BUDAPEST (Reuters) - Prime Minister Viktor Orban said on Friday his government would have collapsed had Hungary not converted billions of euros worth of Swiss franc mortgages into forints before the franc's surge in January.
Orban's government ordered Hungary's banks, about half of which are foreign-owned, to convert the loans late last year at the then market exchange rate.
If it had not done so, the franc's leap in value following the Swiss National Bank's shock decision in January to drop its long-standing cap against the euro would have been catastrophic for Hungary, Orban said in a speech on Friday.
"The monthly instalments of foreign currency borrowers would have risen by 70 percent on average. I think (central bank governor Gyorgy Matolcsy) is right in saying that the country would not have been able to cope with this," he added.
"Families would have collapsed and ... even though we have a good opinion about the government's stamina, the government would have probably not been able to weather this either and the country would have succumbed to chaos."
The franc's appreciation since the financial crisis had already left many borrowers struggling to repay their loans and pushed up the stock of bad loans on banks' balance sheets.
Orban said he took a risk when appointing Matolcsy, his former economy minister and the country's "most creative economist" to lead the central bank in 2013, but the decision so far seems to have paid dividends.
The central bank eased the conversion process by providing euros from its reserves to help lenders.
The mortgage conversions were seen at the time as another of the unorthodox policies dubbed Orbanomics but other countries in the region where households are struggling with Swiss franc home loans are now looking at similar measures.