European Nations Begin Seizing (Stealing) Private Pensions

“They want your f€€€ing retirement money!” – George Carlin (2005)


Hungary, Poland, Bulgaria, Ireland and France take over citizens’ pension money to make up government budget shortfalls.

People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends. In recent weeks I have noted five such attempts: Three situations concern private personal savings; two others refer to national funds.

The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.

The Bulgarian government has come up with a similar idea. $300m of private early retirement savings was supposed to be transferred to the state pension scheme. The government gave way after trade unions protested and finally only about 20% of the original plans were implemented.

A slightly less drastic situation is developing in Poland. The government wants to transfer of 1/3 of future contributions from individual retirement accounts to the state-run social security system. Since this system does not back its liabilities with stocks or even bonds, the money taken away from the savers will go directly to the state treasury and savers will lose about $2.3bn a year. The Polish government is more generous than the Hungarian one, but only because it wants to seize just 1/3 of the future savings and also allows the citizens to keep the money accumulated so far.

The fourth example is Ireland. In 2001, the National Pension Reserve Fund was brought into existence for the purpose of supporting pensions of the Irish people in the years 2025-2050. The scheme was also supposed to provide for the pensions of some public sector employees (mainly university staff). However, in March 2009, the Irish government earmarked €4bn from this fund for rescuing banks. In November 2010, the remaining savings of €2.5bn was seized to support the bailout of the rest of the country.

The final example is France. In November, the French parliament decided to earmark €33bn from the national reserve pension fund FRR to reduce the short-term pension scheme deficit. In this way, the retirement savings intended for the years 2020-2040 will be used earlier, that is in the years 2011-2024, and the government will spend the saved up resources on other purposes.

Read moreEuropean Nations Begin Seizing (Stealing) Private Pensions

Hungary Nationalizes Private Pension Funds

“It’s unprecedented in Europe that a government is threatening to kick its own citizens out of the state pension system,” Zoltan Torok, a Budapest-based economist at Raiffeisen Bank International AG.

“This is open blackmail,” Julianna Baba, president of the Stabilitas Penztarszovetseg, which groups private pension funds, said in a phone interview today. “It’s a rigged deal.”

George Carlin would say: “They are coming for your f$$$ing retirement money!”

WTF!


Hungary Follows Argentina in Pension-Fund Ultimatum, `Nightmare’ for Some

Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.

Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

“This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”

Hungary is rolling back pension changes implemented more than a decade ago as countries from Poland to Lithuania find themselves squeezed by policies designed to limit long-term liabilities by shifting workers into private funds. Now the cost is swelling debt and deficit levels at a time when the European Union is demanding greater fiscal discipline.

Hungary, the most indebted eastern member of the EU, is following the example of Argentina, which in 2001 confiscated about $3.2 billion of pension savings before the country stopped servicing its debt. The government in Buenos Aires nationalized the $24 billion industry two years ago to compensate for falling tax revenue after a 2005 debt restructuring.

Read moreHungary Nationalizes Private Pension Funds

Hungary Toxic Spill Alumina Plant Reopens As Villagers Return

The Hungarian government sends those people back to live in a contaminated environment:

Hungary’s toxic flood could turn into a cancerous cloud (Telegraph):

Thousands of Hungarian residents battling to contain the flood of poisonous red sludge have been warned to wear face masks because as the slurry dries it will turn into a toxic dust cloud.

Environmentalists said high levels of arsenic and mercury, which can cause cancer, had been found in water polluted by the ooze and that, if airborne, this could enter the human respiratory system.

The scale of the pollution – where 180?million gallons escaped from an industrial reservoir – has been compared with the BP oil spill in the Gulf of Mexico, a leak of 200 million gallons.

Analysis lags on Hungarian sludge leak (Nature News)

A week after around one million cubic metres of red sludge escaped from a Hungarian alumina factory, an analysis commissioned by the environmental group Greenpeace has revealed that more than 50 tonnes of arsenic may have been released as a result of the spill.

In addition to containing almost twice as much arsenic (110 milligrams per kilogram dry mass) as expected for the red mud resulting from aluminium oxide production, the concentrations of mercury and chromium are also relatively high, says chemist Herwig Schuster, chief Greenpeace campaigner for Central and Eastern Europe. “Because arsenic is readily soluble we might be in for a major groundwater problem,” he adds.

Water hazard

Schuster says that Greenpeace’s figures suggest that the drinking water supplies of at least 100,000 people could be affected by potentially toxic levels, including inhabitants of the city of Györ downstream of the contaminated rivers. Exactly how fast and far the contamination will spread depends on the permeability of local soils — which scientists have not yet assessed.
Although small amounts of arsenic in bauxite sludge might have accumulated over time, “If that [Greenpeace] sample is representative there is no question that industrial wastes have been mixed in the basin,” says Weiszburg.

