REINHARD ENGEL
55
citizens don't even have bank accounts, and salaries still are being paid
in bags of cash.
In
some regions money transfers are unknown-even
more of a disadvantage for entrepreneurs who cannot rely on their
multinational contacts. The communist system used just one bank,
which took care of everything from international trade to internal
credit. (Hungary alone had a divided banking system.) And even after
the end of communism the financial sector remained weak and largely
government-controlled. The finance ministers tried to bring down the
galloping inflation. Credit-especially for new enterprises-was lim–
ited and expensive. On the other hand, state enterprises were given
ample funds, thus throwing good money after bad. Bailing out large
banks has been costiy, and will be even more costly in some countries.
The Hungarians solved the problem by selling their entire banking sec–
tor to foreign interests. They assumed that the government would
thereby lose its control, which would be offset by the fact that modern–
ization of the entire system would be paid for rather inexpensively, since
the competition among international banking giants would reduce
costs. This seems to have worked, and Hungarian banks are the most
successful and professional ones in the region. Poland also followed suit
by selling to foreigners, and the Czechs and Slovaks are now allegedly
doing the sa me.
For the most part, the modernization of the banking systems in the
reform states has been helpful. Now, people are more easily extended
short- and long-term credit in their own country's currency, and actual
interest rates fell during the last few years, helped by the competition
and by stricter banking regulations. At the same time, investment bank–
ing began-via foreign take-overs and local capital markets.
In
Poland,
Hungary and the Czech republic, these markets have begun to take on
a certain importance, although their future as a sort of European stock
market has not yet been decided. The effort of the Vienna stock market,
however, which tried to establish itself as the regional East-Central
European one, was unsuccessful.
• •
•
TOURISM
HAS
I~EC:OME
an important means to acquire foreign currency.
A couple from Bavaria recounts that they have been coming to western
Hungary for many years to bathe in its thermal waters, rid themselves
of arthritic pains, and dine in the Thermal Hotel Buck's elegant restau–
rant: "Our thermal hotels are actually money machines," says Hun–
gary's new State Secretary for Tourism, a former successful banker;
