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Eastern Europe, Remember Them?

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http://www.zerohedge.com/news/sp-second-rating-agency-warn-it-will-cut-hungary-junk

Earlier today it was Fitch; now, way after the close, it is S&P's turn: the rating agency just put Hungary on junk bond watch, due an "unpredictable policy framework", and better yet, advised readers that the almost certain downgrade from Investment Grade would happen this month. Naturally, if Hungary, AAAustria is next. Then all of Eastern Europe follows quickly and Germany finds itself in a war with contagion on every single front.

From S&P

Republic of Hungary 'BBB-/A-3' Ratings Placed On Watch Negative Owing To The Unpredictable Policy Framework

Overview

In our opinion, the predictability of Hungary's policy framework continues to erode, weighing on the economy's medium-term growth prospects.

As a result, we are placing the 'BBB-/A-3' foreign and local currency sovereign credit ratings on Hungary on CreditWatch with negative implications.

We are also placing the 'BBB-' long-term counterparty credit rating on the National Bank of Hungary on CreditWatch with negative implications.

Rating Action

On Nov. 11, 2011, Standard & Poor's Ratings Services placed its 'BBB-/A-3' foreign and local currency sovereign credit ratings on the Republic of Hungary on CreditWatch with negative implications. At the same time, we placed the 'BBB-' long-term counterparty credit rating on the National Bank of Hungary on CreditWatch with negative implications.

For those who maybe new here Eastern Europe is another pressure point that's been mentioned lots of times in the past but appears to have disappeared from mainstream press and the following is the reason why this could be a major problem whilst we are nicely distracted with Greece / Italy.

http://articles.businessinsider.com/2011-09-19/markets/30174878_1_hungarian-forint-mortgage-loans-fidesz-party

Last month we wrote about Hungarians bucking under Swiss Franc denominated mortgage loans. Two-thirds of Hungarian mortgages are denominated in Swiss francs and there's been a lot of chatter about officials coming to the rescue of borrowers. The latest move has taken markets by surprise.

The government is letting borrowers who make payments on time, the opportunity to pay a fixed rate of 180 Hungarian forint to a Swiss Franc and 250 forint to a Euro, with banks taking a massive blow. Officials also have a temporary break on evictions, and have introduced early repayment options.

....

Hungary's economy

Only 54.6% of Hungary's working age population is currently employed.

Google Search

This google search bought up a couple of FT's latin's articles on the matter as well.

Edited by interestrateripoff

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Hungarian property is pretty cheap by European standards. But having been to Budapest I can tell you it`s cheap for a reason, it being, as our Italian friends would say, a bit of a sheet howl. The only way is down apparently.

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The beauty of the EU is that it is a grouping of geographic locations known as "States" This setup allows the labour force to become liquid whereby the labour resource can be utilised in areas of demand and scaled back in areas that no longer have a requirement for that particular labour resource.

The EU is going to be of great benefit to the UK, Germany, France as they utilise the cheaper labour available from the EU Labour pool to bring their economies back into the black. The USSR is looking on with envy having had their model of states broken up and no longer competative in the world markets.

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Without wanting to be pedantic much, Hungary is in Central Europe, not Eastern.

Former eastern block but otherwise agreed. It's useful to group certain countries together and considering Germany is central Europe then it doesn't describe things so well.

My girlfriend is eastern European so I know about what's going on there on the ground. Lots of nervous people.

Oh and my username is actually hungarian.

Edited by cica

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laurejon are you really being serious. :unsure:

Looking at the problem with a business hat on, yes I am being serious. If you free up the labour markets and make them mobile you can place that resource at the coal face.

In reality its going to be bad news for the UK operating as an independent state, but good for Europe as a whole. For the people on the ground in the UK its going to be devastating, the standard of living will plummet and young people will be left to wander the streets.

For anyone that has travelled around Europe, in particular Eastern Europe you will have noted five years ago that the streets were littered with unemployed young people, the standard of living was low, and the prospect of gainfull employment was nil.

