgage debts in post-Soviet economies and Iceland are more explosive. Although these countries are not in the Eurozone, most of their debts are denominated in euros. Some 87% of Latvia’s debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. So their government borrowing by non-euro members has been to support exchange rates to pay these private-sector debts to foreign banks, not to finance a domestic budget deficit as in Greece.

All these debts are unpayably high because most of these countries are running deepening trade deficits and are sinking into depression. Now that real estate prices are plunging, trade deficits are no longer financed by an inflow of foreign-currency mortgage lending and property buyouts. There is no visible means of support to stabilize currencies (e.g., healthy economies). For the past year these countries have supported their exchange rates by borrowing from the EU and IMF. The terms of this borrowing are politically unsustainable: sharp public sector budget cuts, higher tax rates on already over-taxed labor, and austerity plans that shrink economies and drive more labor to emigrate.

Bankers in Sweden and Austria, Germany and Britain are about to discover that extending credit to nations that can’t (or won’t) pay may be their problem, not that of their debtors. No one wants to accept the fact that debts that can’t be paid, won’t be. Someone must bear the cost as debts go into default or are written down, to be paid in sharply depreciated currencies, but many legal experts find debt agreements calling for repayment in euros unenforceable. Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere “haircuts.”

There is no point in devaluing, unless “to excess” – that is, by enough to actually change trade and production patterns. That is why Franklin Roosevelt devalued the US dollar by 75% against gold in 1933, raising its official price from $20 to $35 an ounce. And to avoid raising the U.S. debt burden proportionally, he annulled the “gold clause” indexing payment of bank loans to the price of gold. This is where the political fight will occur today – over the payment of debt in currencies that are devalued.

Another byproduct of the Great Depression in the United States and Canada was to free mortgage debtors from personal liability, making it possible to recover from bankruptcy. Foreclosing banks can take possession of collateral real estate, but do not have any further claim on the mortgagees. This practice – grounded in common law – shows how North America has freed itself from the legacy of feudal-style creditor power and the debtors’ prisons that made earlier European debt laws so harsh.

The question is, who will bear the loss? Keeping debts denominated in euros would bankrupt much local business and real estate. Conversely, re-denominating these debts in local depreciated currency will wipe out the capital of many euro-based banks. But these banks are foreigners, after all – and in the end, governments must represent their own home electorates. Foreign banks do not vote.

Foreign dollar holders have lost 29/30th of the gold value of their holdings since the United States stopped settling its balance-of-payments deficits in gold in 1971. They now receive less than a thirtieth of this, as the price has risen to $1,100 an ounce. If the world can take that, why shouldn’t it take the coming European debt write-downs in stride?

There is growing recognition that the post-Soviet economies were structured from the start to benefit foreign interests, not local economies. For example, Latvian labor is taxed at over 50% (labor, employer, and social tax) – so high as to make it noncompetitive, while property taxes are less than 1%, providing an incentive toward rampant speculation. This skewed tax philosophy made the “Baltic Tigers” and central Europe prime loan markets for Swedish and Austrian banks, but their labor could not find well-paying work at home. Nothing like this (or their abysmal workplace protection laws) is found in the Western European, North American or Asian economies.

It seems unreasonable and unrealistic to expect that large sectors of the New European population can be made subject to salary garnishment throughout their lives, reducing them to a lifetime of debt peonage. Future relations between Old and New Europe will depend on the Eurozone’s willingness to re-design the post-Soviet economies on more solvent lines – with more productive credit and a less rentier-biased tax system that promotes employment rather than asset-price inflation that drives labor to emigrate. In addition to currency realignments to deal with unaffordable debt, the indicated line of solution for these countries is a major shift of taxes off labor onto land, making them more like Western Europe. There is no just alternative. Otherwise, the age-old conflict-of-interest between creditors and debtors threatens to split Europe into opposing political camps, with Iceland the dress rehearsal.

Until this debt problem is resolved – and the only way to resolve it is to negotiate a debt write-off – European expansion (the absorption of New Europe into Old Europe) seems over. But the transition to this future solution will not be easy. Financial interests still wield dominant power over the EU, and will resist the inevitable. Gordon Brown already has shown his colors in his threats against Iceland to illegally and improperly use the IMF as a collection agent for debts that Iceland doesn’t legally owe, and to blackball Icelandic membership in the EU.

Confronted with Mr. Brown’s bullying – and that of Britain’s Dutch poodles – 97% of Icelandic voters opposed the debt settlement that Britain and the Netherlands sought to force down the throat of Allthing members last month. This high a vote has not been seen in the world since the old Stalinist era.

It is only a foretaste. The choice that Europe ends up making will likely drive millions into the streets. Political and economic alliances will shift, currencies will crumble and governments will fall. The European Union and indeed, the international financial system will change in ways yet to be seen. This will be especially the case if nations adopt the Argentina model and refuse to make payment until steep discounts are made.

