Poor Tamas. :(
http://worldblog.msnbc.msn.com/archive/2009/04/03/1878205.aspx
QuoteHungary on the 'brink of ruin'
Posted: Friday, April 03, 2009 8:09 AM
Filed Under: On Assignment
Reporter's Notebook
By Jim Maceda, NBC News Correspondent
BUDAPEST – If anyone wonders how bad the economic crisis is in Europe, consider this: While shooting a story in Budapest, last week we parked our vehicle on a street in a part of town that has fallen on hard times.
Our translator, Andras Krucsai, suggested we not stray too far from the car. But it was broad daylight. And we weren't headed far enough away to lose sight of the vehicle.
Still, within no more than three minutes, vandals struck, seemingly out of nowhere. In a blur, two teenagers broke the glass and grabbed our GPS navigational device, which was sure to fetch good money on the black market. They'd disappeared by the time we ran the distance – around 300 yards – screaming all the way back.
''I saw them clearly,'' said Andras, who owned the car, brushing glass shards from the front seat. ''Just kids, 16 or 17, but you know it's gonna happen more and more often. It's gonna be worse and worse.''
Eastern Europe's shining light
Pal Serge, 38, would agree. We met him at a busy subway station on Moscow Square, in downtown Budapest, standing in near-freezing cold with a couple of dozen other unemployed men. They were looking for any kind of day labor.
Serge, a forklift driver, had recently returned from a bus trip to England. He couldn't find work there either. ''I think if it continues like this much longer, you'll see anger, even violence, in the streets,'' he said.
Not long ago, Hungary was Eastern Europe's shining light, the one former Communist nation that was destined to catch up to its richer, Western European neighbors. Hungarians were egged on by their government to consume with abandon – to buy that new foreign car or take out a low-interest home mortgage, in euros, while resting assured that German or Austrian banks would guarantee the loans.
Similar thinking was used to justify tens of millions of euros in generous subsidies to pensioners, families with children, and the unemployed. After all, Europe wouldn't turn a cold shoulder on a country that was on a fast track into the Eurozone, that club of 19 countries that use the euro as the national currency.
So Hungary spent, and the European Union covered the bulging deficit – until, that is, the financial crisis struck like a perfect storm. Today, Hungary is the EU's most indebted member.
Now on the 'brink of ruin'
''It went on a spending spree and a borrowing spree when times were good and now Hungary is really on the edge of insolvency," said British economist and historian Niall Ferguson. ''It's a little bit like a Latin American economy. It's spent itself to the brink of ruin.''
As the economic crisis evolved, the Western European banks ran out of credit and Hungary's currency, the forint, crashed, effectively tripling those euro car and home loans. And suddenly construction workers like 25-year-old Shandar Barnoi, who had only known the steady climb of prosperity, were hit by two crises – Hungary's and Europe's.
''I have no idea what happened,'' Barnoi said. ''All I know is that I haven't found any work for weeks and it's getting harder on my family.''
Drive down any street in Budapest and you'll see boarded-up shops, peeling paint and "For Sale" signs. We came across one new, unsold high-rise development that was standing right next to an abandoned site, now just a foundation of concrete and protruding steel rods, all flooded in sewer water and debris. It could have been a metaphor for what's become of Hungary's middle-class dreams.
Inflation has driven produce prices up so high that it's cheaper to import Turkish or Moroccan fruit and vegetables. And what about beef, that key ingredient in Hungarian goulash?
''I haven't sold more than 10 euros [about $13.00] of meat all day,'' said one normally busy butcher.
Many Hungarians who took out those euro-based mortgages – like truck driver Ishtvan Hatosh – have had to cut back on meat and other products in a desperate attempt to hold onto their homes.
''We've had to deny ourselves to pay back the loan," said Hatosh. ''Food, entertainment, vacation, travel – it's financial chaos for us now.''
'A very unpleasant problem'
Can Hungary avoid going bankrupt? Probably just barely, with international help.