Greenpeace also suspects that the leaked basin may have contained toxic waste besides the sludge from aluminium oxide production.

–  Hungarian officials recalculate volume of red sludge flood _ almost as much as Gulf oil spill (Newser):

Government officials said Friday that 600,000 to 700,000 cubic meters (158 million to 184 million gallons) of sludge escaped and inundated three villages before entering the Danube.

The sludge is ‘slightly’ RADIOACTIVE and inhaling its dust can cause LUNG CANCER:

Hungary sludge flood called ‘ecological disaster’ (ITN NEWS):

Sounds like it is safe to return, doesn’t it?


Hungary toxic spill plant reopens as villagers return


Homes in the village of Kolontar were among the worst affected

The Hungarian alumina plant which caused a toxic sludge leak has reopened as villagers forced to abandon their houses begin to return home.

Dozens of homes in the western village of Kolontar, the closest to the plant, were made uninhabitable by the sludge.

Nine people died following the 4 October spill that devastated towns and rivers in the west of the country.

Some 30 people were taken to Kolontar from the nearby town of Ajka, where evacuated residents had been staying.

The plant of the Aluminium Production and Trade company (MAL Zrt) restarted its operations on Friday.

The state commissioner – now in charge of MAL Zrt’s operations after the government took control of the plant earlier this week – said in a statement: “It will take a maximum four days for the plant to go back to normal operation.

“Next Tuesday, production will be up to full capacity.”

The plant will remain under state control for up to two years.

A criminal investigation continues into whether the owners followed safety regulations and whether they knew of warnings that the waste reservoir might collapse.

Read moreHungary Toxic Spill Alumina Plant Reopens As Villagers Return

Hungary Declares State of Emergency After Toxic Sludge ‘Ecological Catastrophe’

Toxic flood from ruptured reservoir at alumina plant claims third life amid fears for Raba and Danube rivers


Tunde Erdelyi clings to her cat after toxic sludge from an alumina plant flooded her home in Devecser, Hungary. Photograph: Bela Szandelszky/AP

The Hungarian government has declared a state of emergency after a third person died today in flooding from a ruptured red sludge reservoir at an alumina plant. Six people were missing and 120 injured in what officials said was an ecological disaster.

The sludge, a waste product in aluminum production, contains heavy metals and is toxic if ingested. Many of the injured suffered burns as the sludge seeped through their clothes. Two of the injured were in life-threatening condition. An elderly woman, a young man and a three-year-old child were killed.

The chemical burns could take days to reveal themselves and what may seem like superficial injuries could disguise damage to deeper tissue, Peter Jakabos, a doctor at a hospital in Gyor where several of the injured were taken, said on state television.

The government declared a state of emergency in three western counties affected by the flooding. Several hundred tonnes of plaster were being poured into the Marcal river to bind the toxic sludge and prevent it from flowing on, the national disaster management directorate said.

So far, about 1m cubic metres (35.3m cubic feet) of sludge has leaked from the reservoir and affected an estimated area of 40 sq km (15.4 square miles), the environment secretary, Zoltan Illes, told state news agency MTI.

Illes said the incident was an “ecological catastrophe” and it was feared that the sludge could reach the Raba and Danube rivers.

Read moreHungary Declares State of Emergency After Toxic Sludge ‘Ecological Catastrophe’

Moody’s Downgrades Ireland’s Credit Rating

See also:

Anglo Irish Bank losses are the worst in the entire world


• Moody’s cuts Ireland’s sovereign bond rating by one notch

• Move will add to fears over Europe’s debt crisis

• IMF pulled €20bn finance deal for Hungary at the weekend

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Moody’s cut Ireland’s credit rating this morning, citing weaker growth prospects and the cost of rebuilding the country’s crippled banking system (The Guardian)

Credit ratings agency Moody’s has downgraded Ireland’s debt rating, adding to investor jitters about the state of Europe’s heavily indebted economies.

The agency cut Ireland’s sovereign bond rating by one notch to Aa2 this morning, citing weaker growth prospects and the high cost of rebuilding the country’s crippled banking system. It added that the outlook was stable.

But the downgrade comes after the International Monetary Fund and the European Union pulled a €20bn (£17bn) financing deal for Hungary over the weekend. Talks broke down on Saturday after the European commission voiced concerns over the newly elected Hungarian government’s budget plans.

This means Hungary will not have access to remaining funds of €5.5bn in its €20bn credit line, agreed two years ago, until a review is completed. Hungary’s currency, the forint, plunged more than 2.5% against the euro on the news and bond yields surged by up to 30 basis points.

Ireland’s downgrade came ahead of a bond auction tomorrow.

