[Marxism] a question I can't answer: Why do European capitalists prefer stagnation?
lnp3 at panix.com
Thu Mar 12 08:48:52 MDT 2009
> When Summers came out a few days ago and called for more, Europe refused to
> comply. Was this rational from the point of view of European capitalists? I
> guess I'll have to go through some of the German or French business press to
> find out what CEOs are saying.
> Mihaly Koltai
Btw, I think I speak for the whole list in giving a hearty welcome to if
not our first Hungarian subscriber, at least the first who has posted to
Hungary is very much on my mind now since I am doing some intensive
research on George Soros, the Hungarian-born hedge fund manager who
played a significant role in promoting market solutions for Hungary's
problems. In a comic book (!) biography of Soros written by Kaoru
Kurotani, there's a discussion of Soros's partnership with Mikos
Vasarhelyi, who was Imre Nagy's spokesman during the 1956 uprising and
spent 5 years in prison.
In 1983 Vasarhelyi was teaching at Columbia University's Institute for
International Change (a CIA front?) when he was approached by Soros who
was only a billionaire at the time rather than a zillionaire. They
figured out that the Hungarian government would welcome a Soros NGO on
the basis of support for scientific research but Soros pressed for
foreign travel. Apparently a key aspect of his philanthropy in Eastern
Europe was foreign travel in order to get intellectuals over to wealthy
capitalist countries where they would be weaned from their
Finally, the Hungarian government acceded to Soros's demands since he
promised $3 million per year. For a country starved for foreign
currency, that was a significant amount. Despite Soros's promises that
some of the money would be devoted for scientific research, it mostly
went for foreign travel. Kurotani, the comic book author, concludes that
those who went abroad on Soros funding "absorbed democratic values that
they brought back with them to Hungary". In 1988, Soros's hard work
finally paid off. Hungary removed its Communist government and began to
enjoy freedom and prosperity. Well, at least there's still some freedom
The Daily Telegraph (London)
February 26, 2009 Thursday
Hungary faces ruin on the back of foreign currency borrowing binge
sours; The great success; story of post-Soviet economics is on the
brink, reports Damien McElroy in Budapest
BYLINE: Damien McElroy
HUNGARY is teetering on the edge of bankruptcy with its citizens
struggling to pay foreign currency mortgages and personal loans taken
out during one of the post-Communist era's most exuberant booms. The
forint currency has plummeted and unemployment has ballooned, creating a
debt trap that is sucking down banks backed by Western taxpayers,
particularly those of Switzerland and Austria.
Laslo Gulyas, a Budapest barman, is one of the lucky few who can still
meet his repayments. "In times of trouble people need to keep
drinking,'' he bleakly noted at the counter of a handsome pub in a
"But it is sure now that many people with mortgages that were taken
because they were cheaper than local loans have lost their jobs and
can't generate the money to make the repayments.''
For almost a decade Hungary binged on cheap loans taken out in foreign
Forint interest rates stayed stubbornly high, so lower rate loans in
Swiss francs and euros proved hard to ignore.
"People's desire for wealth was not bound by the forint,'' said Laslo
Czirjak, a Budapest fund manager. "They borrowed in Swiss francs, euros
and, even for a time, Japanese yen was available - it was just nuts.''
Statistics show that more than 60 per cent of Hungarian mortgages and
car loans are denominated in foreign currencies.
In one frenzied month - October 2007 - foreign currency loans
represented 93 per cent
of all lending. Hundreds of debtors in default have turned to a
volunteer organisation, the Association of Bank Loan Victims, for advice
on saving their homes from repossession.
Rakitouszki Istvan, a builder, has not been paid for a year and lost his
job in August. Last month the bank sold his flat to a businessman who
wants to evict Mr Istvan and his family.
"I had no idea I was going to get laid off. I thought as long as I could
work I was all right but it's dreadful.
"There's no investment in construction. I've been all over the place and
Despite losing his property, Mr Istvan remains liable for the entire
loan and if he cannot repay, his children would be held responsible for
Mariann Lenard, a lawyer who runs the association, said: "For a long
time the ordinary man in the street is going to be involved in an
unequal struggle with the banks.'' Hungary is experiencing its gravest
crisis since 1946 when it suffered history's worst bout of
hyperinflation. Today's battered forint was introduced then to replace
the pengo, which was destroyed after the government tried to wipe out a
Second World War debt overhang.
After the fall of the Berlin Wall, Hungary was a magnet for foreign
investment, particularly in car manufacturing and property.
But after a run on the currency last year, the property market
collapsed. The accompanying collapse in Western European demand for
manufactured goods - most notably cars - means Hungary has seen no
advantage from the devaluation. Unemployment has soared - 100,000 people
are expected to lose their jobs this year.
The Hungarian government is attempting to guarantee the mortgage
payments of everyone who loses a job in the crisis but it is already in
receipt of IMF assistance and the pledge will mean more cuts in general
International help has been sought. Switzerland has promised to provide
all the Swiss francs the Hungarian government needs to meet repayment
demands. Austria is demanding the EU establish a euro150 billion (
pounds 134 billion) fund to bail out East and central Europe.
Hungary's highly unpopular prime minister, Ferenc Gyurcsany, has hit out
at bankers who enjoyed the profits of lucrative cross-border
transactions without ensuring customers were fully prepared for the risks.
Hungarians are aware that the fallout from their folly will stretch far
beyond the Danube.
"What's happening here means that all of Europe is going to suffer . . .
you can't have one country drop out of its element without affecting all
the continent,'' said Mr Gulyas.
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