The International Monetary Fund has already lent the country $16 billion in emergency funds. Also, Thursday's announcement at the G-20 Conference of $1 trillion in additional funding for the IMF could make a difference for emerging economies like Hungary's, but it will take months, or more, for any new loans to be approved. And Hungary will eventually have to pay them all back.
Meanwhile, those once rich EU banks in Germany and Austria now have their own empty pockets to deal with – they aren't likely to return to the old days of bailouts and spending bubbles anytime soon.
''Unfortunately this is a very unpleasant problem that almost certainly has to get worse before it gets better," said William Browder, CEO of Hermitage Funds and an expert in Central and Eastern Europe investment.
But not all is gloom and doom in what was once the heart of an empire. Some Hungarian analysts, like the Open Society Institute's Kristof Varga, believe there's a silver lining in this crisis if politicians can find the courage to reform Hungary's deficit spending, no matter how painful that is. He thinks that this could be a moment of truth.
''Economists have been saying we need to cut back for years, that we should reform the system because it's going to crash. Well now it's crashed. So there's no argument anymore that we don't do this, because we have to,'' he said.
'Never really a dream'
Still, most Hungarians just laughed when we asked if they could afford more cutbacks.
"Janos Kadar [the former Communist header] was better for us,'' said Hatosh, the truck driver, sitting on a tiny bed inside his 200 square foot studio apartment, the one he's struggling to keep. ''People were happier. Calmer. The situation was much better back then.''
Perhaps Andras, our translator, best summed-up the frustration that people here are feeling.
''It was never really a dream for us in Hungary. Even in the good times we were always promised that things would get better, in two or three years. Now we're in about the fifth 'two or three years.' We never seem to get there.''
Jim Maceda is an NBC News correspondent based in London. He was recently on assignment in Budapest, Hungary.
Why do we care?
I mean, besides Tamas, who can easily sail away towards the setting sun.
Meanwhile, Polish economy is being forecasted as the only EU economy to experience growth in 2009, and the Warsaw Stock Exchange index has gone up by 7% yesterday. :cool:
Last month, when the EU prime ministers met to discuss economic crisis and Hungary tried to get the EBRD to assign money to the "Central and Eastern Europe" Poland and Czech Republic opposed this vocally, saying that we are quite fine, thank you very much, and don't need any aid. Fortunately, this worked and we stopped being seen as being in the same basket as silly Hungarians.
I am not sure if the article is saying that (didn't read it) but the problem with Hungary is that their economy did not really do a big leap after 1989, but sort of continued to evolve from the communist economy. In the era of the universal boom, they could sustain themselves, but not anymore. Meanwhile, Poland had very harsh economy reforms done in early 1990s (which resulted in inflation in the area of over 100% p.a. initially and unemployment over 20%) but now it fucking works.
So please don't think that only because we are all ex-commies, we have the same problems. :P
Quote from: Martinus on April 03, 2009, 07:29:39 PM
So please don't think that only because we are all ex-commies, we have the same problems. :P
Except the ticking time bomb of FX denominated mortgages. You should give some thought to swapping out Marty.
Quote from: Admiral Yi on April 03, 2009, 07:33:27 PM
Quote from: Martinus on April 03, 2009, 07:29:39 PM
So please don't think that only because we are all ex-commies, we have the same problems. :P
Except the ticking time bomb of FX denominated mortgages. You should give some thought to swapping out Marty.
Actually, the currency is moving back to normal.
That being said, I'm debt-free. I prepaid my mortgage at the height of zloty's value. :p
The problem isnt with industrial output or somesuch, but as the article clearly says, debt is the problem, and the fact that beside that debt, huge taxes and wealth redistribution is needed to sustain the insane social welfare shit we have going on, so now that we are neck-deep in shit, there is no real room to manouver because you have millions of poor people accustomed to get by on various state grants.
The new PM (if he really gets named) will supposedly make HUGE spending cuts, which can in theory save us. But I suspect the opposition for this will be massive, and the cut in spending should be accompanied by tax cuts.