Read moreMoody’s Downgrades Ireland’s Credit Rating

European Debt Crisis Worsens: Now Hungary Warns of Greek-Style Crisis

Hungary Warns of Greek-Style Crisis (New York Times):

PRAGUE — Fears that the debt crisis could migrate to central Europe were stirred Friday after a senior Hungarian government official said the previous government had manipulated budget figures and lied about the state of the economy, but most financial experts dismissed the remarks as a ham-handed negotiating ploy.

The official, Peter Szijjarto, a spokesman for Prime Minister Viktor Orban, was quoted by Bloomberg News and other news agencies as saying that the Hungarian economy was in a “very grave situation.” He even raised the specter of a default, saying such speculation “isn’t an exaggeration.”

His comments followed similar warnings on Thursday by Lajos Kosa, a vice president of the governing center-right Fidesz party, and other officials that Hungary was in danger of suffering a Greek-style crisis, with budget deficits — officially 4 percent of gross domestic product in 2009 — possibly reaching 7.5 percent of G.D.P. this year.

After the comments, the Hungarian currency slid and the yield on benchmark 10-year Hungarian bonds surged, to close at 8.1 percent from 7.4 percent on Thursday. The Budapest Stock Exchange Index closed down 3.4 percent, having fallen as much as 7.1 percent earlier in the day.

For all the alarmism by senior government officials in recent days, however, economists said the country was nowhere near the crisis level of Greece and emphasized that the comments appeared to have been politically motivated to tarnish the previous Socialist government and to give Mr. Orban a stronger negotiating position with the I.M.F.


Sovereign Credit-Default Swaps Surge on Hungarian Debt Crisis

st-stephen-basilica-budapest
St. Stephen’s Basilica stands above the rooftops in Budapest. (Bloomberg)

June 4 (Bloomberg) — Credit-default swaps on sovereign bonds surged to a record on speculation Europe’s debt crisis is worsening after Hungary said it’s in a “very grave situation” because a previous government lied about the economy.

The cost of insuring against losses on Hungarian sovereign debt rose 63 basis points to 371, according to CMA DataVision at 3:30 p.m. in London, after earlier reaching 416 basis points. Swaps on France, Austria, Belgium and Germany also rose, sending the Markit iTraxx SovX Western Europe Index of contracts on 15 governments as high as a record 174.4 basis points.

Hungary’s bonds fell after a spokesman for Prime Minister Viktor Orban said talk of a default is “not an exaggeration” because a previous administration “manipulated” figures. The country was bailed out with a 20 billion-euro ($24 billion) aid package from the European Union and International Monetary Fund in 2008.

“The comments out of Hungary have really spooked the market,” said Rajeev Shah, a credit strategist at BNP Paribas SA in London. “Investors are interpreting it as bad sign for trying to tackle Europe’s debt crisis.”

The euro dropped below $1.21 for the first time since April 2006, stocks tumbled and the cost of insuring against corporate default rose on speculation Hungary will weaken the EU’s willingness to rescue the region’s indebted nations.

Credit markets were also roiled after data showed U.S. employers hired fewer workers in May than forecast, signaling slowing economic growth.

‘Something Serious’

Read moreEuropean Debt Crisis Worsens: Now Hungary Warns of Greek-Style Crisis

Hungary on edge of bankruptcy

Hungary is teetering on the edge of bankruptcy with its citizens struggling to pay off mortages and personal loans taken out in foreign currency during one of the post-Communist era’s most exhuberant booms.


Hungary’s prime minister Ferenc Gyurcsany Photo: BLOOMBERG

The birthplace of the Rubik’s Cube has provided its government with a multi-sided financial crisis that defies any ingenious solution.

The forint currency has plummeted and unemployment has ballooned, creating a voracious debt trap that is sucking down banks backed by Western taxpayers, particularly those of Switzerland and Austria.

Read moreHungary on edge of bankruptcy

Euro Dreams Shattered for Poles, Hungarians, Czechs as Currencies Plummet


Hungarian Forint notes of differing denominations sit on display in Budapest on Nov. 19, 2008. Photographer: Balint Porneczi/Bloomberg News

Dec. 8 (Bloomberg) — The slowing global economy is halting the spread of monetary union into eastern Europe and may lead to another year of losses for the Polish zloty, Hungarian forint and Czech koruna.

The zloty fell 21 percent against the euro from a record high in July as Poland headed for its biggest economic slowdown in almost a decade, while Hungary turned to the International Monetary Fund, World Bank and European Union for a bailout as the forint weakened 15 percent. Koruna volatility almost tripled as it depreciated 12 percent. The two-year mandatory trial period before adopting the euro allows swings of no more than 15 percent.

