[Marxism] a question I can't answer: Why do European capitalists prefer stagnation?

Louis Proyect 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 
the list.

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 
socialist/Stalinist beliefs.

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 
but prosperity?


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 
Habsburg-era building.

"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 
currency.

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 
there's nothing.''

Despite losing his property, Mr Istvan remains liable for the entire 
loan and if he cannot repay, his children would be held responsible for 
the debt.

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 
expenditure.

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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