Analysts polled by MTI on Monday said the notion that East-European countries should introduce the euro before their formal inclusion in the eurozone is unrealistic and pointless.
The Financial Times reported on Monday that a confidential report by the International Monetary Fund (IMF) has urged non-euro-zone European Union member states in central and eastern Europe to consider unilateral adoption of the euro without formally joining the single-currency bloc.
CIB Bank’s Gyorgy Barta said unilateral adoption of the euro would not be the same as introduction of the single European currency following the process of euro-convergence. Mr Barta said internal austerity measures are necessary in Hungary, though would only serve to put the government budget in order, stressing that introduction of the euro should only be considered only following nominal and real convergence and an increase in potential growth. Any other approach would meet resistance, Mr Barta said.
Mr Barta added that thorough structural reforms would stabilize the forint and ease concerns related to the government budget and debt, thus making the potential adoption of the euro before convergence criteria are met unnecessary.
K and H Bank’s Gyorgy Barcza said adoption of the euro before meeting the convergence criteria is unrealistic and would increase risks to both Hungary and the eurozone. Mr Barcza added that Hungary has lost its credibility with regard to the introduction of the euro, a condition that that is reflected in the significant difference between long-term forint and euro interest. Mr Barcza estimated that long-term forint interest is 1pc higher due to the uncertainty surrounding the date on which Hungary will adopt the euro.
Mr Barcza said Hungary’s main task is to meet all requirements and specify a date for adopting the euro.
Mr Barcza said that satisfaction of the necessary conditions would signal that Hungary is pursuing sustainable economic policies. Hungary’s current economic problems would persist even if the country were to introduce the euro before meeting the criteria, though they might manifest themselves in the form of rising inflation and debt rather than forint rates. Mr Barcza commented that it is in Hungary’s interest to join a stabile system, noting that it is precisely the strict conditions that underpin the system’s stability. The K and H analyst remarked that euro-zone members have met the same criteria, which some members such as Sweden consider to be too relaxed.
Gyorgy Barcza added that the European Central Bank’s repeated indication that it would not loosen the conditions supporting the system’s stability also make the possibility of early euro adoption unlikely.
Hell, all the real estate that I have priced here in Hungary is either in Euro or pounds and not a one in forint. Might as well convert to the euro.
that all these hungarian experts are against it strongly indicates bith A. that it is a good idea and that B. they are invested in maintaining the status quo.
you cannot tell me that someone is not getting rich of the massive slide in the forint against CHF, Yen and Euro. With 53% of Magyars holding loans in these currencies.
Well, Hungary was supposed to have “adopted” that wretched euro way back in 1997-98 or thereabouts. Ever since then, the “date of adoption” has been pushed back and then pushed back even further. Right now, it is “sometime before New Year’s Eve 2025,” I understand.
Makes no difference what the currency of Hungary is, the country is toast, finished. Even though they have been using the forint since 20 August 1948, the Hungarians have been fooling themselves for decades by counting things in foreign currencies — i.e., in somebody else’s currency.
Since 1948 until the late 1980s, it was Russian rubles, but also USD and DM. After the “fall of Communism” in Hungary (ha-ha-ha-ha), the currency of choice was the DM for a short period, followed soon by the USD, and now, the EUR.
Wait a few years, and they will be quoting everything in Zimbabwian dollars, Man!
Actually it isn’t a fully terrible idea -with the amount of foreign currency loans in Hungary relative to the loans held in forint (especially the number of government loans denominated in foreign currencies) unilaterally adopting the Euro wouldn’t be a bad move. It would, in many cases, stabilize the amount paid since it’s exactly the difference in currencies (and volatile exchange rates) where money is made off of them.
As always, someone, somewhere, is profitting of the idea (and idea only!) that Hungary is a poor Central/Eastern European nation. A few countries have unilaterally adopted the dollar and it tended to stabilize both their stock markets and loan payment interest. So, why is it so bad?
