Debt 'Public Enemy No.1' to Hungary: Minister
Staff Writer, CNBC.com
Since it was elected last year, Hungary's government has aggressively aimed to cut the country's debt burden, through raising taxes and nationalizing private pension assets, amongst other measures.
These measures have caused consternation in some quarters, with the country's banking trade body threatening to legally challenge a regulation which fixed the exchange rate for loans taken by individuals from banks in Swiss francs at below-market rates, to encourage the public to pay loans back more quickly.
"We consider public debt as public enemy number one," Zoltan Csefalvay, Hungary's Minister of State for Economic Strategy, told CNBC Wednesday.
"In the whole of Europe, the main problem is debt. We inherited a huge debt (81 percent of GDP). We have made real progress in this."
"If we fail on this we fail on everything," he added.
The Hungarian government estimates that it will have reduced its debt-to-GDP ratio to 77 percent this year.
"The most important thing is to secure stability in Hungary and stable finances and reduce debt. Stability is good for everybody, good for companies who want to invest," said Csefalvay.
"I haven't seen companies withdrawing, although a number of them are not too happy."
Andreas Treichl, chief executive of Austrian Erste Bank, which has substantial Hungarian operations, said last week that the regulation on Swiss franc loans was a "major problem."
Austrian banks have lent 5.4 billion euro ($7.4 billion) worth of Swiss franc-denominated loans in Hungary.
Csefalvay said that businesses should think about how Hungary's debt might affect its future prospects.
"What does it cost if Hungary fails? Much, much more for our future prospects," he added.
The country is a member of the European Union, and is aiming to adopt the euro as its currency at some stage, although a firm date has not yet been set.
"The Hungarian economy is closely connected to the European economies. Certainly the slowdown in Europe has some effect on the Hungarian growth project," said Csefalvay.