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LOANS IN FOREIGN CURRENCY COME TO HAUNT HUNGARY

It is not just the Hungarian government whose borrowing in foreign currency has left it buffeted by the financial crisis and vulnerable.

Average people flocked in droves to banks here for once-cheap loans in Swiss francs and euros to buy their cars and houses, leaving them exposed now to rising debt payments as the economy and the local currency suffer.

The government has taken steps to shore up its position in the midst of the credit crunch, through talks to line up support from the International Monetary Fund and the European Central Bank.

But for average Hungarians watching their loan payments claim more and more of their salaries as the Hungarian forint declines in value, all they can do is wait.

"I can't do anything else," said Bori Bende, 26, who with her husband owns two apartments with mortgages in the Swiss franc. The couple had bought a new, larger apartment and were in the process of selling their old one, a brightly painted one-bedroom in an up-and-coming part of the city, when the financial crisis intensified, credit markets tightened and buyers grew scared.

Borrowing in another currency, like Swiss francs or euros, was as simple as walking into the nearest bank branch and applying for credit. The interest rates were lower, but the risks were far greater than many Hungarians realized.

According to Hungary's central bank, the Hungarian National Bank, nearly 90 percent of new loans to households were made in euros and Swiss francs this year.

And the forint has dropped against those currencies as investors concerned about the stability of Eastern European economies have begun pulling their money out of the country.

Although Hungary is in nowhere near the dire situation of Iceland, it has been marked as one of Europe's problem countries, particularly because of the large government debt. Making matters worse, almost a third of that debt is denominated in foreign currencies.

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