Unfortunately in moving labour around the EU that is going to be the case with the UK. The UK in the future will be the poor man of Europe with mass unemployment and services such as the NHS non existent.

In my view we will not get to the juncture. I firmly believe the UK will leave the EU within the next decade and that will be brought about by civil disturbance brought about on a previously unknown scale. 40% of young people are unemployed and the austerity measures have yet to kick in, and will get much worse.

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In my view we will not get to the juncture. I firmly believe the UK will leave the EU within the next decade and that will be brought about by civil disturbance brought about on a previously unknown scale. 40% of young people are unemployed and the austerity measures have yet to kick in, and will get much worse.

I also think it's hard for Eurozone to unemploy vast numbers over time without civil unrest.

What we've seen so far are protests and 'econoriots'. Not so widely reported is the rise in crime.

In Greece:

Home break-ins jumped to 90,936 in 2010, up from 72,658 in 2009. This year, home break-ins totalled 48,268 for the first six months, on track to set new records. Extortions, armed robbery, scams, car thefts and other categories saw increases as well.

"There are many small crimes happening in Athens on streets, houses and businesses where people don't go to the police immediately," said Sakis Tsaoussis, president and CEO of Pyrsos Security, one of the largest security firms in Athens. He says ATM kidnappings are also on the rise, crimes in which perpetrators force their victims to withdraw money from a bank cash machine.

In the nineties, the IMF measures which threw millions of Russians into poverty were accompanied by a massive crime wave, with gang warfare and drive-by shootings becoming commonplace. Everyone fitted at least two steel doors to their apartments. Not because they had any real possessions, but because they kept their money at home, away from the banks or the system.

One suspects that the new receivers (sorry technocrats) appointed in Greece and Italy will be tasked with 'privatising' the countries' assets as a priority and then getting out before they become no go areas.

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In the nineties, the IMF measures which threw millions of Russians into poverty were accompanied by a massive crime wave, with gang warfare and drive-by shootings becoming commonplace.

Then the gangs just became the government ..

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Someone offloading their Bulgarian houses - saw this morning in a newsagent window on a handwritten postcard £35K for 2 Bulgarian houses I think it said

So almost - but not quite there - as cheap as parts of County Durham, Tyne & Wear and Northumberland..

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http://www.bbc.co.uk/news/business-15791191

Hungary expects to sign a new agreement with the International Monetary Fund (IMF) and the EU early next year, the Economy Ministry has said.

It comes a day after the ministry said it wanted "a new type of co-operation" with the IMF to act as an "insurance".

Hungary received an IMF-led bailout in 2008, but decided not to renew a standby loan agreement last year.

The EU said it was aware of Hungary's plans to ask for help but had not yet received a formal request.

The Economy Ministry said in a statement: "The government has started talks with the IMF and the EU about a new agreement that, instead of austerity measures, will aid Hungary's economic growth."

The meeting marks a reversal in policy. As recently as Monday, Economy Minister Gyorgy Matolcsy said that "this three-letter institution is opposed to every single one of our steps".

But its currency, the forint, has fallen to a record low against the euro this week and government bond yields have soared.

I wonder how many mortgages are under real stress at the minute!

Looks like we have a new phrase to watch out for "a new type of co-operation" whatever that means.

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http://www.zerohedge.com/news/35-seconds-tv-air-time-explaining-why-austrias-aaa-rating-doomed

While we will get into the nuances of why the Austrian AAA rating is the next to go (just after Hungary is downgraded in a matter of weeks if not days, following the country's request for IMF help earlier today) an event which we described ten days ago when the news that Austria's shaky rating was about to be downgraded first broke via the FTD and has since resulted in a major spike in Austrian credit spreads and bond yields, first we wanted to show readers the one ad which explains why the seeds of Austria's credit perfection collapse were sown back in 2007. In the ad, the second biggest Austrian bank, Raiffeisen Bank, explains precisely what its "selection" criteria were to get a loan in Hungary at the peak of the credit bubble (and yes, the ad is real). The ad explains the follow up news, which is namely that Austrian bank supervisors were today told to limit their lending to Eastern Europe. Unfortunately, the horses are out of the barn, and the biggest banks in Austria are about to be at the mercy of the markets, especially once the rating agencies do the inevitable and cur the country by at least 2 notches.

