Hungary's government has backup plans at the ready if its controversial new foreign currency mortgage repayment scheme fails an international legal challenge and is ready to fight with banks as long as necessary, the prime minister said.
A bill submitted to parliament late on Friday would allow borrowers to repay their expensive forex loans at a big discount to market exchange rates, forcing all losses of such transactions on banks, who have sharply criticised the plan.
The central bank has said the solution could threaten financial stability. "We are ready for each domestic and international fight with banks and politicians on their side," Prime Minister Viktor Orban was quoted as saying by the Blikk daily in an interview published on Saturday.
"We have a solution at the ready that we can pull out of the drawer in case our current decision is banned by the international court and we will continue our struggle against the banks until we prevail," Orban was quoted as saying. Under the proposal, subject to parliamentary approval, borrowers would have the option to repay Swiss franc and euro mortgages at 180 forints per franc and 250 per euro in one go.
Banks in Hungary - already slapped with Europe's highest financial sector tax - have called the plan "unacceptable" and promised a legal challenge. The plan also drew an angry response from Austria, whose UniCredit Bank Austria, Erste Group Bank and Raiffeisen Bank International have roughly 6 billion euros ($8.23 billion) worth of foreign-currency loans outstanding in Hungary, Austrian officials said. The bill sets December 30, 2011, as the deadline for borrowers to apply for early repayment of their loans. After an application is submitted, banks would have 60 days to prepare for the termination of the loan contract.
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