Poland, Hungary and the Czech Republic joined the European Union in 2004, committing to enter the 10 trillion-euro ($12.7 trillion) economy of countries sharing a single currency. The dream faded since July as the worst global financial crisis since the Great Depression drove investors from emerging markets. Now, New York-based Morgan Stanley and UBS AG in Zurich predict more foreign exchange losses in eastern Europe.

Read moreEuro Dreams Shattered for Poles, Hungarians, Czechs as Currencies Plummet

Panic Strikes East Europe Borrowers as Banks Cut Franc Loans


The Hungarian National Bank stands in Budapest, Hungary, on Oct. 16, 2008. Photographer: Balint Porneczi/Bloomberg News

Oct. 31 (Bloomberg) — Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer in Budapest can’t get a foreign-currency loan.

The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, euros and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe’s developing markets and local currencies plunge.

“There’s no money out there,” said Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers. “We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”

Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism. The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.

Read morePanic Strikes East Europe Borrowers as Banks Cut Franc Loans

IMF may need to “print money” as crisis spreads

The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money.

IMF's work in countries such as Turkey is only just beginning
IMF’s work in countries such as Turkey is only just beginning

The Fund is already close to committing a quarter of its $200bn (£130bn) reserve chest, with a loans to Iceland ($2bn), Ukraine ($16.5bn), and talks underway with Pakistan ($14.5bn), Hungary ($10bn), as well as Belarus and Serbia.

Neil Schering, emerging market strategist at Capital Economics, said the IMF’s work in the great arc of countries from the Baltic states to Turkey is only just beginning.

“When you tot up the countries across the region with external funding needs, you get to $500bn or $600bn very quickly, and that blows the IMF out of the water. The Fund may soon have to start calling on the West for additional funds,” he said.

Brad Setser, an expert on capital flows at the Council for Foreign Relations, said Russia, Mexico, Brazil and India have together spent $75bn of their reserves defending their currencies this month, and South Korea is grappling with a serious banking crisis.

“Right now the IMF is too small to meet the foreign currency liquidity needs of the larger emerging economies. We’re in a dangerous situation and there is the risk of extreme moves in the markets, as we have seen with the Brazilian real. I hope policy-makers understand how serious this is,” he said.

The IMF, led by Dominique Strauss-Kahn, has the power to raise money on the capital markets by issuing `AAA’ bonds under its own name. It has never resorted to this option, preferring to tap members states for deposits.

The nuclear option is to print money by issuing Special Drawing Rights, in effect acting as if it were the world’s central bank. This was done briefly after the fall of the Soviet Union but has never been used as systematic tool of policy to head off a global financial crisis.

“The IMF can in theory create liquidity like a central bank,” said an informed source. “There are a lot of ideas kicking around.”

Read moreIMF may need to “print money” as crisis spreads

Europe on the brink of currency crisis meltdown

The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.

They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.

Read moreEurope on the brink of currency crisis meltdown

Russian default risk tops Iceland as crisis deepens

Russia’s financial crisis is escalating with lightning speed as foreigners pull funds from the country and the debt markets start to price a serious risk of sovereign default.


S&P has cut its outlook for Russia, which has been propping up the rouble: a man on a phone passes a board displaying currency exchange rates in Moscow Photo: Reuters

Russia’s financial crisis is escalating with lightning speed as foreigners pull funds from the country and the debt markets start to price a serious risk of sovereign default.

The cost of insuring Russian bonds against bankruptcy rocketed to extreme levels yesterday. Spreads on credit default swaps (CDS) reached 1,123, higher than Iceland’s debt before it sought a rescue from the International Monetary Fund.

Moves by Hungary, Ukraine and Belarus to seek emergency loans from the IMF have now set off a dangerous chain reaction across Eastern Europe.

Romania had to raise overnight interest rates to 900pc on Wednesday to stem capital flight, recalling the wild episodes of Europe’s ERM crisis in 1992. The CDS spreads on Ukraine’s debt have topped 2,800, signalling total revulsion by investors.

Rating agency Standard & Poor’s issued a downgrade alert on Russian bonds yesterday, warning that a series of state rescue packages worth $200bn (£124bn) could start to erode the credit-worthiness of the state.

Read moreRussian default risk tops Iceland as crisis deepens

Crisis spreads to Eastern Europe as Ukraine, Hungary and Serbia call IMF

Ukraine, Hungary, and Serbia are all in emergency talks with the International Monetary Fund, raising fears that an exodus of foreign investors will set off a systemic crisis across Eastern Europe.

A team of IMF trouble-shooters rushed to Kiev on Wednesay to draw up a possible standby loan to help Ukraine stabilize its bank after a panic run on deposits this month.

Read moreCrisis spreads to Eastern Europe as Ukraine, Hungary and Serbia call IMF