tag:blogger.com,1999:blog-36596111.post6735132218759379317..comments2009-09-21T11:07:15.010+02:00Comments on Hungary Economy Watch: Why Hungary Is Not The Next IcelandUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-36596111.post-26805389642072803632008-10-17T12:04:00.000+02:002008-10-17T12:04:00.000+02:00Hello again Antal,I appreciate your concenr and I ...Hello again Antal,<BR/><BR/>I appreciate your concenr and I understand your frustration, but I really do feel you are underestimating the garvity of all this (see my George Bokros post just up).<BR/><BR/>Having the banks foreign owned isn't a protection in these circumstances, since the parent bank starts to get its credit downgraded back home (as has happened to Swedbank in the context of the Baltics, and Unicredit and Erste Bank in the context of Hungary). Even the Hungarian owned OTP can find itself downgraded due to the risk of its Russian, Romanian and Serbian operations.<BR/><BR/>It isn't access to the Fx that is going to be the problem, but the willingness of banks to lend in Fx to people who are being paid in forint.<BR/><BR/>The only real solution would be for the Eurozone to take the whole EU10 into the zone on masse, but with critical situations already in Spain and Italy resources just won't stretch to this, IMHO, so some have to be left to drown in the icy sea, which is why a rescue from HMS IMF is the best bet on the table. <BR/><BR/>But really, the IMF's own balance sheet is going to need to expand, since the Fund is likely to end up virtually "owning" countries like Hungary.Edward Hughhttps://www.blogger.com/profile/10384039867580949531noreply@blogger.comtag:blogger.com,1999:blog-36596111.post-32957347564548968312008-10-17T09:26:00.000+02:002008-10-17T09:26:00.000+02:00There is another notable difference: Iceland, whic...There is another notable difference: Iceland, which is the size of Budapest 11th district is not only a very small, open country with an on currency, but it also has bank ownership and the tiny capital reserves may dry up. In Hungary we have circa 50 banks and only one of the major players is partly Hungarian-owned, so their financing does not depend on Hungarian savings.<BR/><BR/>Although the liquidity of the fx swap markets dried up for days and some banks postponed new fx lending, in fact, sometimes they have more fx founding sources than forint so I clearly do not see why commentators make this a dramatic point.Antal Dánielhttps://www.blogger.com/profile/13982036207587080662noreply@blogger.com