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Tuesday, August 20, 2013

Bank-Government Complicity in Mortgage Trap Scheme Provokes Wildcat Protest

Downtown Budapest is shut down by protesters.

Almost one-third of the population of Hungary lives in a household that toils under an increasingly unmanageable debt burden slapped on them, a decade or so ago, through a "foreign currency based mortgage" scheme--where the principal amount is fixed in CHF and the payments are made in Hungarian Forints (which has been sliding vis-a-vis the CHF for quite a while). As a result, principal is changing monthly. There are also bank fees that anybody familiar with the German or US mortgage system would balk at. The whole thing is essentially one big pyramid scheme, created by banks and the top layers of the political elites. Lack of jobs and foreign-currency mortgages are the two leading causes for the recent spike in job-seeking abroad by hundreds of thousands of Hungarians.

Except for a very partial debt swap scheme easing public employees' burdens introduced by the current government--a drop in the bucket--, the political parties won't touch the issue with a ten-foot pole. Understandably so: they were all complicit in this system. Most deafening is the silence of the self-labelled "left" (in practice: centrist-liberal) parties.

The septuagenerian Péter Róna, a former British banker and a leading figure in the Politics Can Be Different party has been a lone exception: He has repeatedly pointed it out that the "foreign-currency-based mortgage" system is /1/ a "shoddy banking product" and, worse yet, /2/ illegal in Hungary (where commercial law prohibits the mixing of currency speculation with lending, which is the essence of the scheme). So far, Róna's arguments have been ignored and/or ridiculed by /1/ the banks, /2/ neoliberal majority among economists (a.k.a. "the experts") /3/ the government and /4/ the rest of the opposition. This cannot go on much longer: Even from a neoliberal point of view (i.e., even if we reduce society, humans, with needs for shelter, etc., to bodiless supply/demand dynamics), this is a real problem since the prospect of a massive default could lead to an unprecedented collapse and chaos to the Hungarian economy as a whole. Now, _that_ prospect should catch the attention of even neoliberal observers.

So far, it hasn't. Homeowners keep receiving the increasingly absurd monthly statements featuring randomly increasing principals and fees and basically no possibility of a pay-up.

At long last, and predictably, the victims have organized themselves--on their own idiosyncratic terms. On August 20th, 2013, they occupied Astoria, Erzsébet Bridge, and other vital parts of downtown Budapest. At the time of writing this, they are sitting there, on the asphalt, eating sandwiches. Police around them. (Possibly some of them, too, have the same kind of mortgages.) The protesters' language is strikingly familiar: They speak the metaphors of the extreme-right. This is not surprising, given that political speech is fully censored in Hungary: "Left" concerns cannot be voiced.

For now, car and public transport traffic is rerouted. Technically, the protest is "spontaneous": un-registered and without a permit. What makes things a little easier is that there is also a national holiday in progress so that traffic is minimal, and conventionally affected by the festivities anyway.

The question is what happens from tomorrow morning. Elections are to be held in spring 2014.


  1. Update: The government is raising the stakes: The organizer of the protests, Kásler Árpád, has been arrested for disturbing public services (forcing diversion of public transport).

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cover page of the book

cover page of the book
image used for the cover design by Anannya Dasgupta