By Ben Shore
Europe business reporter, BBC News, Budapest and Vienna
Drive for half an hour outside of Budapest, get lost several times, argue with your cameraman about how to use the sat-nav and you may just end up in Szentendre, a pretty town north of the Hungarian capital.
Currency movements could cost Gabor Kovac his home
Living here is Gabor Kovac, a passionate inventor of "logic" games, very much in the mould of his fellow countryman Erno Rubik, of Rubik's Cube fame.
In person, Gabor is every inch the mad professor, with a wonderfully long beard and long grey hair. But beneath his jolly demeanour there is a sadness.
Last year, he took out a loan worth 14 million Hungarian forints to develop an ingenuous game called Cubi Cup.
Unfortunately, that loan was denominated in Swiss francs.
The value of the Swiss franc has gone up, while the forint, famously, has gone down. Consequently, Gabor's loan has hugely increased in value in his own currency, he now owes 20 million forints and cannot afford to pay.
He faces losing his beautiful house and seeing his business go down the drain.
"I didn't make any fault. The budget was good, the game was good and just because of the economic crisis, which was not my fault, I have lost everything."
Unfortunately, Gabor's problem is common in Hungary, where about 60% of all loans were denominated in foreign currencies.
The travails of the Hungarian economy are well documented. It has already received $25bn (£18bn) in loans from the World Bank and the European Union, but still faces a bleak few years, with the economy set to shrink by well over 3% in 2009.
But what's new about the unfolding tragedy of Hungary is that people have started to "follow the money". The trail is not very long - at a push, 150 miles across Hungary's western border with Austria.
The Hungarian forint has sharply declined in value
The Austrians have a long tradition of investing in the former communist countries of Eastern Europe.
It was a natural thing to do as the Iron Curtain came down and educated, skilled people naturally turned their attention to cashing in on the new capitalist dream.
Across Eastern and Central Europe, Austrian banks are thought to be responsible for between £200bn and £270bn in loans, much of that denominated in foreign currencies. The amount could be equal to 80% of Austria's entire economic output in one year.
Ratings agencies, particularly Moody's, have been warning this poses a systemic risk to not only Austria's banking system, but that of the whole euro area in the Armageddon scenario of an Austrian default.
Andreas Schnauder, the business editor of the Viennese daily newspaper Der Standard, was amongst the first to report on the problems and believes the facts speak for themselves.
"The banks and the government say they can cope with the situation, " he says, "but if [they] just have a 10% loss, this will be quite a dramatic situation."
He's right in the sense that Austrian banks can ill afford to lose £25bn. But the European Bank for Reconstruction and Development has said that is exactly the level of default that should be expected as Eastern and Central European countries enter a severe downturn.
In the face of an onslaught of bad news, however, the Austrian banks have come out fighting. I am invited to meet Herbert Stepic, the formidable chief executive of Raiffeisen Bank, one of Austria's biggest, and a dominant player in Hungary and Ukraine, another country facing serious problems.
Mr Stepic is in no mood to accept blame for what is happening across his territory.
"I have personally intervened in several countries," he won't say which ones, "in order to disallow foreign currency lending to private individuals and the answer was always, 'We cannot do it,' because there will be public uproar."
We have to carry our customers through a crisis, that is the responsibility of a bank
Herbert Stepic, Raiffeisen Bank
Neither is he in the mood to accept the doomsday scenarios being pumped out by media outlets, desperate for new credit crunch angles.
He points out that although Austrian banks may control hundreds of billions in loans, only about £75bn has come directly from Austria.
The majority of the money was raised through local deposits. In other words, Hungarians deposited money, other Hungarians borrowed it.
However, this is actually a fine distinction. Mr Stepic certainly has responsibility for all the money his bank manages. But his other point is stronger.
There is a misconception about former communist countries. They tend to be grouped as one "central and eastern Europe". I use the phrase myself far too many times a day.
But, of course, what we are in fact describing is a diverse group of countries, with a diverse set of economies.
Ukraine is almost a basket case in economic terms - and Mr Stepic knows it - but he can also point at Poland, Slovenia, Slovakia and the Czech Republic and fairly claim that those countries do not face a problem any more serious than their Western neighbours.
And because of this, he rejects the financial Armageddon that is proposed for Austria.
"Even if the loans go sour, even in the most exposed countries, we still have something. We have to carry our customers through a crisis, that is the responsibility of a bank. But that will not kill us."
After speaking to Mr Stepic, I took a personal pilgrimage to the scene of my favourite movie moment. In the 1949 film The Third Man, the two main characters meet at Vienna's great wheel or "Riesenrad".
The film captured its fragility amidst the devastation of World War II. But it's still standing.
Admittedly it has seen several facelifts since then, but the Austrian finance community could do worse than draw inspiration from its longevity in a changing world.
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