And Marty that 7% stock exchange raise one day was a global thing.
Quote from: Martinus on April 03, 2009, 07:29:39 PM
So please don't think that only because we are all ex-commies, we have the same problems. :P
The author of the article seems to think Hungary is synecdoche for all of Europe. If you want to know how bad the situation is in Europe go to a small country with existing economic problems on the fringes of Europe :huh:
Quote from: Martinus on April 03, 2009, 07:29:39 PM
Meanwhile, Polish economy is being forecasted as the only EU economy to experience growth in 2009, and the Warsaw Stock Exchange index has gone up by 7% yesterday. :cool:
....
I blaim jews.
Quote from: Sheilbh on April 03, 2009, 08:15:04 PM
Quote from: Martinus on April 03, 2009, 07:29:39 PM
So please don't think that only because we are all ex-commies, we have the same problems. :P
The author of the article seems to think Hungary is synecdoche for all of Europe. If you want to know how bad the situation is in Europe go to a small country with existing economic problems on the fringes of Europe :huh:
Well, Iceland, Hungary, Romania, Ukraine, potentially Slovakia - you all will have problems if these collapse
Quote from: Sheilbh on April 03, 2009, 08:15:04 PM
Quote from: Martinus on April 03, 2009, 07:29:39 PM
So please don't think that only because we are all ex-commies, we have the same problems. :P
The author of the article seems to think Hungary is synecdoche for all of Europe. If you want to know how bad the situation is in Europe go to a small country with existing economic problems on the fringes of Europe :huh:
"For every tree is judged by its fruit."
Better to be on the brink of ruin than to be on the drink of urine.
Quote from: Sheilbh on April 03, 2009, 08:15:04 PM
Quote from: Martinus on April 03, 2009, 07:29:39 PM
So please don't think that only because we are all ex-commies, we have the same problems. :P
The author of the article seems to think Hungary is synecdoche for all of Europe. If you want to know how bad the situation is in Europe go to a small country with existing economic problems on the fringes of Europe :huh:
Yeah, the reporter has a _BIG_ axe to grind.
First, he takes Hungary as a good example of how all of Europe is coping with the crisis. Wrong, Hungary had very deep problems before (a pity we can't access that Tama 'Great Hungarian Politics thread' anymore). To say that it was "Eastern Europe's shining light" is pathetic.
Second, he blames EU. Wrong again, that part about "European Union covered the bulging deficit" if not a blatant lie, clearly shows that the reporter hasn't got the slightest idea about how EU works. The Union provides money for public works and directly to the farmers, but when states spend in other areas, EU is not involved.
Third (perhaps I should have put this first) they go to one of the worst parts of a city, leave their car parked with an expensive GPS device in full sight, and then thiefs strike. Oh, how deeply surprising. Shocking indeed... the only really astonishing part is that they were able to see anything from 300 yards away and why did they bother running at all. Trying to catch young thiefs that flee with something so light and small as a GPS and have a 300 yards advantage? Pleaseeeee....
And Fourth, when they needed an expert, who did they call? No one else than Niall Ferguson, not exactly a great expert on Eastern Europe Economies. What he said, that "''It went on a spending spree and a borrowing spree when times were good and now Hungary is really on the edge of insolvency," is just nothing, a mere commonplace, but adding this ''It's a little bit like a Latin American economy. It's spent itself to the brink of ruin.'' brings his opinion to the point where it becomes amusing. Good ol'Niall at his worst....
I rest my case.
The article comments on the msnbc site are positvely disgusting. Americans, you've outdone BBC have your say!
Quote from: Tamas on April 03, 2009, 07:57:34 PM
and the cut in spending should be accompanied by tax cuts.
How will that get rid of your debt?
Quote from: The Nickname Who Was Thursday on April 04, 2009, 04:17:52 AM
Quote from: Tamas on April 03, 2009, 07:57:34 PM
and the cut in spending should be accompanied by tax cuts.
How will that get rid of your debt?
I was wondering the same. :P
:nelson Hungary has economy problems.
