The debate on the problem of people indebted in foreign currency has increased again because of the Constitutional Court’s decision. The problem of more than 230 thousand contracts affecting several thousands of families has been a question dividing the public opinion for several months. Policy Agenda has examined what answers on the merits are given to this by the political parties possessing a country-wide list. The result is distressing.
What is the extent of this problem?
The year-end figures of 2013 show that the value of the population’s indebtedness in foreign currencies is HUF 1751 billion. 34% of such contracts is problematic, that is to say so many of the clients are in delay. This figure was 28% yet in 2010. The biggest problem with this is that the proportion of unpaid debts exceeding one year has grown from 2% to 11% for the recent four years. This means that it is not only the proportion of people paying late that has increased but also the proportion of people has also increased whose delay has exceeded an untreatable extent already.
In accordance with the figures published by MNB (National Bank of Hungary) the number of contracts on foreign currency loans has reduced from 349 thousand to 231 thousand. It is important to be aware of the four possible causes behind the contracts that have been terminated:
· the debtor has paid the outstanding balance and the real estate has become exempt of encumbrance. The final redemption could favour this;
· the debtor has paid the amount via the final redemption but only by selling his/her real estate;
· the debtor has converted the loan in foreign currency into a HUF-based loan;
· the bank has terminated the contract because of the overdue debt and the real estate has been sold.
From political aspect, if a newer package for saving the indebted in foreign currency were introduced, people could complain about their grievance that might have redeemed their final debt but at the same time they had to sell their real estate. If there had been a package for saving the indebted before, it would be easy to say they would have preferred this instead of moving into a sub-tenancy.
All in all, there can be around 80 thousand contracts with clients that can pay only late or that cannot pay at all. The flows show that there are more and more „good debtors” finding themselves in trouble. Therefore, some solution should be offered to approximately 150 thousand families.
The exchange rate from HUF to euro has increased by 31% in Hungary since the economic crisis. From this aspect it is Hungary where the value of the national currency has depreciated the most compared to our competitors (the Czech Republic, Poland, Romania, Croatia). In the Baltic States and in Slovakia, Bulgaria and Slovenia the national currency is either euro already or they have been able to fix the value of the national currency to euro. This means, they cannot have been hit by depreciation.
In addition to the exchange rate, which is the base of interest rate of the debts in foreign currency, the strength of Hungarian ecomony is a very important factor. This strength is measured by by the CDS spread at the money markets. In our case, this value has increased by 105% since the start of the economic crisis while the increase at our competitors has been only 34%. The image is worsened by the fact that the countries around us have been able to improve their situation from this aspect for the recent four years (the CDS average of 192.85 has reduced to 150) while in the case of our country the same value has increased to a minor extent (from 253 to 255). This fact has made the loan interests more expensive explicitly.
The root of the problem is the general deterioration of Hungarian economy. The figures show that the countries around us have a more stable economy and are less exposed to the fluctuations of money markets.
What is offered by the political parties pursuing governance?
The case of people indebted in foreign currency could have been a popular topic of the election campaign. On the contrary, this is not a problem at all for 61% of the political parties possessing a country-wide list. These 11 organisations have not covered this problem even at programme-level but they have not mentioned it at all.
Only a few of the remaining 7 parties possessing a country-wide list try to offer some solution to the electors. Some of these offers cannot be undertaken at all (releasing the debt completely proposed by the movement “Haza nem eladó” (“The Mother country is not for sale”)) or there is an idea affecting the problem only partially (regulating the method of interest calculation by LMP (“The politics can be different”).
At the same time either the currently governing Fidesz-KDNP coalition or their challenger, the Kormányváltás baloldali szövetség (“Government Change, alliance of left-wing parties”) has not offered an actual proposal while the next parliament will have to confront the problem definitely. As a consequence, the uncertainty of the affected people will grow further and this shows that the current campaign is not about the programmes.