Hungary's Savvy Banker

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János Fekete, 65, a guest at the TIME European Board of Economists session, is the favorite Eastern banker of Western bankers. As deputy president of the National Bank of Hungary, Fekete has raised hundreds of millions of dollars in loans that have helped keep afloat Hungary's distinctive and partially decentralized brand of Communism. Says one European banker who has negotiated with him: "If Hungary weren't a Communist country, Fekete would be the chairman of a private bank and ride around in a Rolls-Royce." He actually drives a Soviet-built Lada.

The gregarious central banker has been one of the designers of the reforms that have seen Hungary unabashedly substitute many market-economy techniques for rigid central planning. As Fekete told the TIME economists, "In the early 1960s we came to the conclusion that central planning was no longer acceptable for Hungary because it was impossible, even in such a small country as Hungary, to decide every important economic decision in one building, even if the people there are the most intelligent people in the world, which they are not. We decided to put the plan under the control of the market." To be sure, Hungary's economy has strong state direction, with the central bank exercising a tight rein on credit. But Hungary's concessions to a market economy include allowing people to make some profits from family farm plots.

Because Hungary relied so heavily on short-term bank deposits, it was especially vulnerable to the credit squeeze that hit Eastern Europe after Poland's near default. But unlike the rest of the Soviet bloc, Hungary has been able to raise new loans in the West ($1.6 billion in 1982) to strengthen its cash position, partly owing to Western confidence in Fekete's economic management. The country last year joined the International Monetary Fund, and it has since met the organization's stiff loan requirements. Hungary succeeded through an austerity program that included a cutback in imports and sharply increased prices for consumer goods like gasoline.

As a result of those actions, which Fekete admitted were easier to apply in a Communist nation than in a Western debtor country like Brazil, Hungary has laid the foundation for growth and is once again able to borrow from Western banks. Nine weeks ago, Hungary signed an agreement for $200 million in credits with a consortium of financial institutions that included Bank of America, Chemical Bank, Bankers Trust and Manufacturers Hanover. Moreover, the World Bank has granted Hungary $239.4 million in long-term loans.

Fekete, an avowed Marxist who is nonetheless a master at using Western financial methods, sketched some ideas for the board. "We are now issuing bonds," he said. "Everybody told me that is capitalistic. Why is it capitalistic to issue bonds? There are a lot of people with money who do not use it, and there are others who need money. Why not let them change positions?" Fekete's long-range goal is to make the forint largely convertible with Western currencies.