Hungary Counties, Banks Agree on Debt Repayment, Gyuris Says

Hungary’s counties and their banks have reached agreement on terms of their debt repayments, said Daniel Gyuris, deputy head of the Hungarian Banking Association.

“The issue of county debt has been settled correctly bank by bank and county by county,” Gyuris said at a press briefing in Budapest today.

Details of the agreements, which cover 187 billion forint ($773 million) in debt, were concluded by Dec. 31 and haven’t been disclosed. Prime Minister Viktor Orban said last year that the central government would assume responsibility for the debt as part of an overhaul of local government. The government may pay back the debt by using up part of the central bank’s foreign-currency reserves, news website Index reported today, citing unidentified people close to the government.

The association “isn’t aware” of any lender unable to agree with counties on debt repayment, Gyuris said, adding that contents of the agreements varied.

Hungarian municipalities owed almost 500 billion forint in foreign-currency denominated debt at the end of September, according to data from the financial supervisory authority.

Talks earlier with the government concerning “local council debt ended on the note that any problems need to be settled by individual municipalities and their financing banks,” Gyuris said.

On Dec. 29, the local council of the city of Hodmezovasarhely asked Erste Group Bank AG’s Hungarian unit to share the burden of foreign-currency losses on the municipality’s Swiss-franc denominated bonds.

The municipality, which sold 69.4 million Swiss francs ($74 million) in bonds in 2006, is servicing its debt, according to a letter signed by Mayor Janos Lazar, who is also the ruling Fidesz party’s parliamentary group leader.

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