Econ-committee chief says help for FX borrowers to cost government HUF 15 - 20 billion a year

Asked about the scale of assistance the state would offer troubled borrowers, Rogán told Magyar Nemzet it was “difficult to say precisely”. “We also want to help the 85% [of borrowers with foreign currency-denominated mortgages] who have made regular repayments till now. In their case -- in exchange for a state guarantee -- we expect a guarantee fee from banks, thus the two amounts will balance out. Over this amount, the cost to the budget will be between HUF 15 billion and HUF 20 billion, a burden that will have to be taken on every year,” he said.

The government earlier said it “envisages” an assistance package for troubled borrowers with foreign currency-based loans that involves fixing an exchange rate at a level somewhat more favorable than now and providing a state guarantee on any negative balance.

“In the construction envisaged, the exchange rate determining the installments for foreign exchange denominated mortgage loans will be fixed...with the difference from the actual future exchange rate to be entered on a separate account where the debt may be accumulated (or even disappear if better exchange rates emerge)," according to an update of Hungary's Structural Reform Program, dubbed the Széll Kálmán Plan, published in April.

Retail borrowers with Swiss franc-based mortgages -- more popular than forint mortgages before they were banned -- saw their repayments rise as the forint weakened during the crisis, prompting Hungary's previous government to introduce moratoriums on foreclosures and evictions by lenders. The moratorium has been extended several times, most recently until July 1, 2011.

Overdue payments have been seen on more than 117,000 foreign currency-denominated mortgages because of higher installments, according to the updated program.

Asked about a committee, which Rogán heads, established to ensure companies compensate low-earners for any decline in wages due to tax changes introduced at the start of the year, he said the government plans to allow companies who pay the compensation to deduct the amount from payroll taxes in the given year.

Hungary introduced a flat-rate 16% personal income tax from January 1. Although a boon for many Hungarians, it puts low- and mid-earners at a disadvantage. The government made it compulsory for state institutions and state-owned companies to compensate such employees for any fall in income and it said private sector companies that do not do the same would not be allowed to do business with the state.

Asked about the possibility of central government assistance for Hungary's indebted local councils, Rogán said he agreed with János Lázár, parliamentary group leader of governing Fidesz, that there can be no free lunch for municipalities, but he blamed part of the problem on a decline in central budget funding for cities and towns under the previous government.

“The same basic principles apply to [local governments] as do to people with home loans: anybody who takes out a loan will sooner or later have to pay it back. Local governments could get assistance from the state in that we could make the terms on those debts longer through instruments that conform to the market. On the part of local councils, it must be considered which assets could be given to the state in exchange for putting the debt in order,” he said.