THE CONSEQUENCES OF THE CREDIT-ANSTALT CRISIS FOR CEE
Österreichische Postsparkasse, architect: Otto Wagner, built 1904-1906
The Great Depression hit Hungary hard, stopping the slow recovery and leading to a dramatic decline. The crisis hit Hungary first through the collapse of the international agricultural market with a 60-70 per cent decline in agrarian prices. But the most severe blow was dealt by the break-down of the Credit-Anstalt and was followed by the international financial and banking crisis. Hungary was heavily indebted, but new credits stopped arriving and substantial portions of the short-term credits were withdrawn from Hungary. The Hungarian National Bank lost most of its gold and foreign exchange reserves and the banking system reached the edge of the abyss in 1931. Between 1931 and 1933 70 banks collapsed. By 1938 the number of banks had been reduced by more than 300 that had been operating in 1929. The effect of the shrinking banking sector was the decrease in its share of industry. Strict government measures were introduced after the financial collapse and the repayment crisis in 1931, the gold Standard was abolished and foreign exchange controls were introduced. After the trade agreement with Nazi Germany in February 1934 barter trade became dominant and a clearing system was introduced to replace hard currency payments in foreign trade. State interventions, economic nationalism, high protection and the policy of self-sufficiency became stronger. Hungary was isolated from the world market and became integrated into the German Nazi economic system.…