Quote from: Martinus on April 04, 2009, 04:34:41 AM
Quote from: The Nickname Who Was Thursday on April 04, 2009, 04:17:52 AM
Quote from: Tamas on April 03, 2009, 07:57:34 PM
and the cut in spending should be accompanied by tax cuts.
How will that get rid of your debt?
I was wondering the same. :P
Well, who knows. A huge portion of the hungarian economy is in the grey and black zone because of the huge taxes, so smaller taxes coupled with harsher punishments for tax fraud (altough we already has a tax authority which puts the gestapo to shame) might actually result in somewhat higher income for the state than presently.
And there is also the question of keeping inviting foreign capital to the country. We basically built up Slovakia: the fuckers were smart enough to cut spending and taxes while we kept our socialist heaven and as a result several big factories choosed to deploy in Slovakia instead of Hungary.
But of course I do not actually expect tax cuts. They will need some reserves next year for the elections, so what I do expect is the country recovering a bit this year, debt wise, and in the sense of avoiding bankrupcy, but sinking neck-deep in crap again next year when the "the state will take care of all your troubles" election campaigning will commence.
Quote from: The Brain on April 04, 2009, 04:44:15 AM
:nelson Hungary has economy problems.
Our Parlaiment did decide on expanding our nuclear power plant though. :cheers:
Quote from: Tamas on April 04, 2009, 09:37:07 AM
Quote from: The Brain on April 04, 2009, 04:44:15 AM
:nelson Hungary has economy problems.
Our Parlaiment did decide on expanding our nuclear power plant though. :cheers:
Bomb program?
Quote from: The Brain on April 04, 2009, 09:46:34 AM
Quote from: Tamas on April 04, 2009, 09:37:07 AM
Quote from: The Brain on April 04, 2009, 04:44:15 AM
:nelson Hungary has economy problems.
Our Parlaiment did decide on expanding our nuclear power plant though. :cheers:
Bomb program?
I am not allowed to tell. :ph34r:
How can Hungary be on the brink of ruin? That's like Pompey being on the brink of ruin.
Quote from: Razgovory on April 04, 2009, 01:56:36 PM
How can Hungary be on the brink of ruin? That's like Pompey being on the brink of ruin.
:rolleyes:
You sound like a guy who has never left his parents' basement.
Quote from: Tamas on April 04, 2009, 02:02:34 PM
Quote from: Razgovory on April 04, 2009, 01:56:36 PM
How can Hungary be on the brink of ruin? That's like Pompey being on the brink of ruin.
:rolleyes:
You sound like a guy who has never left his parents' basement.
I don't think he's part of the Fritzl family.
Quote from: Tamas on April 04, 2009, 02:02:34 PM
Quote from: Razgovory on April 04, 2009, 01:56:36 PM
How can Hungary be on the brink of ruin? That's like Pompey being on the brink of ruin.
:rolleyes:
You sound like a guy who has never left his parents' basement.
But it's a first world basement :contract:
Quote from: Mikael Hakim on April 04, 2009, 03:05:20 AM
The article comments on the msnbc site are positvely disgusting. Americans, you've outdone BBC have your say!
I'm curious which comments irked you. I just skimmed them and didn't find any that were outrageously boneheaded. Maybe a few that were medium boneheaded.
As an aside, I know that individual eurozone countries have the deficit caps, is the same true for the EU commission? Are they allowed to deficit spend?
Quote from: Admiral Yi on April 04, 2009, 04:26:29 PM
As an aside, I know that individual eurozone countries have the deficit caps, is the same true for the EU commission? Are they allowed to deficit spend?
No, not that I know of anyway.
The Eurozone stuff isn't set in stone, I think it's largely guidelines and it's largely enforced by the European Central Bank, which like any central bank can release €7 trillion, as the Fed did a week or two ago, for various measures. I think the EU have declared that they won't allow the bankruptcy of any member state to happen, through the ECB taking on a less scary IMF like role for member states - from what I understand.