Paying in euros – for real estate and personal income streams in negative equity, where the debts exceed the current value of income flows available to pay mortgages or for that matter, personal debts – is impossible for nations that hope to maintain a modicum of civil society. “Austerity plans” IMF and EU style is an antiseptic, technocratic jargon for life-shortening and killing impact of gutting income, social services, spending on health on hospitals, education and other basic needs, and selling off public infrastructure for buyers to turn nations into “tollbooth economies” where everyone is obliged to pay access prices for roads, education, medical care and other costs of living and doing business that have long been subsidized by progressive taxation in North America and Western Europe.

The battle lines are being drawn regarding how private and public debts are to be repaid. For nations that balk at repayment in euros, the creditor nations have their “muscle” waiting in the wings: the credit rating agencies. At the first sign a nation is balking in paying in hard currency, or even at the first hint of it questioning a foreign debt as improper, the agencies will move in to reduce a nation’s credit rating. This will increase the cost of borrowing and threaten to paralyze the economy by starving it for credit.

The most recent shot was fired on April 6 when Moody’s downgraded Iceland’s debt from stable to negative. “Moody’s acknowledged that Iceland might still achieve a better deal in renewed negotiations, but said the current uncertainty was hurting the country’s short-term economic and financial prospects.”[1]

The fight is on. It should be an interesting decade.

More fun looming. A perfect storm brewing?

[interestrateripoff]

http://globaleconomicanalysis.blogspot.com/2010/06/dollar-soars-euro-euroswiss-forint-hit.html

The situation in Europe is taking a turn for the worse as the Prime Minister of Hungary says Hungarian economy is in a "very grave situation and talk of a default is not an exaggeration".

Please consider Hungary’s Forint Weakens to 12-Month Low; Bonds, Stocks Plunge

Hungary’s forint weakened to the lowest level in a year, the nation’s stocks plunged and government bond yields had the biggest increase since November 2008 after a spokesman for Prime Minister Viktor Orban said the economy is in a “very grave situation.”

The forint depreciated 2.1 percent to 287.73 per euro at 2:28 p.m. in Budapest, the weakest level since June 2009. The extra yield investors demand to own Hungary’s debt over U.S. Treasuries rose 93 basis points, the most since November 2008, to 4.12 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index. The BUX Index of equities tumbled 7 percent.

Hungary’s economy is in a “very grave situation” because the previous government manipulated figures and lied about the state of the economy, Orban’s spokesman Peter Szijjarto said at a press conference in Budapest today. Talk of a default is “not an exaggeration,” Szijjarto said. European equities and U.S. stock-index futures fell after the comments.

Hungary secured a 20 billion-euro ($24 billion) loan from the IMF, the European Union and the World Bank in October 2008 to avoid default as the global financial crisis spurred investors to avoid the country and sent the economy into a recession.

Orban, who took over May 29 after winning elections by pledging to cut taxes and stimulate the economy, yesterday failed to get EU approval for looser fiscal policy.

Whatever You Do, Don't Tell The Truth!

Here is an interesting quote from the article.

“The new government needs to think a bit more clearly about communication with the market. You simply cannot talk like this in these markets” said Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc, in an e-mailed comment.

Translation "No matter what the problem is ... please don't tell the truth!"

..........

Swiss franc intervention cost a billion a day in April

Inquiring minds are reading a May 21, 2010 Financial Times Alphaville article Swiss franc intervention cost a billion a day in April

Data just released show that the SNB increased its holdings of foreign currency by an extraordinary CHF28.5 billion in April – almost CHF1 billion a day. This means that, in the first four months of this year, Herr Hildebrand had gobbled up CHF58.9 billion of a money nobody else much wanted to own – on top of which we have to add what is likely to be a sizeable sum of flight capital ‘absorbed’ in the first turbulent weeks of May (€9.5 billion on Wednesday morning alone, according to market rumour).

Making a simple estimate that the overall intervention this month has at least matched that undertaken in April (a decidedly conservative guess), the Bank will have amassed around CHF80 billion so far this year, a total of which the mighty PBoC would not be ashamed and one, even more remarkably, equivalent to around 45% of the Confederation’s entire private national income for the period.

Not only has the SNB therefore seriously diluted its existing citizen-shareholders’ equity stake in their own country (think about it), it has gone some good way into turning the Swissy into the Hong Kong Dollar of Europe, since fast approaching 70% of the asset side of its balance sheet is currently being held in the form of forex (160% of the monetary base, 38% of M1), putting the once-proud Swissy well on track to degenerating to mere currency board status.

Yet more govt's manipulating data.......

It also appears that the Swiss have created a nice little problem as well....

Still I'm relieved it's all contained and everything is fine.

[ralphmalph]

You seem to be talking to yourself IRripoff.

