Sunday, April 5, 2009

Hungary on the Brink of Disaster

BUDAPEST – If anyone wonders how bad the economic crisis is in Europe, consider this: While shooting a story in Budapest, last week we parked our vehicle on a street in a part of town that has fallen on hard times.

Our translator, Andras Krucsai, suggested we not stray too far from the car. But it was broad daylight. And we weren’t headed far enough away to lose sight of the vehicle.

Still, within no more than three minutes, vandals struck, seemingly out of nowhere. In a blur, two teenagers broke the glass and grabbed our GPS navigational device, which was sure to fetch good money on the black market. They'd disappeared by the time we ran the distance – around 300 yards – screaming all the way back.

''I saw them clearly,'' said Andras, who owned the car, brushing glass shards from the front seat. ''Just kids, 16 or 17, but you know it's gonna happen more and more often. It's gonna be worse and worse.''

Eastern Europe’s shining light
Pal Serge, 38, would agree. We met him at a busy subway station on Moscow Square, in downtown Budapest, standing in near-freezing cold with a couple of dozen other unemployed men. They were looking for any kind of day labor.

Serge, a forklift driver, had recently returned from a bus trip to England. He couldn't find work there either. ''I think if it continues like this much longer, you'll see anger, even violence, in the streets,'' he said.

Not long ago, Hungary was Eastern Europe's shining light, the one former Communist nation that was destined to catch up to its richer, Western European neighbors. Hungarians were egged on by their government to consume with abandon – to buy that new foreign car or take out a low-interest home mortgage, in euros, while resting assured that German or Austrian banks would guarantee the loans.

Similar thinking was used to justify tens of millions of euros in generous subsidies to pensioners, families with children, and the unemployed. After all, Europe wouldn't turn a cold shoulder on a country that was on a fast track into the Eurozone, that club of 19 countries that use the euro as the national currency.

So Hungary spent, and the European Union covered the bulging deficit – until, that is, the financial crisis struck like a perfect storm. Today, Hungary is the EU's most indebted member.

Now on the ‘brink of ruin’
''It went on a spending spree and a borrowing spree when times were good and now Hungary is really on the edge of insolvency," said British economist and historian Niall Ferguson. ''It's a little bit like a Latin American economy. It's spent itself to the brink of ruin.''

As the economic crisis evolved, the Western European banks ran out of credit and Hungary's currency, the forint, crashed, effectively tripling those euro car and home loans. And suddenly construction workers like 25-year-old Shandar Barnoi, who had only known the steady climb of prosperity, were hit by two crises – Hungary's and Europe's.

''I have no idea what happened,'' Barnoi said. ''All I know is that I haven't found any work for weeks and it's getting harder on my family.''

Drive down any street in Budapest and you'll see boarded-up shops, peeling paint and "For Sale" signs. We came across one new, unsold high-rise development that was standing right next to an abandoned site, now just a foundation of concrete and protruding steel rods, all flooded in sewer water and debris. It could have been a metaphor for what's become of Hungary's middle-class dreams.

Inflation has driven produce prices up so high that it's cheaper to import Turkish or Moroccan fruit and vegetables. And what about beef, that key ingredient in Hungarian goulash?

''I haven't sold more than 10 euros [about $13.00] of meat all day,'' said one normally busy butcher.

Many Hungarians who took out those euro-based mortgages – like truck driver Ishtvan Hatosh – have had to cut back on meat and other products in a desperate attempt to hold onto their homes.

''We've had to deny ourselves to pay back the loan," said Hatosh. ''Food, entertainment, vacation, travel – it’s financial chaos for us now.''
‘A very unpleasant problem’
Can Hungary avoid going bankrupt? Probably just barely, with international help.

The International Monetary Fund has already lent the country $16 billion in emergency funds. Also, Thursday's announcement at the G-20 Conference of $1 trillion in additional funding for the IMF could make a difference for emerging economies like Hungary's, but it will take months, or more, for any new loans to be approved. And Hungary will eventually have to pay them all back.

Meanwhile, those once rich EU banks in Germany and Austria now have their own empty pockets to deal with – they aren't likely to return to the old days of bailouts and spending bubbles anytime soon.

