Pressure on Hungary Increases
The chairman of the Austrian Central Bank, Ewald Nowotny, sees no danger for Austrian banks from Hungary. EU and IMF criticize the Hungarian government.
European Central Bank policymaker Ewald Nowotny has said that the Austrian banks are not in danger due to exposure to Hungary. In a radio interview given to the public broadcaster ORF, Nowotny, who heads the Austrian central bank, said 'our engagement is around € 30bn, including purchases of government bonds.' Though situation in Hungary posed a challenge, there would be no danger to Austrian banks. The banks have necessary capital reserves to handle the situation, he told the broadcaster.
Nevertheless, distrust against the local government increases in Hungary. In Burgenland, the eastern Austrian province at the Hungarian border, many Hungarians bring their money to local banks. Many banks report from a massive inflow of Hungarian new customers. They fear that private savings at Hungarian banks are not safe anymore, German media report. Such concerns are not unfounded, as Prime Minister Orban nationalized the private pension funds entirely. Nevertheless, Orban emphasized that private savings will remain untouched. Over the last six months, the Hungarian Forint lost about 20% against the Euro.
Also for political and market observers, the situation is very serious. According to Olli Rehn, the Economic Commissioner of the EU, Hungary has failed to prevent the “excessive budget deficit”. Rehn considers suspending economic aids by 2013. These structural aids, provided by the EU cohesion fund, amount to 1.7% of Hungary´s GDP. Orban´s government promised to correct “errors of the past”. “Thus, we continue to decrease public debt and to limit the budget deficit below 3.0% of the GDP.”, the Hungarian Ministry of Economics announced. As pressure increased on the Hungarian government massively, a delegation from Hungary negotiates over an IMF loan in Washington. Details are not known yet.