Summary of a speech given by Dr. Surányi at the annual meeting of the Financial Research Institute in Visegrád, Hungary on the 28th of October, 2011

Financial Research Working Papers, October 2011

An economic downturn boosts demand for fiscal rebalancing. It can come either in the form of increased revenues or as spending cuts. Extra revenues can be generated in two major ways: 1) increasing traditional forms of taxes or 2) hitherto unknown, or unorthodox revenue raising, special taxes and levies. Latter was especially dominant in the case of Hungary.

Pension costs are a considerable expenditure of every government and are not sustainable in their present form. The crisis has brought it to attention – but arguably not to the degree it would necessitate. Structural changes to the pension systems are thus rare and hard to come by.

The recent appearance of China as potential saviour of the Eurozone is put in doubt by Francois Godement at the European Council of Foreign Relations.

Asserting political conditions in return for help is a risky game to play for China but Europe may not be united enough to withstand it, argues Godement.

If one quarter of the foreign currency loans (HUF 5200bn) are affected by the government’s plan, banks would suffer a 20-25% loss (HUF 250 bn). The Hungarian banks had only HUF 10-12bn profits last year (mostly the Hungarian OTP).

The move will further deteriorate their lending position.

(Between 2010-2011the decrease of corporate lending was HUF 700 bn, private lending decreased by HUF 450 bn.)

The Turkey-versus-Hungary comparison is perhaps the starkest example of the macroeconomic contrasts within the EEMEA region and also of the different policy responses of the respective central banks, writes Christian Keller of Barclays Capital.

Financial Times blogs, 24 August, 2011

Like Saint-Tropez, many municipalities across Europe are saddled with loans carrying variable interest rates pegged to fluctuations in the Swiss franc, other foreign currencies or various commodity prices.

Jittery investors have been turning en masse to the Swiss franc and other assets deemed as safe havens amid growing concerns over sputtering economic growth in the U.S. and Europe.

2 августа 2011
Ласло Лендьел
Государства ЦВЕ: конец иллюзий о золотом веке

Ласло Лендьел – генеральный директор Института финансовых исследований (Будапешт, Венгрия).

There are two big reasons to think austerity will not work in 2011 the way it did in 1919 and 1945, writes James Macdonald in Foreign Policy.

Foreign Policy, 18 August, 2011

In a SPIEGEL interview, billionaire investor George Soros criticizes Germany's lack of leadership in the euro zone, arguing that Berlin must dictate to Europe the solution to the currency crisis. He also argues in favor of the creation of euro bonds as a way out of the turbulence.
Spiegel Online, 15 August, 2011