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Hungary to end 'era of bankers', says PM

Hungary's government will close the "era of bankers" and put an end to the practice of making borrowers shoulder all losses and risks, Prime Minister Viktor Orbán said in a Monday interview with daily Metropol on Monday.

The era of bankers has ruined Europe, and within it, Hungary, Orbán said. Over the past 15-20 years, banks have made people believe they could borrow without consequences, and that they would always have unrestrained access to cheap credit, he explained.

Some countries, such as Romania and Poland, protected people from the negative effects of the era of bankers, but Hungary's past leaders took the side of banks, he added.

Banks helped local councils and companies to see the risks of taking out foreign currency-denominated loans, but "defenseless" retail clients were "tricked" into taking out forex loans, he said.

To put the situation in order, Hungary's government introduced new tools, such as the moratorium on evictions, a fixed exchange rate for repayments of foreign currency-based loans and an option for early repayment of the loans, Orbán said. Banks condemned these measures, but they are likely to reconsider their position and similar measures could be introduced in more European countries, he added.

Orbán said it was worth it to take out a forint loan to repay foreign currency-based loans at a fixed rate, because the Swiss franc was unlikely to weaken to levels around the time many Hungarians took out CHF-based loans. The government is not making it mandatory for banks to offer clients forint loans to repay their forex loans, but it calculates that banks will do so anyway, he added.

He said Hungary's complicated progressive tax system in the past had worked against labor, families and businesses. This is why the government decided to end the practice of adding social contributions to the personal income tax base and create a labor-based economy, he added.

"Hungary must become a production centre for Europe," which can materialize if people feel that it is worth working, and the current tax system encourages this, he said.

Orbán said the flat-rate tax system would form part of a new stability act, a so-called cardinal law requiring a two-thirds majority, to be submitted in the near future. The stability act will include all rules preventing any new build-up of state debt, he added.

The prime minister said the number of people involved in public-works schemes would rise to between 200,000 and 300,000 in 2012.