All of the EU lovers on here, have stuck their heads in the CAP watered earth. The absolute perfect position to assume for the rogering they are about to receive.

[interestrateripoff]

You seem to be talking to yourself IRripoff.

All of the EU lovers on here, have stuck their heads in the CAP watered earth. The absolute perfect position to assume for the rogering they are about to receive.

It appears that no one is concerned about this, probably because it's all contained and the recovery is locked in.

Strange that the IMF bailout hasn't worked, I mean after there success with Russia and the Asian crisis I'm a bit flummoxed.

[bogbrush]

In Hungary, the previous [socialist] government falsified data," said the spokesman. "In Greece, they also falsified data.

We'll be going for the hat-trick then?

[bajista]

Oh dear.

All through the Greek crisis they kept assuring us that Greece's problem was that it couldn't float its currency and that the UK was safe because it had good old sterling.

It seems that having a floating currency isn't all it's carcked up to be after all.

Uk; not quite next but soon, I fear......

Fact is, all the talk about currencies is trash at this stage in the game. What matters is 'can you service your debts?' If the answer is no, you are ****ed, one way or the other.

[Meerkat]

It appears that no one is concerned about this, probably because it's all contained and the recovery is locked in.

Strange that the IMF bailout hasn't worked, I mean after there success with Russia and the Asian crisis I'm a bit flummoxed.

You forgot to mention their success with Argentina

[Eddie_George]

They always release their news before the weekend don't they....

[OnlyMe]

I was looking for CDS spreads for Eastern European Countries, don't think I need to bother when this is happening............ the dots don't need much joining.

http://www.istockanalyst.com/article/viewarticle/articleid/4180063

http://www.istockanalyst.com/images/articles/europeansovereigncds64201061393.jpg

Edited June 4, 2010 by OnlyMe

[OnlyMe]

I was looking for CDS spreads for Eastern European Countries, don't think I need to bother when this is happening............ the dots don't need much joining.

http://www.istockanalyst.com/article/viewarticle/articleid/4180063

[The Masked Tulip]

Considering it was an Austrian bank that set the 2nd leg off during last depression is history about to repeat? Still it's contained.

I hope no bloke called Archie Duke shoot an ostrich over the weekend.

Edited June 4, 2010 by The Masked Tulip

[david m]

Hungary's fiscal deficit was 4.9% of GDP in 2007, 3.8% of GDP in 2008, and 4.0% of GDP in 2009, and expected to be around 5% of GDP for 2010 (possibly higher now clearly). Hungary's public-sector debt to GDP is about 80%. None of these numbers would have implied any real risk of default before Thursday. They are better numbers than many G10 countries coudl have boasted.

On Thursday, Hungarian Deputy PM Lajos Kosa shocked the market by saying that Hungary has "a slim chance to avoid the Greek situation" and that the Hungarian economy is in a "much worse" situation than the ruling party Fidesz understand when it took office in April Today, Peter Szijjarto, spokesperson for the Prime Minister, said that "the economy is in a grave situation, yet the government will do all it can to avoid a sovereign default".

I think you have to see this as all part of the Fidesz strategy to do as much damage as possible to the country's economy whilst they can still blame it on the previous incumbents. They want to trigger a mini-crisis, so Fidesz with then garner enough domestic public support to step in with their own controversial strategy to save the country and reduce the deficit.

What they are considering is to nationalize the second pillar of the nation's pension system. This is a defined contribution system, in which younger individuals (sub 46 years) allocate all of their mandatory pension contributions to private accounts. These individuals do not contribute to the traditional pay-as-you-go defined benefit system. Nationalization would add revenue to the public sector by receiving all future contributions from the sub 46 year old population and allow the Ministry of Finance to discontinue payments to the defined benefit system fro these individuals. This would knock posssibly 3% of GDP of the deficit at an instant and make their pension system sustainable.

Dangers to this proposal are clear since if each individual private pension account were nationalized (as Argentina did in 2008), then this would involve some form of confiscation. Hungary's debt/GDP would fall but at a very high cost: a total break in discussions with the IMF and the EU, weakening of the forint (triggering default on Swiss denominated mortgages), and a sharp increase in the likelihood of a sovereign default.

Of course this is a frighteningly naive strategy but Fidesz has been out of power for a while. Frankly they could end up with with a full-blown currency and debt crisis ...

[blankster]

Surely we're all becoming so distrustful of statistics now - whether it's house prices, company profits, public debts - there seem to be so many ways of massaging the figures, and perhaps all that's needed is a few inventive new ways of massaging figures to make everything OK again.

[Georgia O'Keeffe]

Hungary's fiscal deficit was 4.9% of GDP in 2007, 3.8% of GDP in 2008, and 4.0% of GDP in 2009, and expected to be around 5% of GDP for 2010 (possibly higher now clearly). Hungary's public-sector debt to GDP is about 80%. None of these numbers would have implied any real risk of default before Thursday. They are better numbers than many G10 countries coudl have boasted.

