Hungary has not had a mortgage crisis yet, but the country’s public finances are a mess.

Hungary has not had a mortgage crisis yet, but the country’s public finances are a mess. Since the accession to the European Union the country had no chance to enter the ERM-II and start the adoption of the euro, so its very open, free-trading economy has to do with the forint. The government had excessive deficits since 2002, crowding out everybody else from the credit market and pushing up interest rates a few percentage points above the euro rate. The Hungarian families, hoping to pay back some time in euros, started to take out their mortgages in euros and Swiss francs, which just suited their banks fine, who happened to have Western European owners, and could easily find loanable funds abroad than in cash-strapped Hungary. Everybody had to sign a paper that he or she understood the risks involved: if the forint stumbles, mortage rates will be high.