The European Commission has little role in producing the European budget which is decided by the Council of Europe (that is the 27 heads of state/government), rather they administer and use the budget within broad guidelines. I believe the EU's budget is set two or three years in advance because, unlike national government, it doesn't really have to respond to crises.
The EU, effectively pays for the Common Agricultural Project, the administration of the bodies in charge of making sure the single market's operating, the courts, the parliament, internal measures such as consumer protection, environmental action and long-term infrastructure development and investment, as well as some foreign aid. Agriculture's about 45% and infrastructure's about 30%. Very little of that would really be increased or decreased in response to a recession, the most important aspect of it is, after all, that it's a stable investment.
Hungary: on the brink of ruin since Mohacs.
Quote from: Ed Anger on April 04, 2009, 04:47:50 PM
Hungary: on the brink of ruin since Mohacs.
:lol: now that you mention it...
Quote from: Admiral Yi on April 04, 2009, 04:26:29 PMAs an aside, I know that individual eurozone countries have the deficit caps, is the same true for the EU commission? Are they allowed to deficit spend?
While I don't know, I very much doubt that. There is no way the member states would allow the EU commission to just spend money it doesn't have.
The Eurozone deficit caps are enforced by the commission and the finance ministers of all EU countries (not just the Eurozone countries). Obviously in this crisis nobody really cares.
Quote from: Admiral Yi on April 04, 2009, 04:26:29 PM
Quote from: Mikael Hakim on April 04, 2009, 03:05:20 AM
The article comments on the msnbc site are positvely disgusting. Americans, you've outdone BBC have your say!
I'm curious which comments irked you. I just skimmed them and didn't find any that were outrageously boneheaded. Maybe a few that were medium boneheaded.
Somehow the vast majority of them was about blaiming the situation on either EU, Obama or capitalism.
Quote from: Sheilbh on April 04, 2009, 04:42:00 PM
The Eurozone stuff isn't set in stone, I think it's largely guidelines and it's largely enforced by the European Central Bank, which like any central bank can release €7 trillion, as the Fed did a week or two ago, for various measures. I think the EU have declared that they won't allow the bankruptcy of any member state to happen, through the ECB taking on a less scary IMF like role for member states - from what I understand.
What happened? Were the deficit limits "clarified" after France and Germany broke them? Was the treaty rewritten?
Quote from: Admiral Yi on April 04, 2009, 09:33:03 PM
Quote from: Sheilbh on April 04, 2009, 04:42:00 PM
The Eurozone stuff isn't set in stone, I think it's largely guidelines and it's largely enforced by the European Central Bank, which like any central bank can release €7 trillion, as the Fed did a week or two ago, for various measures. I think the EU have declared that they won't allow the bankruptcy of any member state to happen, through the ECB taking on a less scary IMF like role for member states - from what I understand.
What happened? Were the deficit limits "clarified" after France and Germany broke them? Was the treaty rewritten?
AFAIK, the only thing happened was that France and Germany were just big enough to make the EU ignore their brake of the treaty.
Quote from: Razgovory on April 04, 2009, 02:09:58 PM
Quote from: Tamas on April 04, 2009, 02:02:34 PM
Quote from: Razgovory on April 04, 2009, 01:56:36 PM
How can Hungary be on the brink of ruin? That's like Pompey being on the brink of ruin.
:rolleyes:
You sound like a guy who has never left his parents' basement.
But it's a first world basement :contract:
You lucky bastard.
Think of the geeks in Africa.
Quote from: Admiral Yi on April 04, 2009, 09:33:03 PM
Quote from: Sheilbh on April 04, 2009, 04:42:00 PM
The Eurozone stuff isn't set in stone, I think it's largely guidelines and it's largely enforced by the European Central Bank, which like any central bank can release €7 trillion, as the Fed did a week or two ago, for various measures. I think the EU have declared that they won't allow the bankruptcy of any member state to happen, through the ECB taking on a less scary IMF like role for member states - from what I understand.
What happened? Were the deficit limits "clarified" after France and Germany broke them? Was the treaty rewritten?
