Messages in the Media - University of Toronto

- Legislation concerning the banks: While most European
governments tried to strengthen their banking system in
an attempt to avoid a Greek-style bankruptcy, the Hungarian
government punished its banks, as it saw them as
chiefly responsible for the crisis. 23 Due to a period of irresponsible
lending, most of it in Swiss Francs (the Eurozone
crisis caused the appreciation of Swiss Francs),
many home and car owners saw their annuities increase
by 40-50%. Fearing an economic collapse, the national
government created legislation that held the banks responsible
and proposed a way to opt-out. Under this new
legislation, Hungarians who have loans in Swiss Francs
are able to peg the exchange rate at an appropriate level,
while banks are forced to absorb the losses. The current
legislation is still in progress.
o Renationalization of the pension system: Hungary had
a hybrid pension system with private providers and
government support, but the new government decided
to renationalize pensions in order to fill up a budget
hole. 24 Critics argue that this is only a short-term solution
and will result in insecurity for future pensioners.
The EU has no legislative power over this, as pensions
fall under national jurisdiction.
o Dependency of the Central Bank of Hungary: After the
absorption of the pension funds, the current government
looked for alternate ways to correct the budget
imbalance, and one idea was to use the foreign exchange
reserves – at an all time high - of the Hungarian
Central Bank. 25 This was greatly criticized by the EU,
and it looks as though the EU will force Hungary to abolish
or reform this plan. 26 27 With the inclusion of
most recommendations made by the EU, the government
passed the legislation concerning the Central
Bank of Hungary. 28 It is expected that the EU will penalize
Hungary by freezing its funding, as the new legislation
is in conflict with the funding charters of the
Union. 29
- The New Constitution of Hungary or ‘Alaptorveny’: The
new constitution of Hungary was passed and came into
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