March 18, 2020 / 4:05 PM / 16 days ago

UPDATE 2-Hungary imposes blanket moratorium on loan repayments to year-end

* Time to support the economy to mitigate virus impact -PM

* Loan repayments stop, tax breaks and employment rules ease

* Hungary’s top bank OTP welcomes move, will support it (Adds comment from Hungary’t top bank OTP)

BUDAPEST, March 18 (Reuters) - Hungarian Prime Minister Viktor Orban on Wednesday announced a blanket moratorium on loan repayments for all companies and private borrowers until the end of the year to limit the economic fallout from the spread of the coronavirus.

The virus has presented the 56-year-old Orban with the biggest challenge of his decade-long rule, raising the spectre of mass unemployment and temporary factory closures that pose the risk of Hungary’s economy grinding to a halt.

Orban, whose unorthodox fiscal stabilisation campaign after his 2010 rise to power had roiled foreign investors, said the main objective of Wednesday’s measures was to protect jobs after a steady fall in unemployment over recent years.

“Private individuals and companies, all private individuals and all companies, will be exempt from principal and interest payments through the end of this year on loans taken as of today,” Orban said in a video on his Facebook page.

The announcement follows calls by the central bank, led by Gyorgy Matolcsy, Orban’s former economy minister, for banks to suspend loan repayments voluntarily for companies and private borrowers.

As Orban announced the decision, the Hungarian forint , which has lost more than 6% of its value against the euro this year, sank to record lows near the 355 mark.

Shares in OTP Bank, central Europe’s largest independent lender, fell 7% late on Wednesday to their lowest levels since July 2017, having scaled record highs at the end of last year.

OTP came out in support of the package, saying it was prepared to help the government’s effort, which would give near immediate relief for borrowers in the household and corporate sectors alike.

“OTP group is a regional corporation with predictable operations and significant capital and liquidity buffers,” the bank said in an emailed statement.

“The economic challenges ahead of us do not endanger the bank’s stable, efficient and profitable operations, therefore we wish to contribute to the necessary extent to protect the economy and our clients.”

Orban also announced further measures to defend jobs, including payroll tax cuts for the most heavily affected sectors, such as tourism and entertainment among others.

The prime minsiter said these were the most pressing measures but more steps to resuscitate the economy would follow almost daily. (Reporting by Budapest bureau Editing by David Goodman and Chizu Nomiyama)

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