Actually our more conservative press duly reports every two-three months the progress of a sanction procedure against Spain (and five or six eurozone countries more, but that rarely gets a mention) for exceeding the 3% deficit cap. No one believes that sanctions will really be applied, of course, except some rabid conservatives, our national version of Fox news, O'Reilly and Coulter.
Regarding the clauses of the Treaty as written no one seems to really know. I guess the text from the start included enough loopholes, exceptions, lengthy procedures, etc., to make the 3% cap flexible, at least enough for an state to ignore it for some years. In practice if not in theory the Treaty is more what you'd call "guidelines" than actual rules, as Capt. Barbosa would say. Besides, and from an estrictly empiric point of view, I think a rigid cap would have been a bad idea. What if, for example, a real war started, an epidemic breaks out or an asteroid hit the Earth and we found ourselves legally forbidden to spend badly needed money...
In general EU regulations are sane, contrary to the crap you usually hear. For example, Schengen countries have suppressed border controls, but the treaties include provisions to reinstate them in case of emergency, and they have been applied on accasions (the last was just yesterday, France and Germany did reactivate them for the NATO summit)
Quote from: Siege on April 04, 2009, 10:16:47 PM
Quote from: Razgovory on April 04, 2009, 02:09:58 PM
Quote from: Tamas on April 04, 2009, 02:02:34 PM
Quote from: Razgovory on April 04, 2009, 01:56:36 PM
How can Hungary be on the brink of ruin? That's like Pompey being on the brink of ruin.
:rolleyes:
You sound like a guy who has never left his parents' basement.
But it's a first world basement :contract:
You lucky bastard.
Think of the geeks in Africa.
^_^
Quote from: Alatriste on April 05, 2009, 02:42:30 AM
Regarding the clauses of the Treaty as written no one seems to really know.
How is that not on the public record? :huh:
On a related topic, does anyone know the situation with fines for countries that don't meet their Kyoto limits?
Quote from: Admiral Yi on April 05, 2009, 02:50:27 PM
Quote from: Alatriste on April 05, 2009, 02:42:30 AM
Regarding the clauses of the Treaty as written no one seems to really know.
How is that not on the public record? :huh:
It's unlikely that those aren't in the public record. It is likely that they need translating from political-speech to humans speech.
QuoteNot long ago, Hungary was Eastern Europe's shining light, the one former Communist nation that was destined to catch up to its richer, Western European neighbors.
When exactly was this again? :huh:
Quote from: Valmy on April 05, 2009, 07:30:41 PM
QuoteNot long ago, Hungary was Eastern Europe's shining light, the one former Communist nation that was destined to catch up to its richer, Western European neighbors.
When exactly was this again? :huh:
Right before Lechfeld.
Quote from: Valmy on April 05, 2009, 07:30:41 PM
QuoteNot long ago, Hungary was Eastern Europe's shining light, the one former Communist nation that was destined to catch up to its richer, Western European neighbors.
When exactly was this again? :huh:
Good point. I always thought the sprinters were the Czech Republic and Slovenia. Poland had further to go and the Baltics, Hungary and Slovakia had more institutional problems. And somewhere, running backwards, was Romania and Bulgaria.
Hey Tamas, is Kecskemét nice?
Heh, you guys quickly forget that it was us who let the East Germans into Austria thus breaching the first hole on the whole iron curtain thing. Then we did have some headstart since the old commies decided its time to change cloaks and actually helped the whole free market and democracy thing forward, instead of trying to hinder it.
But yes, this whole thing was lost around 2002 the latest.
Quote from: Zanza2 on April 06, 2009, 11:12:54 AM
Hey Tamas, is Kecskemét nice?
I haven't been there for ages. Was kinda' nice, but nothing special.
Quote from: Tamas on April 06, 2009, 11:13:25 AM
Heh, you guys quickly forget that it was us who let the East Germans into Austria thus breaching the first hole on the whole iron curtain thing.
I hindsight I'm not sure that was such a bright idea.