The ad in question:

Please tell me this is a spoof ad!

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http://www.bbc.co.uk/news/business-15820340

Hungary has asked the International Monetary Fund (IMF) and the European Union (EU) for financial assistance.

As the eurozone debt crisis has unfolded, official figures showed that the Hungarian governmment's total debt had risen to 82% of its output, as its currency, the forint, has weakened.

Hungary has said it wants "a new type of co-operation" with the IMF.

The IMF team in Budapest will now return to Washington to discuss the request.

The begging bowl is out.

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I live in Hungary and to be honest, the latest financial news hasn't made much impact. The fact is Hungarians are pretty much used to a fairly low standard of living, the country having been on a general decline since losing the First World War. It's only really since joining the EU that they've had any aspirations to the western debt fuelled lifestyle and even then it hasn't had such an impact. They've already had 3 years of austerity since nearly defaulting in 2008. If things do get worse, in many ways I would rather be here than in the UK, as here there's a very homogenous, integrated culture (except for the gypsies) with strong family ties and they tend to look out for each other rather than rely on the state. Most people are used to living fairly close to the breadline, but in the UK it will come as a massive shock.

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The view from Poland is that Hungary is reintroducing an authoritarian system, reflected in this article

Hungary heads in undemocratic direction

Fidesz has created a deeply illiberal constitution that ensures it will exercise power even if the party loses future elections

Edited by Peter Hun

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The view from Poland is that Hungary is reintroducing an authoritarian system, reflected in this article

Hungary heads in undemocratic direction

Fidesz has created a deeply illiberal constitution that ensures it will exercise power even if the party loses future elections

Hmm. The 'spectre of the far right in Europe' is the Guardian's equivalent of the Daily Mail's gypsies, single mums and welfare scroungers.

It's an interesting article though, and good discussion in the comments. Frailone's comments sum up the general Hungarian attitude to Orban as far as I can make out.

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http://www.bbc.co.uk/news/business-15886364

Moody's has cut its rating of Hungarian government debt to junk status.

The ratings agency blamed Hungary's high levels of debt and weak prospects for growth, as well as uncertainty about whether the government can achieve its goals for the economy.

The government said the move by Moody's was part of a series of financial attacks against the country.

Earlier, Standard & Poor's decided not to downgrade Hungary until talks with the EU and IMF had been completed.

Another country joins the junk club.

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http://www.bloomberg.com/news/2011-12-13/austrian-banks-facing-payback-as-hungary-s-debt-slaves-revolt.html

When Hungary’s former central bank governor was buying a house two months before Lehman Brothers Holdings Inc. collapsed and the country sought an emergency bailout, he received an offer he couldn’t refuse.

Peter Akos Bod, now an economics professor at Corvinus University in Budapest, was given a choice of mortgages by his bank. The 60 year-old could select a loan in Hungary’s currency, the forint, at 13 percent interest, or one in Swiss francs at less than 6 percent. After crunching the numbers on a spreadsheet, he picked the cheaper franc loan.

“It was rational,” he said of his 2008 decision in an interview in the Hungarian capital. “I put it into a model.”

Three years later, Bod and about one million compatriots who took mortgages in francs are faced with a debt pile that has swelled to 4.9 trillion forint ($22 billion). The currency’s 40 percent slump against the franc has raised repayment costs, pushing mortgage arrears to a two-decade high and prompting Prime Minister Viktor Orban’s government to brand the loans “debt slavery.”

With genius's like this in charge, well....

I put it into a model and it was cheaper, ignoring the problems currency..

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  • 277 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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