Mencelus, you are working for the Hungarian Ministry of Finance, correct? The “idea” of Hungary being a “poor Central/Eastern European nation” probably came about because Hungary IS a poor Central/Eastern European nation. And looking around the Carpathian Basin at is neighbors, a venerable basket case at that.
Yes, Ecuador does use the USD as its currency. And Panama accepts USD 1:1 with their own balboa. However, neither of these countries are well off just because they use another country’s currency. Now with the euro, it is no one particuar nation’s currency — at the same time, it is just about everybody’s. How smart is that? Who is going to be holding the bag when the bottom falls out and the EU house of cards finally collapses?
The reason the EU had set up a regimen about the pre-requisites of joining the Euroe Zone was excactly so that basket case countries (like Hungary is today) would not be permitted to come in and dilute whatever they have still got going.
Lastly, with Hungary already being one of the most expensive countries in the world in which to do business, all things considered, introducing the euro would jack up prices overnight anywhere from 10 to 20 percent. A lethal combination, no matter how we slice it. And BTW, none of Hungary’s persistent misery was caused by the fact that there is anything wrong with their national currency, the forint. There was nothing really wrong with the DM or French Franc, either, before the euro ate them.
As far as I’m aware the EU has NO INTENTION of offering Hungary the Euro??
What madness would that be……
Why would they want a country that has a 14th Century understanding of economics and whos currency goes up and down like a Tarts knickers.
Get real. Right about now most of the people in Brussels are wondering WHY on Earth they even let Hungary into the EU.
For Hungary.. or for certian people the EU funding has allowed Villa sales in Balaton to increase by about 5000%..
But the New Schools, Hospitals etc… what happened to them???
For the EU it’s just been a Headache from the start.
Regarding vacation home real estate prices around Lake Balaton, I am sure that by now most of those imnvestors/speculators wish they hadn’t gotten into it at all.
With respect to Hungary being a meber of the EU, it is not any worse of a choice than having the Balkan countries, the Baltics, Portugal, Greece, etc. enter this dubious, non-exclusive ‘Club of Eurodummies.’ Heck, even POTUS Obama is “supporting” Turkey’s ascension to full EU membership. I guess the Americans figure, the more fringe Asiatic Muslim nations join the EU, the less the EU shall matter in world affairs and global economics.
I hear Tadjekistan is also quite interested in becoming an EU member now.
)
Does anyone recall this quote from the film The Godfather?
“Keep your Friends close & your Enemies Closer”…
I think that sums up the position of the EU in a nutshell……
Lots of interesting, and accurate comments, on this page about currency, and economic issues.
Huge amounts of money have poured in to Hungary over the last year. Where is it? Loony tune, Gyurcscany Ferenc said, not so long ago, that we were not to worry – “42 billion euros were put away for a rainy day in a safe place”?
Maybe in an off-shore account in the Cayman Islands under the name of Franky G.
It was also declared that a huge some of EU subsidy money was used by the Hungarian Nation Bank to “prop up the ailing forint”!
Viz-a-viz -playing the money-markets, and losing.
i.e. Squandering money meant to kick-start the economy etc.
This is only the tip of the iceberg. Where have the huge IMF and American contributions gone?
Hungary needs a total overhaul of its administrative, financial, and education systems.
It also needs to find honest politicians that can bring the much-needed reforms that will steer Hungary into safer waters.
I am still debating whrther it is more worthwhile to send a care package to Zimbabwe or to Hungary. Both countries need our help, right? ;~))
BTW, did anyone else notice that the recent trouble with the forint free-falling and the Hungarian banks being downgraded to cesspool levels (i.e. the banks with foreign names and foreing owners operating in Hunagry as bona-fide “Hungarian” banks”) has now been blamed on a singel American citizen: Mr. George Soros.
Yeap, nobody in Hungary is to take any of the blame, Man. It is all Big Bad Georgie Boy’s fault, see!? He and his investment fund is milking poor, defenseless little Hungaria bone dry, see? That’s what you get when you do all sorts of charitable activities in a country for 20-odd years, see?