Historical Sketch

The Principality of Hungary was founded in the late 9th century. The conversion to Christianity led to the foundation of the Apostolic Kingdom a century later. After the extinction of the founding dynasty Árpád in the early 14th century, kingship became electoral, and in 1526, the crown fell to the Habsburgs who kept it until the end of the monarchy in 1918. In 1804, the Holy Roman Empire, which Hungary was not part of, was dissolved and all Habsburg possessions got consolidated into the Austrian Empire, which by the constitutional reforms of 1849 and 1867 was transformed into the Austro-Hungarian double monarchy. The defeat in World War I put an end to the Habsburg state. The last emperor was forced into abdication, and the state was partitioned along the language borders.

The Austro-Hungarian defeat in the First World War triggered the fall of the Habsburg monarchy. The Austro-Hungarian Empire collapsed and disintegrated into different national states. The Hungarian Republic was proclaimed in November 1918. The subsequent civil war first saw the communists victorious who proclaimed the Hungarian Soviet Republic in March 1919. In late 1919, the royalists took the upper hand, and in January 1920 the Kingdom of Hungary re-emerged with the throne remaining vacant. During World War II, Hungary allied with the Axis powers. In 1944, the Red Army occupied Hungary and the republic was re-established in 1946, three years later styled into the People's Republic. The communist rule ended in 1989, and in 2004, Hungary joined the European Union.

Monetary History Overview

After the First World War, the Habsburg Empire was split up into national states, Austria (initially German Austria) was one of them, and partly annexed by neighbouring countries. The treaty of Saint-Germain prescribed the liquidation of the Austro-Hungarian Bank and the nationalization (counter-stamping) of the circulating Austro-Hungarian banknotes. The ongoing Hungarian civil war delayed this operation until March 1920 when the nationalists had finally defeated the communists. In May 1919, the short-lived Hungarian Soviet Republic had issued its own paper money through the state-owned Post Savings Bank. The Austro-Hungarian Bank (Hungarian Management) went on until the State Currency Institute began operations in August 1921. The nationalised Hungarian Crown was highly inflationary as the post-war economy was near to collapse. In the mid-1920s the economic situation had stabilised enough to carry out a currency reform. In November 1925, four zeros were cut, and the Hungarian Pengö became the new national currency, and the Hungarian National Bank began operations. The Pengö was pegged to gold until the economic crisis of 1931 and could keep its value stable until the Second World War. The military defeat and Soviet occupation led to an uncontrolled money issuance from mid-1944 onwards. In November, inflation started to surge and turned into a hyperinflation of enormous proportions after October 1945. In January 1946, the National Bank created a parallel currency called Tax Pengö (Hungarian: "Adópengő") as unit of account linked to the tax revenue. The so-called "paper" Pengö continued its hyperinflationary decay and lost 21 zeros against the Tax Pengö within seven months. The Tax Pengö itself could not be kept stable and lost in turn three zeros against the US Dollar. After June 1946, banknotes were issued directly in "Tax Pengö" as the printing press could no longer keep up with the free-falling nominal currency. In August 1946 finally, a reform was carried out cutting 29 zeros from the "paper" Pengö (or eight from the Tax Pengö), and the Hungarian Forint became the new national currency. It was pegged to the US Dollar, which apart from a nominal switch to the Soviet Ruble in 1950 remained unchanged until the mid-1970s. In the late 1950s, the inconvertible official rate was complemented with non-commercial effective rates for dealings outside the Communist bloc. In 1969, the official exchange rate became fully inoperative and got replaced by a variety of commercial and non-commercial rates. The Forint effective rate was unified and floated in 1976 and dominated the transactions until the end of the communist rule. During the 1990s, the Forint lost around two thirds of its value and could stabilize against the Euro afterwards. In the late 2000s, another slow decline has set in.

Hungary joined the International Monetary Fund (IMF) on 06.05.1982.

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