On Thursday, Hungarian Deputy PM Lajos Kosa shocked the market by saying that Hungary has "a slim chance to avoid the Greek situation" and that the Hungarian economy is in a "much worse" situation than the ruling party Fidesz understand when it took office in April Today, Peter Szijjarto, spokesperson for the Prime Minister, said that "the economy is in a grave situation, yet the government will do all it can to avoid a sovereign default".

I think you have to see this as all part of the Fidesz strategy to do as much damage as possible to the country's economy whilst they can still blame it on the previous incumbents. They want to trigger a mini-crisis, so Fidesz with then garner enough domestic public support to step in with their own controversial strategy to save the country and reduce the deficit.

What they are considering is to nationalize the second pillar of the nation's pension system. This is a defined contribution system, in which younger individuals (sub 46 years) allocate all of their mandatory pension contributions to private accounts. These individuals do not contribute to the traditional pay-as-you-go defined benefit system. Nationalization would add revenue to the public sector by receiving all future contributions from the sub 46 year old population and allow the Ministry of Finance to discontinue payments to the defined benefit system fro these individuals. This would knock posssibly 3% of GDP of the deficit at an instant and make their pension system sustainable.

Dangers to this proposal are clear since if each individual private pension account were nationalized (as Argentina did in 2008), then this would involve some form of confiscation. Hungary's debt/GDP would fall but at a very high cost: a total break in discussions with the IMF and the EU, weakening of the forint (triggering default on Swiss denominated mortgages), and a sharp increase in the likelihood of a sovereign default.

Of course this is a frighteningly naive strategy but Fidesz has been out of power for a while. Frankly they could end up with with a full-blown currency and debt crisis ...

This nationalising of pensions is really quite a worrying trend, desperate times call for desperate measures though, it would not be an unlikely position the UK might take if required

[david m]

Hungary is an emerging economy ... not one of the best to be true (in fact always been a bit of a basket case). Nonetheless, it has a better demographic profile than most Western democracies, higher structural growth rate, higher productivity and a lower standard of living (and thus lower expectations from its population). Yet it still finds that its the pension system that is the weight around its neck.

It comes down to the same problem in every country: we have too many older people that due to defined benefit pension schemes we are forced to pay too much money too, which due to increased longevity, we have to pay for too long. Its simply not sustainable ... and yet in every case its the younger generation that is having to foot that bill.

[OnlyMe]

It comes down to the same problem in every country: we have too many older people that due to defined benefit pension schemes we are forced to pay too much money too, which due to increased longevity, we have to pay for too long. Its simply not sustainable ... and yet in every case its the younger generation that is having to foot that bill.

It can't and it won't.

[Meerkat]

Hungary's fiscal deficit was 4.9% of GDP in 2007, 3.8% of GDP in 2008, and 4.0% of GDP in 2009, and expected to be around 5% of GDP for 2010 (possibly higher now clearly). Hungary's public-sector debt to GDP is about 80%. None of these numbers would have implied any real risk of default before Thursday. They are better numbers than many G10 countries coudl have boasted.

Well, can you find more countries with 140% of private debt to GDP ratio?

[Bloo Loo]

finance just puts the price of everything up.

a person unleveraged cant compete, so must borrow to do anything.

same with pensions. you cant pay them out of earnings because, companies are borrowed and prices are therefore higher than they need be.

a living pension also needs to be leveraged.

bankers should be shot.

except the nice ladies at Prettygate Barclays of course.

Edited June 4, 2010 by Bloo Loo

[OnlyMe]

finance just puts the price of everything up.

a person unleveraged cant compete, so must borrow to do anything.

same with pensions. you cant pay them out of earnings because, companies are borrowed and prices are therefore higher than they need be.

a living pension also needs to be leveraged.

bankers should be shot.

except the nice ladies at Prettygate Barclays of course.

Yep, all the profits are being leeched out by the act of financing in the market - every step you make you are competing with some chump and his credit line.

Until this cycle is broken (in a globalised world) this country and others like it are ******ed, finished, caput, going noweher but down with all souls on board.

[david m]

Well, can you find more countries with 140% of private debt to GDP ratio?

Good point ... but that what happens when you encourage home-ownership and the population goes out and gets CHF denominated mortgage because interest rates are sooooo much lower than on a HUF denominated mortgage. Of course when CHF/HUF skyrockets, the population all complains and blames it on their banks. I mean how were they to understand such complexities as FX rates!

So the government has to help all those poor home voters (sorry owners) out so that they don't default ... by doing stupid things like putting interest rates at all time lows, providing subsidized mortgages and paying rentals for tenants so landlords don't default on BTL ... sound at all familiar?