''Unfortunately this is a very unpleasant problem that almost certainly has to get worse before it gets better," said William Browder, CEO of Hermitage Funds and an expert in Central and Eastern Europe investment.

But not all is gloom and doom in what was once the heart of an empire. Some Hungarian analysts, like the Open Society Institute's Kristof Varga, believe there's a silver lining in this crisis if politicians can find the courage to reform Hungary's deficit spending, no matter how painful that is. He thinks that this could be a moment of truth.

''Economists have been saying we need to cut back for years, that we should reform the system because it's going to crash. Well now it's crashed. So there's no argument anymore that we don't do this, because we have to,'' he said.

‘Never really a dream’
Still, most Hungarians just laughed when we asked if they could afford more cutbacks.

"Janos Kadar [the former Communist header] was better for us,'' said Hatosh, the truck driver, sitting on a tiny bed inside his 200 square foot studio apartment, the one he's struggling to keep. ''People were happier. Calmer. The situation was much better back then.''

Perhaps Andras, our translator, best summed-up the frustration that people here are feeling.

''It was never really a dream for us in Hungary. Even in the good times we were always promised that things would get better, in two or three years. Now we're in about the fifth ‘two or three years.’ We never seem to get there.''


  1. this is just the beginning , wait till the beer and American idol stops flowing in the U.S , then the masses will RIOT

  2. International "help" from IMF is going to even more destroy the country. I am so happy that this happened especially to Hungary. I remember how they hated Russians for giving these bastards its recourses almost for free in exchange for their buses (such as Ikarus) and pharmaceutical products (from Gideon Richter), etc. Back then Hungary enjoyed the highest living standards out of the eastern block. But Russia did not rob them of their resources in did not destroy their factories. That was done by western “friends” under the drum bit of “Western values”. Well, here they are – western values. Country is in ruins, economy is totally destroyed, factories are in destroyed and the country is in debt to the eyeballs to its western “friends”. Enjoy!

  3. The same thing happened to me in St Louis

  4. What these do-gooders from IMF are doing is explained here:

  5. why do people spent more than they own?

  6. Interestingly enough, Hungary is the site of the worst hyperinflation in history. Many remember Germany's Weimar-era hyperinflation, but few remember the cripping and more extreme episode that hit Hungary right after WWII. The time saw the printing of the largest-denomination bill in history, the 100-quintillion Hunagarian Pengo note.


  7. Trex is right, most Americans, especially the hope and change crowd of sheep won't wake up until the Mountain Dew and pizza spigot is shut off, along with that pop culture bilge pump called MTV. Throw in BET as well for good measure. Everyone here is in a coma.

  8. The Pengo - thanks for the info on that - incredible stuff. Amazing that like Zimbabwe's currency it was once comparable value-wise to the dollar.


  10. We need to funnel more billions in aid to corporate giants like Coca-cola and McDonalds so people can consume more products unconsciously. The pump needs to continue to be primed. Fuck the banks and their CEO's. The sheep need help too.

  11. TV/propaganda, flouride, vaccines, and prescription antidepressants. The sheep are barely standing as it is ... really bad times as they'll just fall over. I look at how bummed out the average person is right now and it is sad to watch. I wish the fake economy and our clandestine empire could hold together a little longer and not just plunge off a cliff.

  12. The economic situation in Hungary is really bad indeed, nobody can deny but this teenagers vandals dont sound real.
    Ive been living in Budapest for more than 2 months now and I have never heard or seen any case like this.
    Budapest is still much more secure than many others Western European capitals like London, Paris, Madrid and loads of american cities.

  13. Russians "communist Russians" are still believing in a Marxist's UTOPIA.
    The problem is, that they don't even know what
    utopia means. Their mind is just as dirty and unwellkept as their body. Unfortunatelly many of the biggest hypocrate communists are living in western countries, polluting our neighborhoods. Hungarians are still suffering the abuse and lies from Russian communists. Shame on them !!!

  14. Nbody is still suffering from the marixt russians lies so we can step over this subject.

  15. I am very sad to see Hungary on the brink of disaster today, its such a wonderful country.

  16. It really seems that Hungary are really on a brink of disaster after few years.

  17. this in an informative blog and is just the start for Hungary. they have to take serious precautionary measures in order to come up from this disaster.

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