The situation on the land of the Magyars

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In 2004 Istvan Kovacs, a clerk from the local council took out a loan in swiss franc. Later on he took out another loan in yen to finance the first loan then another one in forint (the local currency) to finance the other two loans. He also maxed out a number of credit cards and now he leads the regional list of bad debt with a total of 247 000 euro combined debt plus interest. It was a rude awakening for the banks when they realized that Mr. Kovacs owns only a 4 year old Ford Focus - also bought from credit.

This is a typical story in this small country from the ex-eastern bloc plagued by bad debt, populist, incompetent leaders and obsolete structures inherited from the communist times. Hungary's name is again on the front pages of the world's newspapers as the negotiations with IMF broke down and the country is set to become another Iceland and Greece, combined.

Crisis! The effects of the financial turmoil are ever present on the streets of Budapest, the capital.

According to John Ballyhoe, senior partner of Credit Line Worldwide, Hungary is at the mercy of the unforgiving forces of the world's capital markets. It has to repay 117 billion dollars by the end of the decade which is only possible if it brings down its CDS rate to 141 points. It is a far cry for the Hungarian government - according to Credit Line Worldwide's forecast, without IMF's intervention, the average CDS rate for the period cannot be lower than 320 points.

Hungary's political elite is just starting to realize the graveness of the situation. The ex-financial minister giving an interview to Index, one of Hungary's most influential online portals calls the government economic policy "reckless, fool, criminal". This warning, however, came too late for Mr. Istvan Kovacs. Last week his creditors acquired his Ford Focus and all the cars he will ever own in the future. Another dream about a more prosperous future crashed by the solemn forces of the worldwide financial crisis on the land of the Magyars.